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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27374
UNISON HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 86-0684011
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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8800 NORTH GAINEY CENTER DRIVE, SUITE 245
SCOTTSDALE, AZ 85258
(602) 423-1954
FORMER ADDRESS:
7272 E. INDIAN SCHOOL ROAD, SUITE 214
SCOTTSDALE, AZ 85251
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
Common Stock, Par Value $0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 31, 1997, there were 6,422,096 shares of Common Stock, par
value $0.001 per share, outstanding. The aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant on March 28, 1996, was
approximately $9,539,685. For purposes of the foregoing calculation only, all
directors and executive officers of the registrant have been deemed affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
1996 ANNUAL REPORT ON FORM 10-K
UNISON HEALTHCARE CORPORATION
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PART I
Item 1. Business..................................................................... 1
Item 2. Properties................................................................... 13
Item 3. Legal Proceedings............................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.......................... 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........ 17
Item 6. Selected Financial Data...................................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 19
Item 8. Financial Statements and Supplementary Data.................................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure......................................................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant........................... 31
Item 11. Executive Compensation....................................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and Management............... 38
Item 13. Certain Relationships and Related Transactions............................... 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 42
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PART I
Certain statements contained in this Annual Report, including without
limitation statements containing the words "believes," "anticipates," "intends,"
"expects" and words of similar import, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). While the Company believes that the assumptions
underlying these statements are reasonable, such assumptions (and thus the
statements based upon them) could prove to be inaccurate. Important factors
which could cause results to vary include limitations on the Company's access to
debt or equity financing in light of recent losses and cash flow shortfalls,
adverse uninsured determinations in existing or future litigation or regulatory
proceedings, health care statutory or regulatory changes which disfavor the
types of care delivered by the Company and a reversal of the current limitations
in the supply of long-term care facilities. Important factors which could cause
results to vary also include the factors discussed in "Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as factors discussed elsewhere in this report or in any document
incorporated herein by reference.
ITEM 1. BUSINESS
As used herein, (i) the "Completed Acquisitions" means acquisitions
completed from January 1, 1995 through December 31, 1996 including (among
others) the acquisition of Signature Health Care Corporation and four affiliated
companies ("Signature") on October 31, 1996 (the "Signature Acquisition") and
the acquisition of American Professional Holding, Inc. and Memphis Clinical
Laboratory, Inc. (together, "Ampro") on October 31, 1996 (the "Ampro
Acquisition"); and (ii) the "Dispositions" means the disposition of four nursing
facilities that were subleased to an unrelated party on March 1, 1997 and the
planned disposition of four additional nursing facilities, one of which is not
currently in operation (the "Disposition Facilities"). See "-- Acquisitions."
INTRODUCTION
Unison is a leading provider of comprehensive long-term and specialty
healthcare services. As of March 31, 1997, after giving effect to the
Dispositions, Unison ranks as one of the 25 largest long-term care operators in
the United States, operating facilities in 12 states clustered in the Midwest,
Southwest and Southeast. These facilities include 47 long-term and specialty
care facilities with 4,671 licensed beds and eight independent or assisted
living facilities with 315 units. Unison seeks to operate its businesses as an
interrelated network of services to provide a full continuum of cost-effective
long-term and specialty healthcare.
Unison's healthcare services include both traditional long-term care
services and higher margin specialized healthcare, such as rehabilitation,
infusion and respiratory therapy. Unison also has recently expanded its role as
a medical supplier, both to its facilities and to non-affiliated facilities, of
pharmaceutical services, rehabilitation and therapy services, medical supplies
and laboratory testing.
INDUSTRY OVERVIEW
Unison believes there will continue to be significant business
opportunities to provide healthcare services to long-term care residents in
non-hospital settings, including both long-term care facilities and assisted or
independent living facilities. Certain factors that contribute to this growth
potential are described below.
Industry Consolidation. The long-term care industry is highly fragmented.
There are approximately 16,000 long-term care facilities in the United States
which contain a total of approximately 1.6 million licensed beds. The 35 largest
long-term care providers operate approximately 4,000 facilities comprising
approximately 450,000 licensed beds, or 28% of the industry total. Recently, the
long-term care industry has been subject to competitive pressures and
uncertainty with regard to future changes in governmental regulations, which
have resulted in a trend toward consolidation, especially of smaller, local
operators into larger, more established regional or national providers. The
increasing complexity of medical services provided, growing regulatory and
compliance requirements and increasingly complicated and potentially volatile
reimbursement systems have resulted in the consolidation of operators who lack
sophisticated
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management information systems, operating efficiencies and financial resources
to compete effectively. Unison believes that this trend toward consolidation
will continue. See "-- Business Strategy."
Aging Population. The overwhelming majority of the patients in long-term
care facilities and residents in assisted or independent living facilities are
over the age of 65. According to the United States Bureau of the Census, the
number of people over the age of 65 in the United States has grown from
approximately 25.6 million in 1980, or 11.3% of the population, to approximately
31.1 million in 1990, or 12.5% of the population, and is projected to increase
to approximately 62.2 million, or 18% of the population, by 2025. The United
States Bureau of the Census also reported that approximately 6% of the United
States population between the ages of 75 and 84 and 22% of those over 84 used
some form of healthcare services in a long-term care facility. As the United
States population ages, the demand for the types of service Unison provides is
expected to increase. According to published reports, one in three Americans
currently 65 years old can be expected to enter a nursing home, for an average
of two to three years.
Cost Containment Pressures. Governmental and private pay sources have
adopted cost containment measures which encourage reduced lengths of stay in
acute care hospitals. Many of the patients being discharged, in particular
elderly patients, require additional skilled nursing care and specialty
healthcare services, such as those provided by Unison. Any subsequently adopted
healthcare reform proposals are expected to continue to emphasize the cost
containment efforts included in healthcare reform legislation. See
"-- Government Regulation."
Advances in Medical Technology. Sophisticated new forms of medical
equipment and treatment have lengthened life expectancies, increasing the number
of individuals requiring specialized care and supervision. In the past, the
level of care required by many of these individuals was not generally available
outside acute care hospitals. However, long-term care providers such as Unison
have become a more attractive alternative to acute care hospitals in certain
instances due to technological advances that have enabled long-term care
providers to offer services less expensively than are provided by acute care
hospitals.
Limitations in the Supply of Long-Term Care Facilities. In many areas the
number of available long-term care beds has not grown as quickly as the demand
for them in recent years. Many states (but not all of the states in which Unison
operates) have enacted certificate of need or similar legislation which
generally limit the construction of long-term care facilities and the addition
of beds or services in existing facilities. Furthermore, high construction
costs, limitations on government reimbursement for the full costs of
construction, and start-up expenses also act to constrain growth in the numbers
of facilities. As a result, the Company believes that the supply of long-term
care facilities may not grow as quickly as the demand for such facilities. See
"-- Government Regulation -- Certificates of Need."
BUSINESS STRATEGY
Unison's business strategy is to become a preferred provider of long-term
and specialty healthcare services in its markets by offering a full range of
high quality, cost competitive, long-term healthcare services. Unison seeks to
offer these services across the entire continuum of care from independent and
assisted living, to traditional long-term, specialty and subacute care.
Provide a Continuum of Care. Unison operates both skilled nursing and
assisted living facilities and provides a wide variety of medical,
rehabilitative and pharmaceutical treatments. This strategy provides an
opportunity for entry at each point in the continuum of care. As patients' needs
change, they may be served by different elements of the care continuum. The
primary benefit of offering a continuum of care is that it offers patients an
appropriate level of cost-effective care which the Company believes is
attractive to third party payors.
Unison believes that independent and assisted living arrangements have
become an increasingly important component of the continuum of care required by
older Americans. Cost containment pressures from government and private payors
alike encourage discharge from long-term and specialty care facilities before
residents may be fully able to care entirely for themselves. The change from the
traditional family structure which was able to care for the sick and elderly to
dual income families has increased the need for facilities that
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can assist such persons. Unison believes that offering services at this
important level of the continuum of care enables it to maintain contacts with
potential consumers of its long-term and specialty healthcare services and thus
to improve its occupancy levels and profitability.
Improve Payor Quality, Occupancy Levels and Operating Margins. Unison is
focused on improving its payor quality mix and occupancy levels. The
profitability of caring for private-pay and Medicare patients is generally
higher than that of Medicaid patients. Unison's marketing efforts are focused on
the hospital and medical community in each market to promote higher occupancy
levels and improved payor mix at its long-term care facilities and assisted or
independent living centers.
Unison seeks to improve its profitability by attempting to obtain an
increasing proportion of its revenue from specialized healthcare services which
typically generate higher profit margins than basic long-term nursing care.
Specialty healthcare services are developed in cooperation with and in
accordance with the needs of the local medical community. Specialty programs are
developed by marketing professionals and facility administrators working
directly with local hospital discharge planners and physicians. Management
believes that this approach generally has been well received by local medical
communities, as demonstrated by the recent increases in Unison's quality mix.
Increase Contribution from Ancillary Services. Unison believes that
opportunities exist to capture ancillary service revenues and operating profits,
both from its own facilities and from non-affiliated facilities. Unison provides
ancillary services to facility residents in response to physician orders. The
major ancillary services include physical, speech, and occupational therapies;
pharmaceuticals; parenteral and enteral nutrition; infusion and respiratory
therapies; and laboratory services. Historically, Unison has provided most of
these services through contracts with third party providers, but it is
increasingly offering such services through its ancillary services companies. In
addition to providing services to its own long-term and specialty healthcare
facilities, each of these ancillary providers offers services to other,
unrelated long-term care providers, adding to Unison's revenue base. See
"-- Acquisitions."
Concentrate Healthcare Facilities in Geographic "Clusters." Although
Unison's acquisition program has been substantially curtailed for the indefinite
future, Unison has in the past sought to acquire facilities which fit within
existing geographic regions or "clusters," and to enter new markets through
clustered acquisitions. Clustering is intended to attempt to capture local
economies of scale by providing ancillary services, purchasing, marketing,
information systems, risk management, accounting, reimbursement and quality
control to geographically concentrated facilities. The cluster strategy is based
on the belief that clustering facilities will enable Unison to leverage
management across a larger base of client revenue and efficiently monitor
individual facilities, ensuring high quality patient care. Clustering facilities
should also enable Unison to leverage the addition of ancillary services over a
larger patient base. The Signature Acquisition, which included the acquisition
of five long-term care facilities in the Denver, Colorado area, is an example of
this strategy.
Provide High Quality Care on an Economic Basis. Unison seeks to position
each of its facilities as a high quality provider in its respective market, but
to do so on a cost-effective basis. Unison believes it provides quality patient
care and is generally successful in maintaining regulatory compliance. This is
illustrated by the reduction in the number of deficiencies cited in governmental
reviews from August 1995 through July 1996 of the 28 operating facilities Unison
acquired in the BritWill Acquisition. Under Unison management, these facilities
averaged a 43% reduction in the number of deficiencies cited after the first
review, a 75% reduction as of October 1, 1996, and a 93% reduction as of May 20,
1997 as compared with the number of deficiencies cited prior to the acquisition.
At the time of the Signature Acquisition all of Unison's facilities had
implemented Unison's quality improvement program.
Contain Costs. Unison believes that the increasing penetration of managed
care will intensify the focus on containing costs. Unison establishes detailed
operating budgets at its facilities and the administrator is responsible for
adherence to these budgets. Monitoring the performance of these budgets at the
facility level is necessary to enable Unison to control operating costs.
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PATIENT SERVICES
Unison's objective is to provide long-term care services across the
continuum of care from independent living services to subacute care services,
all of which are provided primarily to the elderly. Independent living
facilities that offer assistance with activities of daily living are appropriate
for those among the elderly requiring limited healthcare services. Assisted
living facilities are appropriate for residents in need of greater assistance,
but who do not need the services of a skilled nursing facility. The services of
an assisted living facility are appropriate where nutritional, housekeeping, and
only limited medical services are needed. For the elderly and other patients in
need of specialized support, rehabilitation, nutrition, respiratory therapies
and other treatments, skilled nursing care is often required. The innovation of
specialized subacute services within skilled nursing facilities also responds to
the needs of patients requiring intense and specialized treatment and
rehabilitation therapy services immediately after hospitalization.
Assisted and Independent Living Services. Services and facilities at
assisted and independent living centers include central dining facilities,
limited nursing services, recreational areas, social programs, housekeeping,
laundry and maintenance service, emergency call systems, special features for
handicapped persons and transportation to shopping and special events. These
facilities provide fewer nursing and medical services than are provided at
Unison's long-term care facilities. Unison believes that the availability of
healthcare services and assistance with the activities of daily living are
significant reasons that residents move to an assisted or independent living
center.
Skilled Nursing Care Services. Unison's skilled nursing facilities provide
basic healthcare services, including room and board, dietary services,
recreational therapy, social services, housekeeping, laundry and nursing
services. In addition, the long-term care facilities dispense medications and
otherwise follow care plans prescribed by the patient's physician. Unison's
long-term care facilities are licensed by state licensing agencies and are
extensively regulated at the federal, state, and local level. Unison also
provides for the delivery of specialty medical services at its facilities.
Subacute and Other Specialty Care Services. Unison's facilities currently
offer a wide variety of subacute and specialty healthcare services, which may
include (i) intensive rehabilitation services; (ii) wound management; (iii)
enteral and parenteral feeding programs; (iv) intravenous drug administration,
including chemotherapy; (v) respiratory therapy; (vi) orthopaedic rehabilitation
and (vii) other specialized subacute services. Subacute and other specialty care
is a major component of Unison's strategy. Unison provides care to certain types
of patients with specialized needs through designated units such as those for
the treatment of Alzheimer's disease, AIDS and other conditions. These units are
located in specially designed sections within selected facilities and are
staffed by specially trained personnel. As of March 31, 1997 Unison operated 246
licensed beds in Alzheimer's units, 36 beds in AIDS units and more than 200 beds
in other specialty units, including wound management, hospice care,
rehabilitation services and respiratory therapy. In addition to providing care
tailored to the unique needs of patients within these units, these services
include education and support to the patients' families. These units generally
receive higher levels of reimbursement. The daily cost to patients for Unison's
specialty services are generally significantly less than the cost charged for
similar services by acute care hospitals.
Ancillary Services. Unison provides ancillary services to the residents of
skilled nursing facilities in response to physician orders. The major ancillary
services include physical, speech and occupational therapies, pharmaceuticals,
parenteral and enteral nutrition, infusion and respiratory therapies and
laboratory services.
PAYOR MIX
Medicare, Medicaid, and other payor sources each pay at different rates,
which are customarily expressed as rates per patient day. Changes in the mix of
a facility's patient population among Medicaid, Medicare, and private pay can
significantly affect the profitability of the facility's operations because of
the widely varying
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rates of payment between these various payors. As the following table indicates,
Unison has achieved growth in its quality mix of payor sources throughout the
periods presented.
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YEAR ENDED DECEMBER 31,
----------------------------------- PRO FORMA
SOURCE OF REVENUES 1993 1994 1995 1996 1996(1)
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Medicare........................................ 3.4% 9.1% 26.9% 29.5% 30.2%
Private and other............................... 13.8 32.4 17.2 17.0 18.1
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Quality mix................................ 17.2 41.5 44.1 46.5 48.3
Medicaid........................................ 82.8 58.5 55.9 53.5 51.7
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Total.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
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(1) Adjusts for the Completed Acquisitions and the Dispositions as though such
transactions occurred as of the first day of the period presented.
ACQUISITIONS
On October 31, 1996, Unison acquired Signature. As of March 31, 1997,
Signature operated 11 long-term care facilities with 1,043 licensed beds in
Arizona and Colorado. Signature provides rehabilitation services through its
related company, RehabWest. Signature also operates two assisted living
facilities with 124 units. Signature's long-term care facilities generally offer
the same types of services as are provided by Unison's other facilities.
At closing, the shareholders of Signature and RehabWest received (a) cash
equal to approximately $42.4 million (minus the amount paid by Unison to redeem
outstanding options for shares of Signature Health Care), (b) 1,509,434 shares
of Unison Common Stock, and (c) promissory notes of Unison in the aggregate
principal amount of $1.1 million bearing interest at the rate of 8% per annum
and maturing one to two years after the closing, which have been deposited into
escrow to secure Signature's representations and warranties. In accordance with
the adjustment provisions of the Signature merger agreements relating to their
stockholders' equity at closing, in March 1997 the former shareholders of
Signature received an additional $2.5 million in convertible promissory notes
and shares of Unison common stock.
On October 31, 1996, Unison also acquired Ampro in a pooling of interests
transaction. The consideration paid for Ampro included: (a) cash of
approximately $237,000, (b) 540,000 shares of Unison Common Stock, and (c) a
promissory note in the amount of $250,000, bearing interest at the rate of 10%
per annum and due in installments through April 15, 1998, which has since been
prepaid. The cash and promissory note eliminated the interest of a single
shareholder and represented less than 10% of the transaction value. Ampro
operates a medical laboratory business with laboratories in Texas, Missouri and
Tennessee which, at March 31, 1997, provided testing services for approximately
275 nursing homes and other healthcare facilities.
Unison's most significant acquisition prior to 1996 was the purchase of
BritWill on August 10, 1995. The consideration for the purchase included a
debenture that was fully converted into 561,815 shares of Unison Common Stock
and a combination of promissory notes and lump sum contingent payment
obligations totaling $25.0 million, as well as certain monthly contingent
payment obligations. Unison's only remaining obligation related to the BritWill
Acquisition is a $9.8 million contingent obligation (the "Additional Payment
Obligation"). The Additional Payment Obligation is payable in monthly
installments of $98,854 to $166,376 which includes interest at 12.0% to 14.0%
with a balloon payment of $8.1 million due August 9, 2000. Because these
payments are contingent upon revenue targets that, in light of recent
acquisitions are likely to be achieved, the Additional Payment Obligation is
recorded as long-term debt and an increase in lease operating rights in the
consolidated balance sheet. In the event of a sale by Unison prior to August 9,
2000 of debt or equity securities exceeding $10.0 million, the unamortized
balance of the Additional Payment Obligation will be due in full. See
"Management's Discussion and Analysis of Financial Condition and Results of
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Operations -- Liquidity and Capital Resources" and "Executive
Compensation -- Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."
The Company has also acquired and developed several other ancillary
businesses in recent years. In May 1995, Unison established Quest to develop an
institutional pharmacy business. Quest has acquired the pharmacy operations of
Med-Shop Pharmacy in Gilmer, Texas, Indiana Prescription Lab, an institutional
pharmacy in Bloomington, Indiana, and Pharmcare, an institutional pharmacy in
Longview, Texas. As of March 31, 1997, Quest provided institutional pharmacy
services to 84 long-term care facilities, including 31 Unison facilities and 53
facilities operated by others. Since March 1995 the Company has also operated a
Medicare Part B billing and supply company that specializes in wound management
and enteral and parenteral feeding services. On February 1, 1996, Unison
acquired Sunbelt to provide therapy services. As of March 31, 1997, Sunbelt
(including RehabWest) provided therapy services to 94 facilities, including 35
Unison facilities and 59 facilities operated by others.
The following table shows the growth in the number of long-term care
facilities and independent and assisted living facilities leased or managed by
Unison (excluding two closed facilities) as of the dates indicated together with
the related number of licensed beds or living units, and the numbers as adjusted
to exclude the facilities held for disposition by Unison.
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DECEMBER 31,
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1994 1995 1996 1996 AS ADJUSTED
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STATE FACILITIES BEDS FACILITIES BEDS FACILITIES BEDS FACILITIES BEDS
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Long-term care facilities:
Florida............................. 2 210 1 150 1 150 1 150
Indiana............................. 1 162 12 1,081 12 1,073 9 804
Michigan............................ 1 71 2 307 2 307 2 307
Nevada.............................. 1 99 1 99 1 99 1 99
Pennsylvania........................ 1 74 1 74 1 74 1 74
Tennessee........................... 1 89 2 176 1 89 1 89
Alabama............................. 3 337 2 189 2 189 2 189
Arizona............................. 1 115 1 115 7 685 7 685
Idaho............................... 2 183 2 183 2 183 2 183
Kansas.............................. 1 59 3 208 2 106 2 106
Washington.......................... 2 222 2 222 2 187 2 187
Texas............................... -- -- 16 1,825 16 1,837 13 1,469
Colorado............................ -- -- -- -- 5 476 5 476
-- -- -- --
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16 1,621 45 4,629 54 5,455 48 4,818
-- -- -- --
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Assisted and independent living
facilities:
Pennsylvania........................ 1 30 1 30 1 32 1 32
Alabama............................. 3 74 3 82 3 82 3 82
Tennessee........................... -- -- 1 117 -- -- -- --
Idaho............................... -- -- -- -- 1 60 1 60
Indiana............................. -- -- -- -- 1 22 1 22
Arizona............................. -- -- -- -- 2 124 2 124
-- -- -- --
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4 104 5 229 8 320 8 320
-- -- -- --
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Total............................. 20 1,725 50 4,858 62 5,775 56 5,138
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OPERATIONS
Unison is responsible for the day-to-day operation of both operated (owned
or leased) and managed facilities. These responsibilities include recruiting,
hiring and training all nursing and other personnel, and directing the full
scope of patient care activities that are necessary to operate the facilities.
In general, these activities include direct patient care, nursing services, food
service, social services and resident activity programs, housekeeping and
maintenance, business office services including billing and accounts receivable
management, accounts payable, accounting and finance, quality assurance, and
regulatory compliance at each facility.
Organization. Unison believes that long-term and specialty care facilities
should be managed on a decentralized basis. This approach is intended to place
direct decision making as close to the bedside as possible so that facilities
will be able to respond to the specific needs of each medical community. In
order to
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accomplish this, Unison has created five regions, each of which is supervised by
a regional director. The regional director is supported by a clinical operations
specialist, a financial consultant, a regional director of marketing, and
assistant regional managers and clerical personnel, all of whom are employed by
Unison. Daily operations of each leased and managed facility are supervised by
an on-site licensed administrator. The administrator of each facility is
supported by other professional personnel, including a medical director, who
assists in the medical management of the facility, a director of marketing who
directs the sales and marketing efforts of the facility and a director of
nursing who supervises a staff of registered nurses, licensed practical nurses
and nurses aides. Other personnel include dietary staff, activities and social
service staff, housekeeping, laundry and maintenance staff and a business office
staff.
Quality Management. Unison maintains a quality improvement program that is
focused on important aspects of care and critical key indicators that measure
the quality of care provided to its patients. The program is an internal
facility process focused on involvement by direct care givers. Reporting is
monitored by Unison's eight registered nurses under the direction of the Senior
Vice President of Clinical Operations. Monthly reports are used to monitor
adherence to the standards of care established by Unison's quality improvement
program. On-site visits are conducted by specially trained healthcare
professionals. The quality improvement program is designed to provide patients
with better care, and thus a higher quality of life.
In addition to its quality improvement program, Unison strives to provide
each of its facilities with resources to deliver the high quality of care Unison
expects. Policy and procedure manuals are maintained by Unison and provided to
each facility. The manuals are updated to include changes in regulatory
requirements and improvements in clinical practices.
The facility administrator at each facility is primarily responsible for
adherence to Unison's standards of practice. Each facility administrator's
incentive compensation is based, in part, on the achievement of specified
quality objectives. Clinical Operations Specialists provide individualized
on-site training to direct care givers. Clinical Operations Specialists also
conduct mock state and federal surveys in advance of scheduled annual surveys.
In recent years Unison entered into certain leases of facilities that have
had regulatory compliance or quality difficulties. Unison has generally achieved
improvements of such facilities. In August 1995, Unison acquired 28 operating
facilities in the BritWill Acquisition. Regulatory records contained 244 total
deficiencies cited at these facilities prior to acquisition. On the first
governmental review conducted after acquisition this number was reduced to 138
deficiencies, a 43% reduction in regulatory noncompliance. As of October 1, 1996
the number of deficiencies at these facilities was 61, reflecting a cumulative
reduction of 75%. As of May 20, 1997, the equivalent number of deficiencies is
17.
Marketing. Unison's marketing efforts are designed to promote higher
occupancy levels and improved payor quality mix. Quality mix has improved from
approximately 41.5% in 1994 to approximately 46.5% in 1996 and, after giving
effect to the Completed Acquisitions and the Dispositions, 48.3% in 1996. Over
the same period and on a same facility basis, average occupancy improved from
72.2% to 78.6%. On an overall basis, average occupancy was 77.0% for 1996, and
after giving effect to the Dispositions, average occupancy for 1996 was 78.9%.
Unison believes that the long-term healthcare and assisted and independent
living industries are driven by local market forces and that patients and
referral sources are generally located in the immediate geographic area of the
facility. Unison's marketing strategy emphasizes the role and performance of the
administrator and director of admissions in marketing and promoting the services
offered by Unison facilities to each local community.
Unison's marketing program is focused on market analysis, competitive
services, sales training, and accountability and tracking systems. Quantitative
and systematic reporting and analysis is monitored by the regional directors of
marketing, under the supervision of the Vice President of Marketing. Market
specific information, along with weekly and monthly reporting, is used to
monitor adherence to the standards established by Unison.
The hub of this strategy is the local facility administrator and director
of admissions and marketing. These individuals, under the direction of the
corporate and regional marketing staff, are responsible for establishing and
building relationships with various referral sources including general and
specialty physicians,
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<PAGE> 10
hospital administration and discharge planners, insurance case managers and
other local community organizations. Unison seeks to use their input in
conjunction with demographic and medical data analysis to identify specific
market needs, and to introduce new services where appropriate. The facilities
also are involved in community affairs in order to maintain a public awareness
of their services.
DESCRIPTION OF MANAGEMENT SERVICES AND AGREEMENTS
As of May 1, 1997, Unison manages two long-term care facilities pursuant to
agreements under which Unison's responsibilities include recruiting, hiring and
training all nursing and other personnel on behalf of the owner and providing
quality assurance, resident care, dietary care, marketing, accounting, and data
processing services. Services performed at the headquarters level include group
contract purchasing, employee training and development, quality assurance
oversight, human resource management, assistance with third-party reimbursement,
financial and accounting functions, cash management, system design and
development and marketing support.
Unison receives a management fee for the management of long-term care
facilities based on a percentage of net revenues of each facility. Other than
certain corporate and regional overhead costs, the costs for services provided
at a facility are the facility owner's obligation. The facility owner also is
obligated to pay for all required capital expenditures. Unison is not required
to advance funds to the owners of the facilities it manages.
COMPETITION
Unison's facilities compete with general acute care hospitals, skilled
nursing facilities, rehabilitation hospitals, long-term care hospitals, assisted
living facilities, home care providers and other subacute and specialty care
providers. Many of these companies have greater financial and other resources
than Unison. No assurance can be given that Unison will have the resources to
compete successfully with such companies. In addition, cost containment efforts,
which encourage more efficient utilization of general acute care hospital
services, have resulted in decreased hospital occupancy in recent years. As a
result, a significant number of general acute care hospitals have converted
portions of their facilities to other purposes, including various types of
long-term and subacute care. Unison believes that the primary factors in
competing for subacute patients and programs are the scope and quality of
services offered, the location and attractiveness of the facility and the price
of such services.
Unison's pharmacy, rehabilitation therapy, laboratory and product supply
businesses compete with national, regional and local pharmacies, therapy
providers, medical reference laboratories and product supply companies, some of
which have significantly greater financial and other resources than Unison. No
assurance can be given that Unison will have the resources to compete
successfully with such companies. Unison believes that the primary factors in
competing for product supply business are the price and quality of the products
offered, that the primary factor in competing for pharmacy and laboratory
businesses is prompt service and the primary factors in competing for
rehabilitation therapy business are quality of service and availability of
competent therapists.
INSURANCE
Unison carries general liability, comprehensive property damage,
malpractice, workers' compensation directors and officers and other insurance
coverages that management considers adequate for the protection of its assets
and operations. The Company is partially self insured with respect to certain
healthcare benefits and workers' compensation benefits. There can be no
assurance, however, that the coverage limits of such policies will be adequate
or that insurance will continue to be available to Unison on commercially
reasonable terms in the future. A successful claim against Unison in excess of
its insurance coverage could have a material adverse effect on Unison and its
financial condition and results of operations. Claims against Unison, regardless
of their merit or outcome, may also have an adverse effect on Unison's
reputation and business.
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<PAGE> 11
GOVERNMENT REGULATION
Introduction. The federal government and all states in which Unison
operates regulate various aspects of Unison's business. All of Unison's skilled
nursing facilities are certified or approved as providers under one or more of
the Medicaid or Medicare programs. To participate in the Medicare or Medicaid
program, each facility must comply with federal participation requirements and
meet additional state licensure requirements. All of these programs are
currently the subject of numerous legislative and regulatory proposals at both
federal and state levels, some of which could adversely affect Unison. Further,
some state Medicaid programs require certification of all beds in a facility,
which may limit the ability of a facility in such states to establish distinct
Part A Medicare units for subacute care. Unison does not currently operate in
any of these states. Long-term care facilities include both skilled nursing
facilities for Medicare and nursing facilities for Medicaid. The Federal Social
Security Act (the "Act") authorizes the Secretary of the Department of Health
and Human Services to execute agreements with state survey agencies to determine
whether skilled nursing facilities meet the federal participation requirements
for Medicare. State survey agencies perform the same survey tasks for nursing
facilities participating or seeking to participate in the Medicaid program. The
results of Medicare and Medicaid surveys are used by the Healthcare Financing
Administration ("HCFA") and Medicaid state agencies as the basis for decisions
to execute, deny or terminate provider agreements with facilities.
Enforcement Proceedings and Sanctions; Certification Requirements. Under
the Omnibus Reconciliation Act of 1987 ("OBRA"), HCFA has promulgated survey,
certification and enforcement rules governing skilled nursing facilities and
nursing facilities participating in the Medicare and Medicaid programs. Among
other things, the HCFA rules governing survey and certification of long-term
care facilities define a number of terms used in the survey and certification
process. The rules require states to enact state plans (required by federal law)
to incorporate the provisions of the rules, including the full range of remedies
for nursing facilities subject to the jurisdiction of the state Medicaid agency.
Additional remedies are available.
Unannounced standard surveys must be conducted at least every 15 months
with a state-wide average of 12 months. In addition to the standard survey,
survey agencies have the authority to conduct surveys as frequently as necessary
to determine whether facilities comply with requirements of participation, to
determine whether facilities have achieved correction and to monitor care if
there is a change of ownership or management of a facility. Furthermore, the
state survey agency must review all complaint allegations and conduct a standard
or an abbreviated standard survey to investigate complaints of violations of
regulatory requirements by long-term care facilities if a review of the
complaint shows that a deficiency in one or more of the federal requirements may
have occurred and only a survey will determine whether a deficiency or
deficiencies exist. If a facility has been found to furnish substandard quality
of care, or to have deficiencies requiring "significant improvement," it is
subject to an extended survey. The extended survey is intended to identify
policies and procedures which may have caused a facility to furnish substandard
quality of care.
HCFA's rules allow either HCFA or state agencies to impose one or more
remedies provided under the rules for any particular deficiency. Facilities must
provide a plan of correction for all deficiencies regardless of whether a remedy
is imposed. At a minimum, the following remedies are available: termination of
provider agreement; temporary management; denial of payment for new admissions;
civil money penalties; closure of the facility in emergencies or transfer of
residents or both; and state monitoring. States may also adopt optional
remedies. The rules divide remedies into three categories. Category 1 remedies
include directed plans of correction, state monitoring and directed in-service
training. Category 2 remedies include denial of payment for new admissions;
denial of payment for all individuals (imposed only by HCFA); and civil money
penalties of $50 to $3,000 per day. Category 3 remedies include temporary
management, immediate termination or civil money penalties of $3,050 to $10,000
per day. The rules define situations in which one or more of the penalties must
be imposed.
The HCFA certification, survey and enforcement regulations impose
significant new burdens on long-term care facilities. The regulations may
require state survey agencies to take aggressive enforcement actions. The
breadth of the rules create uncertainty over how the rules will be implemented
and the standards of compliance.
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<PAGE> 12
Unison believes that its facilities substantially comply with the various
state licensure and Federal certification requirements applicable to them.
However, in the ordinary course of its business, Unison sometimes receives
notices of alleged deficiencies for failure to comply with regulatory
requirements. Unison reviews such notices and attempts to take corrective
action. Unison's facilities sometimes receive notices from state agencies which
result in fines and/or the agencies taking steps to decertify the facilities
from participation in Medicare and Medicaid programs. In one instance, Unison
paid or agreed to pay monetary penalties totaling $134,225 (following reductions
due to waiver of appeal rights) for violations of Medicare regulations and
approximately $16,000 for violations of state regulations, and voluntarily
terminated the participation of that facility in the Medicare program and
transferred residents to other facilities. This instance involved Unison's
Hillside Care Center located in Bonner Springs, Kansas. Hillside is currently
closed and is one of the Disposition Facilities.
Certificates of Need. Many states (although not every state in which
Unison operates) have adopted certificate of need or similar health planning
laws which generally require prior state agency approval of certain
acquisitions, new bed additions or services or capital expenditures. To the
extent that such approvals are required for Unison to expand its operations or
enter new geographic markets, Unison could be adversely affected by its
inability to obtain the necessary approvals and could incur delays and expenses
associated with obtaining such approvals.
Patient Referral Regulations. Unison is also subject to federal and state
laws that prohibit direct and indirect payments between healthcare providers
that are intended to induce or encourage the referral of patients to a
particular provider of items or services. Violation of these laws may result in
criminal fines, imprisonment and exclusion from the Medicare and Medicaid
programs. Federal regulations establish certain safe harbors from liability
under this statute. While failure to satisfy all of the criteria for a safe
harbor does not necessarily mean that an arrangement is unlawful, arrangements
that are of the same generic kind as those for which a safe harbor is available
may be subject to scrutiny if they fail to qualify for the appropriate safe
harbor. In addition, under separate statutes, submission of claims for payment
that are deemed to be false or fraudulent, or for items or services that are
"not provided as claimed," may lead to civil monetary penalties, criminal fines
and imprisonment, and/or exclusion from participation in Medicare, Medicaid and
other federally funded state healthcare programs.
Under Medicare conditions of participation and some state licensure laws,
Unison, because of its method of service delivery, is required to contract with
healthcare providers, practitioners and suppliers, including hospitals,
facilities, physicians, pharmacies and medical equipment companies. Some of
these individuals or entities may refer, or be in a position to refer, patients
to Unison, and Unison may refer, or be in a position to refer, patients to
certain of these individuals or entities. The Health Insurance Portability and
Accountability Act ("HR 3103"), which was signed by President Clinton on August
21, 1996, has for the first time established a procedure requiring the Secretary
of the Department of Health and Human Services to issue advisory opinions
concerning some activity punishable under federal healthcare fraud statutes. See
"-- HR 3103". The section concerning advisory opinions did not take effect until
six months after the date of enactment of HR 3103, and will sunset four years
after the date of enactment. Although Unison believes its practices are not in
violation of these laws, there can be no assurance that such laws will
ultimately be interpreted in a manner consistent with Unison's practices.
Additional legislation that became effective in stages on January 1, 1992
and January 1, 1995 prohibits physician referrals for certain "designated health
services" rendered to Medicare and Medicaid patients by a provider in which the
referring physician has an ownership interest or other financial relationship.
Various exceptions are available for financial arrangements that would otherwise
prohibit physician self-referrals. Many states have also enacted physician
self-referral laws that apply whether or not Medicare or Medicaid payments are
involved. Similar penalties, including fines and loss of licensure or
eligibility to participate in government reimbursement programs, apply to
violations of these state self-referral laws. These self-referral laws could
require Unison to modify its contractual arrangements in order to satisfy an
available exception, or limit the ability of physicians with whom Unison has
compensation arrangements to refer patients to Unison.
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<PAGE> 13
The nursing home industry has been a target of focus by government
regulators seeking to discover and prosecute claims of healthcare fraud and from
time to time Unison has received inquiries related to such claims. Medicare
intermediaries and carriers have been given new instructions from HCFA
concerning investigating and referring for prosecution suspected instances of
Medicare and Medicaid fraud and abuse. In May 1996, the federal government
announced the first year results of its "Operation Restore Trust" initiative.
This initiative is a combined federal and state effort designed to combat
healthcare fraud, waste and abuse and specifically targets the Medicare and
Medicaid programs in connection with services of home health agencies, nursing
homes and durable medical equipment suppliers. These entities are targeted
because they account for the fastest growing cost areas in the Medicare and
Medicaid programs. Operation Restore Trust originally focused on five states:
California, Florida, Illinois, New York and Texas. It is now extended to all
states and is concerned with detection of suspected nursing facility fraud and
abuse. This effort is focused on problems with claims for services not rendered
or not provided as claimed and claims falsified to circumvent coverage
limitations on medical supplies. The Company expects efforts of this sort to
continue.
Payment For Services. Unison derives a significant portion of its net
revenues, directly or indirectly, from the Medicare and Medicaid programs. These
programs are subject to statutory and regulatory changes, retroactive and
prospective rate adjustments, administrative rulings and funding restrictions,
all of which could limit or reduce reimbursement for Unison's services. Any
significant decrease in Medicare or Medicaid reimbursement amounts could have a
material adverse effect on Unison. Unison also obtains payment from private
insurers, including managed care organizations and private pay patients.
Unison's facilities also have contracts with private payors, including health
maintenance organizations and other managed care organizations, to provide
certain healthcare services to cover patients for a set per diem payment for
each patient. There can be no assurance that the rates paid to Unison by these
payors will remain at current levels or be adequate to reimburse Unison for the
cost of providing services to covered beneficiaries. In addition, cost increases
due to inflation without corresponding increases in reimbursement could
adversely affect Unison's business.
The Medicare Program. The Medicare Program is a federally funded and
administered health insurance program for individuals age 65 and over or who are
disabled as defined by the Social Security Administration. Medicare covers and
pays for rehabilitation therapy services furnished in facilities in various
ways. Medicare reimburses the skilled nursing facility based on a reasonable
cost standard. For rehabilitation services provided directly, specific
guidelines exist for evaluating the reasonable cost of physical therapy,
occupational therapy and speech language pathology services. Medicare applies
salary equivalency guidelines in determining the reasonable cost of physical
therapy and respiratory services, which is the cost that would be incurred if
the therapist were employed by a nursing facility, plus an amount designed to
compensate the provider for certain general and administrative overhead costs.
Medicare pays for occupational therapy and speech language pathology services on
a reasonable cost basis, subject to the so-called "prudent buyer" rule for
evaluating the reasonableness of the costs. Unison's gross margins for services
reimbursed under the salary equivalency guidelines are significantly less than
services reimbursed under the "prudent buyer" rule.
HCFA recently proposed rules applying salary equivalency guidelines to
certain speech and occupational therapy services, while updating physical and
respiratory therapy guidelines. The proposed rates for occupational therapy and
speech language pathology services are lower than the Medicare reimbursement
rates currently received by Unison for these services. The proposed rates are
open for comment and have been subject to criticism by the industry. Unison
cannot predict when or if changes will be made to current Medicare reimbursement
methodologies. The imposition of salary equivalency guidelines on speech
language pathology and occupational therapy services could significantly impact
Unison's margins.
The Medicare program covers patients requiring daily skilled nursing and
other rehabilitation care following a minimum three-day stay in a general acute
care hospital, but does not cover patients requiring only intermediate or
custodial levels of care. With certain exceptions, payment for skilled nursing
facility services is made prospectively with each facility receiving an interim
payment during the year for its expected reimbursable costs. The interim payment
is later adjusted to reflect actual allowable direct and indirect costs of
services based on the submission of an annual cost report at year end. Each
facility is also subject to limits on reimbursement for routine costs.
Exceptions to these limits are available for, among other things, the
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<PAGE> 14
provision of atypical services. Due in part to the provision of subacute
services, Unison's costs for care delivered to Medicare patients in certain of
its long-term and specialty healthcare facilities have exceeded the routine cost
limits. Unison's failure to recover excess costs or to obtain such exceptions
could adversely affect Unison's results of operations.
The Medicaid Program. All of Unison's nursing facilities are certified to
participate in applicable state Medicaid programs. Medicaid is a joint
federal-state medical assistance program for individuals who meet certain income
and resource standards. Facilities participating in the Medicaid program are
required to meet state licensing requirements to be certified in accordance with
state and federal regulations and to enter into contracts with the state agency
to provide services at rates established by the state. Current federal law
requires Medicaid programs to pay rates that are reasonable and adequate to meet
the costs which must be incurred by a nursing facility in order to provide care
and services in compliance with applicable standards. There can be no assurance
that this provision will survive the current legislative efforts to revise
Medicaid. Beyond this general mandate, however, states have considerable
flexibility in establishing their Medicaid reimbursement systems, and as a
result, the payment methodologies and rates vary significantly from state to
state. All of the states in which Unison operates Medicaid-certified facilities
use a cost-based reimbursement system under which reimbursement rates are
determined by the state from cost reports filed annually by each facility, on a
prospective or retrospective basis. Recently, several states, including Texas
and Pennsylvania, have adopted case-mix prospective payment systems, pursuant to
which payment levels increase based on a patient's acuity level and need for
services. Reimbursable costs normally include the costs of providing healthcare
services to patients, administrative and general costs, and the costs of
property and equipment. Not all costs incurred are reimbursed, however, because
of cost ceilings applicable to both operating and fixed costs. Some state
Medicaid programs include an incentive allowance for providers whose costs are
less than the ceilings and who meet other requirements. In addition, certain
Medicaid payments are subject to relatively long collection cycles and payment
delays due to budget shortfalls in state Medicaid programs.
Medicaid reimbursement regulations for Indiana nursing facilities have been
revised three times since August 1, 1994. The first set of revised regulations
(known as "Rule 14") replaced the Rule 4.1 prospective payment system which had
existed since 1983. Under Rule 4.1, actual rate increases after the base period
were generally limited to approximately 3.0% annually and facility operators
were permitted to bill separately for certain ancillary therapy services and
non-routine medical supplies.
With the adoption of Rule 14, the Indiana reimbursement system changed from
a true prospective payment system to a modified cost-based system. Base rates
are now determined by actual costs in the base period subject to various line
item limits. Rates for subsequent years are set at the lower of costs from the
prior year or rates from the prior year inflated by the HCFA Skilled Nursing
Facility Market Basket Index, subject to maximum allowable limits and various
line item limits. This system has, over the last decade, resulted in an increase
in annual reimbursement rates of approximately 6%. Rule 14 also precludes
facility operators from billing separately for certain ancillary therapy
services and non-routine medical supplies. The overall impact of Rule 14 reduced
total Medicaid nursing facility payments by $10 million statewide out of total
prior year expenses of $720 million. The elimination of separate billing for
supplies and therapies had a significant effect on certain facility operators
who had relied heavily on this mechanism to underwrite operating losses from per
diem rates. Rule 14.1, Rule 14.2 and legislation effective July 1, 1995 have
made minor amendments which have generally increased certain line item limits.
HR 3103. On August 21, 1996, President Clinton signed HR 3103, which
contains a variety of significant healthcare fraud and abuse provisions,
including: creation of a coordinated federal healthcare fraud and abuse program;
establishment of a Medicare integrity program; expansion of current healthcare
fraud and abuse sanctions; creation of a healthcare fraud criminal sanction;
creation of a criminal penalty for fraudulent disposition of assets in order to
obtain Medicaid benefits; and expansion of the authority to impose, and
increasing the amount of, civil monetary penalties.
Pharmacy. Pharmacists and those providing pharmacy services in the United
States are regulated by state statutes and the rules and regulations of state
boards of pharmacy. Currently, Unison operates pharmacies only in Texas and
Indiana. As required by Texas and Indiana law, Unison and its pharmacists are
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<PAGE> 15
licensed as a retail pharmacy and as pharmacists, respectively. In addition,
both state and federal regulators prohibit the dispensing of certain drugs or
medicines other than pursuant to a prescription written by a licensed
practitioner. In order to implement these restrictions, regulations impose
strict recordkeeping requirements with respect to the handling and dispensing of
controlled substances, small quantities of which are maintained in Unison's
pharmacy for use in filling prescriptions. These requirements also impose
significant recordkeeping obligations upon Unison and its pharmacists. Unison is
subject to regular audits by governmental authorities to monitor compliance with
recordkeeping and other requirements imposed by law and regulation. Penalties
for failure to comply with applicable regulations can range from imposition of
fines to the suspension or revocation of the license of the pharmacy, one or
more pharmacists, or both. As of March 31, 1997 Unison provided pharmacy
services to 14 Company-affiliated, and 42 non-affiliated skilled nursing
facilities in East Texas, and nine Unison-affiliated and eleven non-affiliated
skilled nursing facilities in Indiana (including the Disposition Facilities),
and eight other Unison-affiliated skilled nursing facilities in Arizona,
Colorado, Washington and Idaho.
Health Care Reform. The Clinton administration and various members of
Congress have made a number of legislative proposals to reform the healthcare
system. Congress is also considering proposals to significantly reduce Medicare
and Medicaid spending, either as a part of efforts to reduce the budget or as a
separate initiative. In addition, some of the states in which Unison operates
are considering or implementing various healthcare reform proposals. These
proposals could limit the types of services or number of providers available to
Medicaid beneficiaries. Unison anticipates that Congress and state legislatures
will continue to review and assess healthcare reform and budget reduction. Talks
in Congress have reached a stalemate with regard to the type and extent of
legislative reform of Medicare and Medicaid programs. Due to uncertainties
regarding the ultimate features of reform or budget initiatives and their
enactment and implementation, Unison cannot predict which, if any, reform
proposals will be adopted, when they may be adopted or what impact they may have
on Unison. No assurance can be given that such measures will not have a material
adverse effect on Unison.
EMPLOYEES
As of May 1, 1997, the Company employed approximately 4,600 full time
equivalent employees. Unison has collective bargaining agreements covering
approximately 500 of its full time equivalent employees. Unison believes that
its overall relations with its employees are good.
ITEM 2. PROPERTIES
PROPERTIES
The following table summarizes certain information regarding the long-term
care facilities and assisted and independent living centers operated by Unison
as of March 31, 1997. Except as indicated, all of the facilities are leased.
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<PAGE> 16
The following table lists, by state, the nursing facilities operated by the
Company as of March 31, 1997.
<TABLE>
<CAPTION>
LICENSED MANAGED FOR
NUMBER BEDS OWNED LEASED THIRD PARTIES(1)
------ -------- ----- ------ ----------------
<S> <C> <C> <C> <C> <C>
Alabama...................................... 2 189 -- 2 --
Arizona...................................... 7 685 3 4 --
Colorado..................................... 5 473 3 2 --
Idaho........................................ 2 183 -- 2 --
Indiana(2)................................... 12 1,074 -- 12 --
Kansas....................................... 2 106 -- 2 --
Michigan..................................... 2 307 -- 1 1
Nevada....................................... 1 99 -- 1 --
Pennsylvania................................. 1 74 -- 1 --
Tennessee.................................... 1 89 -- -- 1
Texas........................................ 13 1,474 -- 13 --
Washington................................... 2 187 -- 2 --
----- --- ----- ---
--
Number of nursing facilities................. 6 42 2
50
=== ===== ===
==
Number of licensed beds...................... 4,940 480 4,300 160
===== === ===== ===
</TABLE>
- ---------------
(1) Excludes two facilities with an aggregate of 222 licensed beds for which
Unison provides reduced-scope management services and receives management
fees averaging 3.0% of revenues.
(2) Includes three facilities with an aggregate of 269 licensed beds which are
held for disposition.
The following table lists, by state, the independent living and assisted
living facilities operated by the Company as of March 31, 1997. All of the
facilities are leased.
<TABLE>
<CAPTION>
NUMBER UNITS
------ -----
<S> <C> <C>
Alabama..................................................... 3 80
Arizona..................................................... 2 124
Idaho....................................................... 1 60
Indiana..................................................... 1 19
Pennsylvania................................................ 1 32
---
-
315
8
===
=
</TABLE>
Unison leases approximately 23,000 square feet of office space in
Scottsdale, Arizona and Denver, Colorado. The Scottsdale office houses the
executive offices of Unison, and the lease for that space expires in the year
2004. Unison maintains regional offices in Lakewood, Colorado and Indianapolis,
Indiana. These regional offices are either in small office suites or in homes of
the regional executives. Quest Pharmacies, Inc. ("Quest") leases approximately
3,600 square feet of commercial office space in Longview, Texas for its pharmacy
operations and approximately 2,000 feet of office space in Bloomington, Indiana
for its Indiana pharmacy. Sunbelt, through the four therapy companies, leases an
aggregate of approximately 38,000 square feet of space for outpatient clinics
and fitness centers in Mississippi and Alabama. Ampro leases an aggregate of
approximately 7,700 square feet for office and laboratory space in Texas and
Tennessee and owns one building with approximately 4,000 square feet of space in
Missouri. Lease terms on most of the office, pharmacy, laboratory and therapy
space range from one to five years. Management believes that Unison's leased
properties are adequate for its present needs and that suitable additional or
replacement space will be available as required.
Unison leases 50 long-term and specialty healthcare facilities and assisted
or independent living centers. Unison's leases typically are triple net
obligations, have initial terms of 5-10 years with renewal options for up
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<PAGE> 17
to 15 to 20 years and are generally classified as operating leases within the
meaning of Statement of Financial Accounting Standards No. 13. Unison's leases
typically provide for automatic rent increases or repricing. Unison typically
grants its lessor a security interest in Unison's personal property at the
leased facility. Unison's leases are typically entered into by its subsidiaries
and guaranteed by Unison. Some of the leases require Unison to maintain a
minimum net worth, expend specified sums per bed for capital expenditures,
maintain certain current ratios and coverage ratios and prohibit Unison from
operating any additional facilities within a certain radius of the leased
facility. In addition, Unison is generally required to maintain comprehensive
insurance covering the facilities it leases as well as personal and real
property damage insurance and professional malpractice insurance. Failure to pay
rent within a specified time period constitutes a default under each lease
agreement, which default, if uncured, permits the facility's lessor to terminate
the lease. In all cases, Unison's interest in the premises is subordinated to
that of the lessor's mortgage lenders.
Unison's most significant lessors are Omega Healthcare Investors, Inc.
("Omega") from which Unison leases 14 facilities, American Health Properties
from which Unison leases six facilities and BritWill Investments-Texas, Ltd.
("BritWill Texas") from which Unison leases six facilities. The leases typically
include cross default provisions. Covenants in the Omega leases require
maintenance of specified operating ratios, levels of working capital and net
worth. As of December 31, 1996, Unison was not in compliance with these
covenants. Omega has agreed to waive these requirements as of December 31, 1996.
Unison is in the process of renegotiating the Omega leases to provide for a
single lease of all Omega properties and to restructure the associated
covenants.
ITEM 3. LEGAL PROCEEDINGS
Unison is, and may in the future be, party to litigation arising in the
ordinary course of its business. It is also routinely subject to surveys and
investigations by regulators and payors. There can be no assurance that Unison's
insurance coverage will be adequate to cover all liabilities occurring by reason
of such claims or investigations or that any such matters that are not covered
by insurance will not have an adverse effect on Unison's business.
Unison and certain of its current and former directors and officers are
named as defendants in several class action complaints seeking unspecified
damages following Unison's announcement in March 1997 that the Company expected
to restate its financial statements for the nine-month period ended September
30, 1996. To date, six such claims have been filed in federal district court in
Phoenix, Arizona alleging violations of Sections 10 and 20 of the Exchange Act
and Rule 10b-5 promulgated thereunder. While the purported class periods and the
named defendants vary, the broadest class period to date asserts that between
May 14, 1996 (the date of Unison's announcement of first quarter results) and
March 10, 1997 (the date before Unison's March 11 announcement of the
restatement) the defendants knew, or were reckless in not knowing, that Unison's
results for the first three quarters of 1996 were materially overstated. The
individual defendants named in some or all of these actions are Jerry M. Walker
(the Company's former Chief Executive Officer), Craig Clark (the Company's
former Chief Financial Officer), Paul Contris (the Company's former Vice
President of Acquisitions), Phillip Rollins (the Company's Chief Operating
Officer) and Bruce Whitehead (Chairman of the Board). In addition, the Company
is informed that an action has been filed in the Superior Court of the State of
California (County of Orange) against the Company and the aforesaid individuals,
as well as John T. Lynch, Jr. (a member of the Board of Directors), Trouver
Capital Partners, L.P. ("Trouver") (a private investment banking firm of which
Mr. Lynch is a general partner), Cruttenden Roth Inc. and Wheat First Butcher
Singer (the latter two entities are named individually and as representatives of
a purported defendant underwriter class). The Orange County action is
purportedly filed on behalf of all persons who acquired Unison stock in the
Company's December 1995 initial public offering ("IPO"); it essentially alleges
that in connection with the IPO, the defendants made positive statements about
the Company's prospects for which there was no basis, that accounts receivable
were overstated, and that the Company's statement of financial position as of
September 30, 1995 was not fairly presented. Unison's bylaws require the Company
to indemnify current and former officers and directors to the extent permitted
by Delaware law against such liabilities and related expenses. The Company
denies the material allegations in these complaints and intends to defend the
actions vigorously. Management believes that the costs of the ultimate
disposition of
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<PAGE> 18
these matters, if any, will be substantially covered by insurance. An adverse
determination could have a material adverse effect upon Unison.
Unison has received a complaint filed on October 22, 1996 in the Texas
state district court by RehabWorks, Inc. ("RehabWorks"), a therapy services
provider, based on allegations that Unison breached a non-solicitation covenant
in a contract with RehabWorks and tortiously interfered with RehabWorks'
employment relationship with several of its former employees. RehabWorks also
claims that Unison is past due with respect to payment of fees owed the therapy
services provider in the amount of approximately $875,000 plus interest. The
complaint seeks injunctive relief plus a judgment for the unpaid fees, alleged
compensatory damages of not less than $2,375,000 and exemplary damages of not
less than $2,250,000, plus interest and attorneys' fees. Unison intends to
defend this lawsuit vigorously.
Certain of Unison's subsidiaries are defendants in a suit instituted on
June 19, 1996 in the Texas state district court of Shelby County, Texas, which
has been transferred to Dallas County (Texas Star Therapy, Inc. vs. Emory Care
Center, et al, Case No. 96-07767-B) and in a related arbitration proceeding.
Texas Star is seeking $516,577 for unpaid therapy services provided by Texas
Star during 1995 plus interest, penalties, attorney fees and costs. The Company
acknowledges its obligation for the amount of the therapy services and believed
it had reached a settlement in the amount of $725,000 in respect of all claims,
but Texas Star refused to enter into a formal settlement agreement,
notwithstanding its express agreement to do so. The Company believes that it has
offsets and counterclaims and intends to defend this lawsuit vigorously.
A Unison subsidiary is also a defendant in Carillon/Alpha Limited vs.
BritWill Healthcare Corporation, Case No. 96-5742, filed on November 8, 1996 in
the Texas state district court for Dallas County, seeking $218,000 plus interest
and attorney's fees for three months rent and related costs for the period after
the subsidiary vacated the premises and before a new tenant occupied them.
Unison has asserted various defenses and intends to defend this lawsuit
vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On October 28, 1996, a Special Meeting of Stockholders of Unison was held
in Scottsdale, Arizona. A summary of proposals considered and voted upon
follows:
(1) Adoption and approval of an Agreement and Plan of Merger, dated as
of August 2, 1996, between Unison and Signature, and approval of all
transactions contemplated by such agreement: for -- 2,565,763 shares;
against -- 6,175 shares; and abstain -- 585,613 shares.
(2) Approval to amend Unison's Certificate of Incorporation to
increase the number of authorized shares of Unison Common Stock from
10,000,000 to 25,000,000: for -- 2,511,141 shares; against -- 640,325
shares; and abstain -- 6,085 shares.
(3) Approval to (i) amend Unison's 1995 Stock Option Plan to increase
the number of shares of Unison Common Stock authorized thereunder from
511,046 to 800,000; and (ii) increase formula grants to nonemployee
directors from 6,246 shares on the first election to the Board of Directors
and on each fifth anniversary thereafter to 15,000 shares (17,500 shares in
the case of the Chairman of the Board) for 1996 and at each annual meeting
thereafter: for -- 2,088,583 shares; against -- 477,470 shares; and
abstain -- 591,498 shares.
16
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At March 31, 1997, there were approximately 98 holders of record of
Unison's Common Stock. At the same date, the Company believes that approximately
1,300 additional stockholders held shares under beneficial ownership in nominee
name or within clearinghouse positions of brokerage firms and banks. The
Company's Common Stock has been traded on The Nasdaq Stock Market's National
Market System under the symbol "UNHC" since December 19, 1995. The high and low
sales prices as reported by Nasdaq are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First quarter........................ -- -- 11 3/4 8 7/8 14 1/2 2 5/8
Second quarter....................... -- -- 15 1/2 10 1/4 -- --
Third quarter........................ -- -- 15 1/8 10 1/4 -- --
Fourth quarter....................... 9 3/8 9 13 1/4 8 -- --
</TABLE>
Unison has not paid a common dividend and does not anticipate declaring a
common dividend in the near future. Because of its substantial losses in 1996,
Unison does not currently satisfy the minimum tangible net worth criteria for
maintaining the listing of its common stock on the Nasdaq Stock Market's
National Market System. Management is exploring various options for maintaining
Unison's stock listing.
ITEM 6. SELECTED FINANCIAL DATA
UNISON
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
ACTUAL
--------------------------------------------------------- PRO FORMA
1992 1993 1994 1995(1) 1996 1996(2)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(3):
Total revenues............................ $ 4,523 $ 7,011 $ 18,406 $ 68,488 $ 148,674 $182,382
Expenses:
Wages and related....................... 2,201 3,689 9,593 35,047 85,789 99,833
Other operating......................... 1,727 2,629 6,462 24,032 64,771 71,664
Rent.................................... 155 206 1,406 6,673 15,658 15,613
Interest................................ 14 44 147 1,176 5,824 15,638
Depreciation and amortization........... 88 157 286 1,311 4,561 7,500
Impairment losses....................... -- -- -- -- 3,865 3,865
--------- --------- --------- --------- --------- ---------
Total expenses........................ 4,185 6,725 17,894 68,239 180,468 214,113
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes..... 338 286 512 249 (31,794) (31,731)
Income taxes (benefit).................... 100 177 172 132 (8,356) (12,692)
--------- --------- --------- --------- --------- ---------
Net income (loss)..................... $ 238 $ 109 $ 340 $ 117 $ (23,438) $(19,039)
========= ========= ========= ========= ========= =========
Net income (loss) per share............... $ 0.13 $ 0.06 $ 0.19 $ 0.05 $ (5.01) $ (3.21)
Shares used in per share calculation...... 1,806,164 1,806,164 1,806,164 2,280,213 4,676,037 5,929,037
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
ACTUAL
--------------------------------------------------------- PRO FORMA
1992 1993 1994 1995(1) 1996 1996(2)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Skilled nursing facilities:(4)
Number of facilities.................. 4 6 16 45 54 48
Number of licensed beds............... 436 671 1,621 4,629 5,455 4,818
Patient days.......................... -- 12,705 112,727 581,410 1,203,655 1,732,584
Assisted living facilities:(4)
Number of facilities.................. -- 1 4 5 8 8
Number of units....................... -- 30 104 229 320 320
Sources of patient revenues:
Medicare.............................. -- 3.4% 9.1% 26.9% 29.5% 30.2 %
Private pay........................... -- 13.8 32.4 17.2 17.0 18.1
--------- --------- --------- --------- --------- ---------
Quality mix......................... -- 17.2 41.5 44.1 46.5 48.3
Medicaid.............................. -- 82.8 58.5 55.9 53.5 51.7
--------- --------- --------- --------- --------- ---------
Total............................ -- 100.0% 100.0% 100.0% 100% 100%
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------
ACTUAL
--------------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 1996(5)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(3):
Cash and cash equivalents............... $ 169 $ 199 $ 306 $ 6,169 $ 17,409 $ 4,865
Working capital (deficiency)............ 272 298 1,691 (927) (13,955) (14,855)
Total assets............................ 879 1,862 7,468 81,301 230,921 218,377
Total debt.............................. 163 259 2,623 26,737 157,138 143,794
Stockholders' equity.................... (157) (47) 736 20,903 11,689 12,489
</TABLE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(1) On August 10, 1995, Unison acquired BritWill. The actual results for the
year ended December 31, 1995 include the results of operations for BritWill
for the five months ended December 31, 1995.
(2) Gives effect to (i) the Dispositions, (ii) the Completed Acquisitions and
(iii) the Private Offering of the Senior Notes and the application of the
net proceeds therefrom, effective, in each case, at the beginning of the
period presented.
(3) Historical financial results have been restated to include the accounts of
Ampro for all periods presented.
(4) Number of facilities, beds and units expressed are at end of period.
(5) Gives effect to the application of the remaining proceeds of the Senior
Notes effective as of December 31, 1996.
BRITWILL SEPARATE DATA
HISTORICAL
The selected historical financial data set forth below for the year ended
December 31, 1994 are derived from BritWill's audited financial statements. The
audited financial statements of BritWill for the one month ended July 31, 1995,
the six months ended June 30, 1995 and the year ended December 31, 1994,
together with the Notes thereto, are included elsewhere herein. The selected
financial data set forth below should be
18
<PAGE> 21
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" applicable to BritWill's separate
historical results and other financial information included herein.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEARS ENDED
JULY 31, DECEMBER 31,
------------------- -------------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Net patient.................... $38,378 $29,098 $53,801 $32,107 $27,107
Other.......................... 476 759 624 625 70
------- ------- ------- ------- -------
Total revenues......... 38,854 29,857 54,425 32,732 27,177
Expenses:
Operating...................... 28,333 22,666 40,037 23,483 15,162
General and administrative..... 3,870 3,350 6,252 3,670 6,714
Rent........................... 5,223 4,719 8,264 5,097 3,750
Interest....................... 906 571 872 385 2,850
Depreciation and
amortization................ 591 487 987 704 741
------- ------- ------- ------- -------
Total expenses......... 38,923 31,793 56,412 33,339 29,217
------- ------- ------- ------- -------
Income (loss) from operations.... (69) (1,936) (1,987) (607) (2,040)
Other Income:
Interest income............. 113 50 55 65 220
------- ------- ------- ------- -------
Income (loss) before income
taxes.......................... 44 (1,886) (1,932) (542) (1,820)
Income taxes..................... 31 26 53 52 --
------- ------- ------- ------- -------
Net income (loss)................ $ 13 $(1,912) $(1,985) $ (594) $(1,820)
======= ======= ======= ======= =======
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act which are based on
assumptions set forth in this discussion that could prove to be inaccurate.
Important factors that could cause actual events to vary from the discussions
herein include the factors discussed in "Business", "-- Overview" and "-- Risks
and Uncertainties".
The following material should be read in conjunction with Unison's
Consolidated Financial Statements and related notes thereto for the years ended
December 31, 1994, 1995 and 1996. All references in this discussion and analysis
to years are to fiscal years ended December 31 of such year.
SIGNIFICANT EVENTS
- - On October 31, 1996, Unison completed the private placement of its
$100,000,000 12 1/4% Senior Notes Due 2006 (the "Senior Notes").
- - On October 31, 1996, Unison completed the Signature Acquisition and the Ampro
Acquisition. See "-- Acquisitions and Dispositions".
- - On September 30, 1996, Unison announced a plan to dispose of seven
(subsequently amended to include eight) underperforming nursing facilities and
recorded a $3,865,000 nonrecurring charge in the 1996 third quarter. See
"-- Acquisitions and Dispositions".
- - For the year ended December 31, 1996, Unison recorded a net loss of
$23,438,000 compared to net income of $117,000 and $340,000 in 1995 and 1994,
respectively. See "-- Results of Operations".
19
<PAGE> 22
OVERVIEW
From a financial performance standpoint, 1996 was a very disappointing year
for Unison. In 1996, the Company pursued an aggressive expansion program and the
financial reporting and management information systems were not adequate for the
larger and more complex needs of the Company. On March 11, 1997, the Company
announced that it would restate its financial results for the nine months ended
September 30, 1996 and estimated that the restatement would be in the range of
$5,000,000 to $6,000,000. Unison also stated that its investigation was
continuing. On May 12, 1997, after consultation with the Company's auditors,
Unison announced that the restatement would be significantly higher than the
previous estimate. As a result of the auditor's examination in conjunction with
the Company's prior investigation, the restated pretax loss for the nine months
ended September 30, 1996 is $14,997,000.
Despite these difficulties, Unison believes that its core businesses remain
fundamentally sound. Its nursing home occupancy levels and quality mix have
shown improvement. Unison's quality of care as measured by levels of compliance
in state health care surveys is high. Unison's ancillary services subsidiaries
(providing therapy, pharmacy and laboratory services both to Unison facilities
and those of independent nursing home companies) are generally profitable. As of
May 21, 1997, Unison is current in all of its loan and leasehold payment
obligations, having recently made the first required interest payment on its
Senior Notes. During March 1997, Unison's outside directors took initial steps
to replace the Company's chief executive and several of its principal financial
officers. Unison also substantially curtailed its acquisition program, reduced
its corporate cost structure, and is implementing revenue enhancement programs
and expense controls in its nursing homes and ancillary services companies. See
"-- Liquidity and Capital Resources." The Company also is pursuing new sources
of debt or equity financing to help it rebuild value for its shareholders and
note holders. The Company believes that the revenue enhancement and cost
containment initiatives and access to cash flows from draws on its line of
credit or, if necessary, proceeds from sales of unencumbered assets and
additional borrowings, will provide Unison with the liquidity necessary to meet
its obligations during 1997.
RISKS AND UNCERTAINTIES
Risks and uncertainties that may impact future operating results and cash
flows include those described below.
High Leverage and Limited Capital Resources. At December 31, 1996, Unison
had approximately $157,138,000 in total long-term indebtedness, which was
approximately 93.1% of its total capitalization. It also has significant
long-term operating lease obligations (approximately $15,492,000 for 1997 and
$164,743,000 in the aggregate). Substantially all of Unison's cash flow and
availability under its current lines of credit, together with additional funds
from sources yet to be developed, will be needed for the next year and beyond in
order to satisfy its working capital, debt service and lease obligations. The
Company believes that the revenue enhancement and cost containment initiatives
and access to cash flows from draws on its line of credit or, if necessary,
proceeds from sales of unencumbered assets and additional borrowings will
provide Unison with the liquidity necessary to meet its obligations during 1997.
The Senior Notes and Unison's other indebtedness and lease obligations include
certain covenants that prohibit or limit asset sales, acquisitions, incurrence
of additional debt and liens, the making of restricted payments, affiliate
transactions, engaging in certain mergers and consolidations and entering new
lines of business. Unison's ability over the near term to respond to unexpected
obligations or revenue shortfalls or to other risks and uncertainties is
limited.
Pending Securities Litigation. Unison and certain of its current and
former directors and officers (among others) are named as defendants in several
class action complaints seeking unspecified damages following Unison's
announcement in March 1997 that the Company expected to restate its financial
statements for the nine-month period ended September 30, 1996. To date, six such
claims have been filed in federal district court in Phoenix, Arizona alleging
violations of Sections 10 and 20 of the Exchange Act and Rule 10b-5 promulgated
thereunder. While the purported class periods and the named defendants vary, the
broadest class period to date asserts that between May 14, 1996 (the date of
Unison's announcement of first quarter results) and March 10, 1997 (the date
before Unison's March 11 announcement of the restatement) the defendants knew,
or were reckless in not knowing, that Unison's results for the first three
quarters of 1996
20
<PAGE> 23
were materially overstated. The individual defendants named in some or all of
these actions are Jerry M. Walker (the Company's former Chief Executive
Officer), Craig Clark (the Company's former Chief Financial Officer), Paul
Contris (the Company's former Vice President of Acquisitions), Phillip Rollins
(the Company's Chief Operating Officer) and Bruce Whitehead (Chairman of the
Board). In addition, the Company is informed that an action has been filed in
the Superior Court of the State of California (County of Orange) against the
Company and the aforesaid individuals, as well as John T. Lynch, Jr. (a member
of the Board of Directors), Trouver Capital Partners, L.P. (a private investment
banking firm of which Mr. Lynch is a general partner), Cruttenden Roth Inc. and
Wheat First Butcher Singer (the latter two entities are named individually and
as representatives of a purported defendant underwriter class). The Orange
County action is purportedly filed on behalf of all persons who acquired Unison
stock in the Company's December 1995 initial public offering ("IPO"); it
essentially alleges that in connection with the IPO, the defendants made
positive statements about the Company's prospects for which there was no basis,
that accounts receivable were overstated, and that the Company's statement of
financial position as of September 30, 1995 was not fairly presented. Unison's
bylaws require the Company to indemnify current and former officers and
directors to the extent permitted by Delaware law against such liabilities and
related expenses. The Company denies the material allegations in these
complaints and intends to defend the actions vigorously. Management believes
that the costs of the ultimate disposition of these matters, if any, will be
substantially covered by insurance. An adverse determination could have a
material adverse effect upon Unison.
Market Listing for Equity Securities and Access to Capital
Markets. Because of its substantial losses in 1996, Unison does not currently
satisfy the minimum tangible net worth criteria for maintaining the listing of
its common stock on The Nasdaq Stock Market's National Market System. If the
listing of its common stock is suspended and not renewed, Unison's ability to
raise capital in the public or private equity markets will be hampered.
Management is exploring options to forestall or ameliorate any such action.
History of Losses and Accumulated Deficit. Unison began operations in 1992
and, prior to the pooling effects of the Ampro Acquisition on October 31, 1996,
it incurred net losses through the third quarter of 1995. Unison reported a
small net profit in the fourth quarter of 1995, but it reported substantial
losses for 1996. Unison's future profitability will depend upon many factors,
including its ability to reduce and control costs, its ability to integrate
recently acquired operations, occupancy levels, government regulation and
reimbursement policies, competition, Unison's ability to attract and retain
qualified personnel at competitive rates, the outcome of pending litigation and
general economic conditions. While the Company has instituted revenue
enhancement and cost containment programs and continues to work at integrating
recent acquisitions, there can be no assurance that Unison will be profitable in
the future.
Risks from Recent Business Expansion. A key element of Unison's business
strategy during 1995 and 1996 was to expand through the leasing of new or
existing long-term and specialty healthcare facilities and the acquisition or
development of ancillary healthcare businesses or services. The acquisitions of
BritWill, Signature, Sunbelt, RehabWest, and Ampro and the formation of Quest
occurred pursuant to this strategy. Acquisitions are inherently risky due to the
possibility of unknown and unforeseen contingencies affecting the new businesses
and due to costs of integrating acquired operations into the overall enterprise.
These risks have impacted and may continue to impact Unison's financial
performance. Although Unison has substantially curtailed its acquisition
strategy, its corporate overhead increased during the second half of 1996 in the
expectation that the number and size of acquisitions might continue to grow.
This expansion will make it difficult to reduce costs in response to liquidity
challenges.
Management Transition and Dependence on Skilled Personnel. Two of Unison's
executive officers, including its CFO and VP of Acquisitions, resigned during
the first part of 1997 and its former CEO was terminated pursuant to the terms
of his employment agreement. They have not been replaced on a permanent basis. A
number of other personnel have also been laid off, primarily in an attempt to
control overhead costs. The loss of key personnel could adversely affect
Unison's ability to rebuild its financial health.
Rate Increases on Senior Notes. Pursuant to the Senior Note Registration
Rights Agreement, the interest rate payable on Unison's outstanding Senior Notes
has temporarily increased from 12.25% to 13.00%, and it is subject to further
increases at 90 day intervals (to a maximum rate of 14.25%) until a registration
21
<PAGE> 24
statement for the Senior Notes (or for Exchange Notes on the same terms) is
filed and becomes effective with the Securities and Exchange Commission (the
"Commission"). Unison has delayed filing the required registration statement
while it completed work on its financial statements for 1996, but expects to
make the filing in 1997. In light of Unison's 1996 results, the Commission may
choose to review that filing. Accordingly, further delays in completing the
required registration, with corresponding additional interest expense on the
Senior Notes, are possible.
Loan and Lease Covenant Violations. Although Unison is current on its
payment obligations on its outstanding loans and facilities leases, it is not in
compliance with certain covenants under mortgage loans with one lender for six
of its health care facilities and with the lease agreements for 23 facilities
leased from Omega. Unison has obtained a waiver from Omega for these financial
covenant violations as of December 31, 1996, and it is negotiating the terms of
revised covenants for the future. Management is attempting to renegotiate the
leases; however, there can be no assurance that such restructuring will be
accomplished. An acceleration of Unison's obligations under any of its financial
instruments or a default under any of its facilities leases could have a
material adverse impact on Unison.
ACQUISITIONS AND DISPOSITIONS
On October 31, 1996, Unison acquired by merger Signature Health Care
Corporation and four affiliated companies (collectively, the "Signature
Mergers") for a combination of Unison common shares, approximately $37,054,000
in cash and promissory notes totaling approximately $1,146,000. In accordance
with an adjustment provision of the Signature Merger Agreements relating to
stockholders' equity, in March 1997 the former shareholders of Signature
received additional consideration of $2,511,000, paid in convertible promissory
notes ($1,827,000) and 238,052 shares of Unison common stock ($684,000 valued as
of March 27, 1997). Signature operated 11 long-term care facilities and two
assisted living facilities in Arizona and metropolitan Denver, Colorado. Unison
also acquired RehabWest (a related rehabilitation company) for approximately
$5,350,000 in cash. The Signature Mergers and the acquisition of RehabWest are
referred to collectively as the "Signature Acquisition."
On October 31, 1996, Unison also acquired American Professional Holding,
Inc. and Memphis Clinical Laboratory, Inc. (together, "Ampro")(the "Ampro
Acquisition") in a pooling of interests transaction. The consideration paid for
Ampro included: (a) cash of approximately $237,000; (b) 540,000 shares of Unison
Common Stock and (c) a promissory note in the amount of $250,000 which has since
been prepaid. Ampro operates medical laboratories in Texas, Missouri and
Tennessee which, at March 31, 1997, provided testing services for 275 nursing
homes and other healthcare facilities. Summarized results of operations of Ampro
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues............................. $6,000,000 $7,203,000 $6,547,000
Net income (loss).................... 420,000 143,000 (565,000)
</TABLE>
Other acquisitions that have closed within the past three years include
BritWill (1995), Sunbelt (1996) and several smaller facilities or enterprises.
See "Business -- Acquisitions."
On September 30, 1996, Unison announced a disposition plan designed to
improve its long-term financial strength and operating performance (the
"Dispositions"). The plan includes the disposition of eight nursing facilities
(the "Disposition Facilities"), two of which are closed, which do not meet
Unison's operational or financial criteria. Unison also recorded a nonrecurring
charge of $3,865,000 in the quarter ended September 30, 1996 to record
impairment of long-lived assets and to establish reserves for costs to dispose
of the
22
<PAGE> 25
Disposition Facilities. Four of these facilities were subleased to an unrelated
party effective March 1, 1997 and the other four are held for disposition.
Results of operations of the Disposition Facilities were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues................................................. $16,269 $14,539
Net loss before taxes and impairment losses.............. 90 2,320
</TABLE>
RESULTS OF OPERATIONS
UNISON HISTORICAL
The following table summarizes selected operating statistics. Pro forma
data give effect to the Dispositions as if all of the Disposition Facilities had
been disposed of on December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------ PRO FORMA
1994 1995 1996 1996
---- ----- ----- ---------
<S> <C> <C> <C> <C>
Leased/Owned Facilities:
Number of facilities.......................... 11 42 59 53
Number of licensed beds:
Long-term care............................. 631 3,872 5,145 4,508
Assisted and independent living............ 104 112 320 320
Managed Facilities:
Number of facilities.......................... 9 8 3 3
Number of licensed beds....................... 990 874 310 310
Institutional Pharmacies:
Number of outlets............................. -- 1 2 2
Nonaffiliated facilities served............... -- 17 42 42
Therapy Services:
Nonaffiliated entities served................. -- -- 55 55
Laboratory Services:
Nonaffiliated entities served................. 225 260 295 295
</TABLE>
The following table identifies Unison's sources of revenues. Pro forma data
give effect to (i) the Dispositions and (ii) acquisitions completed after
January 1, 1996 as if such transactions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------- PRO FORMA
1994 1995 1996 1996
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Percentage of total revenues:
Long-term care................................. 67.4% 87.6% 81.0% 84.1%
Therapy contracts.............................. -- -- 8.9 7.5
Pharmacies..................................... -- 1.0 4.6 3.8
Medicare Part B billing and supply............. -- 0.9 1.1 1.0
Laboratory services............................ 32.6 10.5 4.4 3.6
----- ----- ----- -----
Total....................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Unison's revenues fluctuate from facility to facility based on various
factors, including total capacity, occupancy rates, reimbursement systems and
rates among the payor categories, payor mix and the scope and utilization of
Unison's ancillary services. Medicare patients generate the highest revenue per
patient day, although profitability is not always increased due to the
additional costs associated with the higher level of care required by such
patients. In general, private pay sources are more profitable to Unison than
governmental reimbursement sources. Unison generally derives a higher profit
margin from ancillary services than from basic nursing services.
23
<PAGE> 26
Data for nursing center operations with respect to sources of net patient
revenues by payor type are set forth below (long-term care only). Pro forma data
give effect to (i) the Dispositions and (ii) acquisitions completed after
January 1, 1996, as if such transactions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------- PRO FORMA
1994 1995 1996 1996
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Medicare........................................... 9.1% 26.9% 29.5% 30.2%
Private and other.................................. 32.4 17.2 17.0 18.1
----- ----- ----- -----
Quality Mix...................................... 41.5 44.1 46.5 48.3
Medicaid........................................... 58.5 55.9 53.5 51.7
----- ----- ----- -----
Total............................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Unison recorded a net loss of $23,438,000 in 1996 and net income of
$117,000 in 1995. Loss before taxes amounted to $31,794,000 in 1996 compared to
pretax income in 1995 of $249,000. The pretax loss in 1996 is primarily
attributable to: (i) write-offs and provisions for doubtful accounts related to
management fees and patient and other receivables in the aggregate amount of
$4,524,000; (ii) a provision for impairment of long-lived assets and the
Dispositions amounting to $3,865,000, (iii) gross receipt taxes, interest, and
penalties of approximately $3,565,000, (iv) accrued accounting, legal and other
professional fees relating to 1996 matters of $1,300,000, (v) loan transaction
costs and fees for debt which has been paid off and acquisition costs of
$1,762,000, (vi) increased corporate salary costs from $2,838,000 in 1995 to
$5,340,000 in 1996, (vii) a litigation settlement amounting to $725,000 and
(viii) losses from nursing home operations.
Revenues. Revenues were $148,674,000 in 1996 compared to $68,488,000 in
1995. The $80,186,000 increase is due primarily to revenues from patient
services which increased from $64,947,000 in 1995 to $146,379,000 in 1996.
Patient days increased from 613,000 in 1995 to 1,235,000 in 1996. The increase
in patient days and net patient service revenues is primarily attributable to
(i) the increase in the number of facilities operated, including a full year of
operations of the 28 facilities acquired in the BritWill Acquisition on August
10, 1995 and 13 facilities with the Signature Acquisition on October 31, 1996;
(ii) the acquisitions of institutional pharmacies and therapy companies, and
progress in providing ancillary products and services to patients of Unison
facilities and unrelated facilities; and (iii) the increase in Unison's quality
mix to 46.5% in 1996 compared to 44.1% in the prior year period. Other operating
revenues decreased to $2,295,000 in 1996 from $3,541,000 in 1995 due primarily
to the decrease in managed facilities from eight at December 31, 1995 to three
at December 31, 1996.
Wages and Related. Wages and related expense increased 144.8% from
$35,047,000 in 1995 to $85,789,000 in 1996 and as a percentage of revenues from
51.2% in 1995 to 57.7% in 1996. The dollar increase is due primarily to the
increase in the number of leased facilities operated and an increase in
corporate overhead due to Unison's acquisition program during 1996 and
accounting and information system conversions. The percentage increase is due
primarily to the acquisition of therapy companies which have an inherently
higher percentage of salaries to revenues than long-term care providers and an
increase in corporate and regional overhead.
Other Operating. Other operating expenses increased 169.5% from
$24,032,000 in 1995 to $64,771,000 in 1996, due primarily to an increase in the
number of leased facilities operated as well as (i) a $1,892,000 increase in the
provision for doubtful accounts related to management fees and other accounts
receivable; (ii) costs associated with acquisition efforts and litigation; and
(iii) increases in corporate overhead. Other operating expenses as a percentage
of revenues amounted to 43.6% in 1996 compared to 35.1% in 1995.
Rent Expense. Rent expense increased 134.6% from $6,673,000 in 1995 to
$15,658,000 in 1996. The increase is due primarily to the increase in the number
of leased facilities operated. Rent expense as a percentage of revenues
increased to 10.5% in 1996 from 9.7% in 1995.
24
<PAGE> 27
Interest Expense. Interest expense amounted to $5,824,000 in 1996 compared
to $1,176,000 in 1995. The increase is primarily the result of debt incurred and
assumed in connection with acquisitions, including the $100,000,000 of Senior
Notes issued on October 31, 1996, as well as increases in borrowings for working
capital. See "-- Liquidity and Capital Resources." Interest expense as a
percentage of revenues increased to 3.9% in 1996 from 1.7% in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased from $1,311,000 in 1995 to $4,561,000 in 1996. The increase is due
primarily to the increase in goodwill and lease operating rights associated with
acquisitions and an increase in fixed assets resulting from capital expenditures
and ownership interests in six facilities acquired in the Signature Acquisition.
Depreciation and amortization expense as a percentage of revenues was 3.1% in
1996 and 1.9% in 1995.
Income Tax Expense (Benefit). Unison recorded an income tax credit for
1996 amounting to $8,356,000, or 26.3% of pretax loss of $31,794,000. The
effective tax rate is lower than the statutory federal income tax rate due
primarily to (i) amortization of intangible assets and other expenses which are
not deductible for tax; (ii) taxable income of certain subsidiaries which are
not consolidated for tax; and (iii) the valuation allowance established against
deferred tax assets. Unison recorded a tax provision in 1995 of $132,000, or
53.0% of pretax income. The effective tax rate for 1995 is higher than the
statutory federal tax rate due primarily to amortization of intangible assets
and other nondeductible expenses.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues increased from $18,406,000 in 1994 to $68,488,000 in
1995. The increase is primarily attributable to revenues from patient services
which increased from $17,070,000 in 1994 to $64,947,000 in 1995. Patient days
increased from 140,000 in 1994 to 613,000 in 1995. Of this growth in patient
revenues and census, approximately 90% is attributable to acquisitions, with the
remainder attributable primarily to the increase in quality mix and an increase
in average census of facilities owned throughout the period. Unison operated 11
leased nursing and assisted living facilities at December 31, 1994 compared to
42 leased nursing and assisted living facilities at December 31, 1995. The
revenues related to the 28 facilities acquired from BritWill are included in
Unison's results of operations for periods subsequent to July 31, 1995.
Management fees and other revenue increased from $1,336,000 in 1994 to
$3,541,000 in 1995 as a result of an increase in the number of managed
facilities from nine facilities in 1994 to 12 facilities during 1995 (with eight
facilities under such management agreements at December 31, 1995).
Wages and Related. Wages and related expense increased from $9,593,000 in
1994 to $35,047,000 in 1995. The increase in wages and related expense is
primarily attributable to the increase in the number of leased facilities
operated. Wages and related expense as a percent of revenues decreased from
52.1% in 1994 to 51.2% in 1995 as a result of the higher proportion of revenues
from certain ancillary businesses whose operations are less labor-intensive than
those of the nursing facilities.
Other Operating. Other operating expenses increased from $6,462,000 in
1994 to $24,032,000 in 1995. The increase is attributable primarily to an
increase in the number of facilities operated. Other operating expenses as a
percent of revenues remained constant at 35.1% in 1994 and 1995.
Rent Expense. Rent expense increased from $1,406,000 in 1994 to $6,673,000
in 1995. The increase is primarily a result of the acquisition of 4 leased
facilities during the first seven months of 1995 and an additional 28 facilities
from the BritWill Acquisition for the last five months of the year. Rent expense
as a percent of patient revenues increased from 7.6% in 1994 to 9.7% in 1995.
Interest Expense. Interest expense increased from $147,000 in 1994 to
$1,176,000 in 1995. The increase is primarily attributable to the agreement
entered into in April 1995 to sell the Company's accounts receivable and
additional indebtedness assumed in connection with the BritWill Acquisition.
Interest expense as a percent of revenues increased from 0.8% in 1994 to 1.7% in
1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased from $286,000 in 1994 to $1,311,000 in 1995. The increase is
due primarily to the amortization of goodwill and lease operating rights
attributable to the increase in leased facilities, related equipment purchases
and leasehold
25
<PAGE> 28
improvements. Depreciation and amortization expense as a percent of revenues
increased from 1.6% in 1994 to 1.9% in 1995.
BRITWILL HISTORICAL
Overview
BritWill's long-term care facilities derived 28.6% of resident care revenue
from Medicare and ancillary services for the seven months ended July 31, 1995
compared to 18.8% in the comparable 1994 period. For the year ended December 31,
1994, 17.6% of resident care revenue was derived from Medicare and ancillary
services compared with 5.0% for the year ended December 31, 1993.
Seven Months Ended July 31, 1995 Compared to Seven Months Ended July 31, 1994
Revenues. Revenues increased from $29.9 million in 1994 to $38.9 million
in 1995, an increase of 30.1%. These increases are primarily attributable to the
expansion of Medicare services; there were 15 facilities in the Medicare program
in the first seven months of 1994 compared to 24 in 1995. Medicare and ancillary
revenue were 7.0% and 7.0%, respectively, of patient revenues in 1994 compared
to 23.0% and 6.0%, respectively, of patient revenues for 1995. Management fee
revenues decreased by $120,000 or 75% due to the conversion of 2 facilities from
management contracts to leases in November of 1994. However, this decrease was
offset by an additional $3.2 million in patient revenues.
Wages and Related Expense. Wages and related expense increased from $17.0
million in 1994 to $23.3 million in 1995, an increase of 37.1%. Salary and wages
increased 18.4%. New leases contributed to $1.7 million of the wage increase.
The remaining increase is attributable to increased staffing necessary to
support the Company's increased Medicare services.
Lease Expense. Lease expense increased from $4.7 million in 1994 to $5.2
million in 1995, an increase of 10.6% due to the addition of the 3 facilities in
the fourth quarter of 1994.
General and Administrative. General and administrative expenses increased
from $3.4 million in 1994 to $3.9 million in 1995, an increase of 14.7%. This
increase is primarily attributable to new leases. As a percentage of revenues,
general and administrative expenses declined from 11.2% of revenue in 1994 to
10.0% of revenue in 1995.
Depreciation and Amortization. Depreciation and amortization increased
from $487,000 in 1994 to $591,000 in 1995, an increase of 21.4%. This increase
is attributable to additional equipment and leasehold improvements at BritWill's
facilities.
Interest Expense. Interest expense increased from $571,000 in 1994 to
$906,000 in 1995, an increase of 58.7%. This increase was primarily due to
additional borrowings under the revolving credit facility.
Income (Loss) before Income Taxes and Net Income. Income before income
taxes increased from a loss of $1.9 million for the seven months ended July 31,
1994 to income of $43,880 for the seven months ended July 31, 1995. This was
primarily attributable to an increase in acuity of patients and an increase in
Medicare patients in 1995; thus, ancillary utilization increased resulting in
substantially improved performance. There was no tax benefit provided for the
1994 loss since a valuation reserve was established for such income tax
benefits. Net income increased from a net loss of $1.9 million for the seven
months ended July 31, 1994 to net income of $13,380 for the seven months ended
July 31, 1995.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Revenues. Revenues increased from $32.7 million in 1993 to $54.4 million
in 1994, an increase of 66.4%, primarily attributable to the acquisition of nine
facility leases in Texas, primarily in the fourth quarter of 1993. In addition,
in the latter half of 1994, there was a significant increase in Medicare patient
days as there were more Medicare certified facilities. Management fee revenues
decreased 28.1% due to the conversion of two facilities from management
contracts to leases in June 1994 and two additional facilities in November. The
increase in patient census was diluted by a modification in Rule 14 under the
Indiana Medicaid reimbursement program. The effect of this ruling decreased
revenues by $1.2 million.
26
<PAGE> 29
Operating Expenses. Operating expenses increased from $23.5 million in
1993 to $40.0 million in 1994, an increase of 70.2%. Facility salaries and wages
increased 68.2%, attributable to new leases in Texas. Ancillary expenses
increased $1.7 million due to the increase in the number of facilities
participating in the Medicare program.
Lease Expense. Lease expense increased from $5.1 million in 1993 to $8.3
million in 1994, an increase of 62.7%, due to the new leases.
General and Administrative. General and administrative expenses increased
from $3.7 million in 1993 to $6.3 million in 1994, an increase of 70.3%. This
increase is primarily attributable to new leases and additional resources
dedicated to expanded Medicare operations in 1994.
Depreciation and Amortization. Depreciation and amortization increased
from $704,000 in 1993 to $987,000 in 1994, an increase of 40.2%. This is
primarily attributable to the amortization of leasehold rights recorded as part
of the acquisition of five of the Texas facilities in December of 1994.
Interest Expense. Interest expense increased from $385,000 in 1993 to
$872,000 in 1994, an increase of 126.5%, primarily due to the payment of
interest on subordinated long-term debt.
Income/Loss before Income Taxes and Net Loss. Loss before income taxes
increased from $542,155 for the year ended December 31, 1993 to $1.9 million for
the year ended December 31, 1994. This was primarily attributable to an increase
in supplies expense, principally ancillary costs, in 1994 which were not
billable to Medicaid. There was no tax benefit provided for the losses since a
valuation reserve was established for such income tax benefit. Net loss
increased from $593,905 in 1993 to $2.0 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, Unison had $17,409,000 in cash and cash equivalents
compared to $6,169,000 at December 31, 1995. The Company had a working capital
deficit of $13,955,000 at December 31, 1996 compared to a working capital
deficit at December 31, 1995 amounting to $927,000. The working capital deficit
shown at December 31, 1996 is primarily the result of current maturities of
notes and debt amounting to $33,915,000. Of this amount, approximately
$12,545,000 was repaid in January 1997 with proceeds from the Senior Notes and
$19,622,000 is classified as a current liability because Unison is not in
compliance with certain financial covenants; however, although the financial
covenants have not yet been cured, management has no reason to believe that this
debt will be accelerated and paid off in 1997.
Cash used in operations in the year ended December 31, 1996 amounted to
$23,658,000 compared to $932,000 in 1995 and $43,000 in 1994. The increase is
due primarily to losses from operations for the various reasons described above
in the comparison of 1996 to 1995 and a net increase in accounts receivable of
$5,310,000, partially offset by an increase in accounts payable and accrued
expenses of $2,454,000 and a decrease in prepaid expenses of $825,000.
Net cash used in investing activities amounted to $48,723,000 in 1996
compared to $3,679,000 in 1995 and $1,630,000 in 1994. In 1996, capital
expenditures amounted to $3,587,000 compared to $1,333,000 in 1995 and $995,000
in 1994. Capital expenditures of approximately $2,144,000 are budgeted for 1997
for routine replacements and refurbishment of facilities, which is anticipated
to be funded from operating cash flows and borrowings under lines of credit.
Expenditures for acquisitions, net of cash acquired, amounted to $41,225,000 in
1996, $40,066,000 of which relates to the Signature Acquisition, compared to
$677,000 in 1995 for the BritWill Acquisition and $300,000 in 1994. Increases in
intangible and other assets amounted to $2,707,000 in 1996, $1,397,000 in 1995
and $155,000 in 1994.
Net cash provided by financing activities amounted to $83,621,000 in 1996
compared to $10,474,000 in 1995 and $1,795,000 in 1994. At December 31, 1996,
Unison had $157,138,000 in total debt (93.1% of total capitalization) compared
to $26,737,000 (56.1% of total capitalization) at December 31, 1995.
On October 31, 1996, Unison completed the private placement of $100,000,000
of the Senior Notes. The net proceeds to Unison amounting to $94,550,000 were
used to complete the Signature Acquisition and the Ampro Acquisition and prepay
certain debt and contingent obligations as described below. Excess proceeds of
approximately $15,500,000 were used for acquisitions and working capital. The
stated interest rate of 12 1/4%
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<PAGE> 30
per annum is subject to temporary increase if the Senior Notes (or Exchange
Notes with the same terms) are not registered with the Commission within
specified time periods. As of December 31, 1996, the interest rate on the Senior
Notes was 12.75% and as of May 16, 1997 the interest rate is 13.00%. The
interest rate is subject to further increases of 0.25% on June 13, 1997 and
every 90 days thereafter (up to a maximum rate of 14 1/4%) until such
registration becomes effective.
In January 1997, Unison repaid with proceeds from the Senior Notes the
$8,000,000 subordinated note payable to the former BritWill shareholders (the
"Subordinated Note") and $1,750,000 of the contingent obligation due to the
former BritWill shareholders. Thereafter, Unison's remaining obligation
associated with the BritWill Acquisition is a $9,750,000 contingent obligation
(the "Additional Payment Obligation"). The Additional Payment Obligation is
payable in monthly installments of $99,000 to $166,000, which includes interest
at 12.0% to 14.0%, with a balloon payment of $8,146,000 due August 9, 2000.
Because these payments are contingent upon revenue targets that, in light of
recent acquisitions, are likely to be achieved, the Additional Payment
Obligation is recorded as long-term debt and an increase in lease operating
rights in the consolidated balance sheet at December 31, 1996. Although this
does not change the amount of cash due to the former BritWill shareholders,
Unison will record an increase in amortization and interest expense in 1997 in
the aggregate amount of approximately $1,600,000. In the event of a sale by
Unison prior to August 9, 2000 of debt or equity securities exceeding
$10,000,000, the remaining balance of the Additional Payment Obligation will be
due in full.
In connection with the Signature Acquisition, Unison assumed a 10.5%
mortgage loan ("Mortgage Note") collateralized by property and equipment of six
of the Signature facilities. The Mortgage Note requires Unison to maintain a
consolidated net worth of at least $39,000,000 and a minimum current ratio
(current assets to current liabilities) consolidated for the six properties of
at least 1.45 to 1 during 1996 and a debt service coverage ratio (as defined)
for the four preceding quarters consolidated for the six properties of at least
1.5 to 1. While the minimum current ratio and debt service ratios consolidated
for the six properties were in compliance with the debt covenants, Unison's
consolidated net worth was $11,689,000 as of December 31, 1996 and accordingly,
the Company was not in compliance with the net worth covenant. Unison did not
receive a waiver of this covenant violation and accordingly, classified the
entire obligation of $18,640,000 as current. In addition, the Company has not
met the financial reporting requirements of the Mortgage Note.
Effective February 1, 1996, in connection with the acquisition of Sunbelt
Therapy, Unison issued promissory notes and debentures in the aggregate amount
of $2,800,000 with interest payable quarterly at 10.0%. The notes and debentures
were convertible into shares of Unison Common Stock. In January 1997, Unison
repaid $2,000,000 of the notes and debentures with proceeds from the Senior
Notes, and the remaining $800,000 principal amount was converted into 105,196
shares of Unison Common Stock. In November 1996, but effective February 1, 1996,
Unison repurchased the 10% minority interest in Sunbelt Therapy. Consideration
for the purchase was comprised of promissory notes and guaranteed payments
totalling $1,876,000, with interest payable quarterly at 9.0% per annum, and
27,942 shares of Unison Common Stock. Additional contingent payments of up to
$1,418,000 will be due if specified income targets are achieved by Sunbelt
Therapy.
Unison also entered into a number of capital leases in 1996. At December
31, 1996, capital lease obligations for purchases of computer systems and other
fixed assets totalled $2,969,000, payable monthly over three to five years with
interest at 11.5% to 12.9%. The leases of two nursing facilities entered into in
August 1996 were recorded as capital leases; at December 31, 1996 the aggregate
lease obligation amounted to $4,122,000, payable monthly over the lease terms at
effective interest rates of 10.5% to 15.0%.
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<PAGE> 31
Unison's minimum annual contractual commitments for leaseholds and
principal and interest on debt are expected to be as follows:
<TABLE>
<CAPTION>
LONG-TERM OPERATING TOTAL
DEBT LEASES OBLIGATIONS
------------ ----------- ------------
<S> <C> <C> <C>
Year ending December 31,
1997............................................ $ 33,289,000 $15,492,000 $ 48,781,000
1998............................................ 20,878,000 15,591,000 36,469,000
1999............................................ 19,268,000 15,362,000 34,630,000
2000............................................ 25,793,000 14,727,000 40,520,000
2001............................................ 16,499,000 13,975,000 30,474,000
Thereafter...................................... 177,071,000 89,596,000 266,667,000
</TABLE>
Unison finances its working capital needs out of its operating cash flows
and under a $10,000,000 revolving credit facility. Borrowings under this credit
facility bear interest at the prime rate plus 2.0% (10.25% at December 31, 1996)
and are secured by certain of Unison's eligible accounts receivable. On October
31, 1996, Unison repaid the outstanding balance of $8,900,000 (plus $200,000 of
fees) with proceeds from the Senior Notes. There were no outstanding borrowings
under this credit facility at December 31, 1996. In March 1997, Unison paid a
management fee (in lieu of a termination fee) of $500,000. The lender agreed
that the existing facility would remain in place at Unison's option until May
26, 1998. Unison is currently working with several lenders in an effort to
replace the existing credit facility and increase the availability of working
capital.
On April 21, 1997, the Company obtained a $2,950,000 loan for general
working capital purposes from affiliates of two of its directors, Messrs.
Kremser and Whitehead. The loan bears interest at prime plus 2% and is due on
the earlier of 30 days notice or August 1, 1997. The loan (and other Company
indebtedness to Messrs. Kremser and Whitehead and their affiliates) is secured
by a pledge of certain other accounts receivable and the stock of certain Unison
subsidiaries.
The terms of certain of Unison's indebtedness and lease obligations require
the Company to meet certain financial and reporting covenants including current
ratio and cash flow ratio and maintenance of specified levels of net worth. At
December 31, 1996, Unison was not in compliance with many of these covenants. At
December 31, 1996, Unison was obligated to Omega as a tenant under three master
lease agreements covering 14 facilities having an aggregate minimum rent of
approximately $34,900,000 (subject to increase) during the remainder of their
initial terms. The master leases require the Company to maintain specified cash
flow to rent ratios, cash flow to debt service ratios, minimum cash, current
ratios and tangible net worth ratios (each as defined). Unison also leases six
facilities located in Texas from BritWill Texas (the "BritWill Texas Leases")
for an initial term that expires in December 2005. The Britwell Texas Leases
contain cross default provisions with the Omega leases by which if Unison is in
default with any Omega indebtedness or lease obligation, the Company is also in
default under the Britwell Texas Leases. Unison was not in compliance with these
covenants at December 31, 1996. Omega has waived all existing covenant
violations through April 11, 1997. The Company may not be in compliance with
these covenants after this date and, accordingly, is negotiating with Omega to
restructure the aforementioned covenants. Management is attempting to
renegotiate the leases; however there can be no assurance that such
restructuring will be accomplished.
Unison's primary response to these developments has been to reduce costs
wherever possible without adversely impacting the quality of care and ancillary
services it provides. The number of corporate office personnel has been reduced
by approximately 35%, from 142 on December 31, 1996 to 92 on May 15, 1997. Cost
cutting and revenue enhancement initiatives are also underway at the nursing
homes and ancillary services companies.
The Company believes that its revenues from operations and its existing
$10,000,000 line of credit facility may be sufficient to meet its near-term cash
flow and capital requirements. However, these funds might not be adequate in the
event of a material reduction in revenues or increase in expenses or if other
risks identified above were to occur. The Company is attempting to develop
lending relationships that will use the Company's
29
<PAGE> 32
available accounts receivable and other available assets to reduce overall
borrowing costs and, if necessary, supply additional working capital. The
Company also intends to explore opportunities for a secured or unsecured term
loan or for equity financings, should that prove necessary or desirable. There
can be no assurances that such financings will be available or, if available,
that necessary funds will be available on terms favorable to Unison and its
shareholders.
Inflation. The Company does not believe that inflation has adversely
affected the Company's business during the past three years, even though
Medicare and Medicaid reimbursement rates in some areas have not kept pace with
inflation. To the extent inflation occurs in the future, the Company may not be
able to pass on the increased costs associated with providing health care
services to patients if reimbursement from third party payors does not keep up
with such increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements are presented on pages F-1 through F-42 of the report
and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As described more fully under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" herein, the Company discovered
early in 1997 that its operating results for the nine months ended September 30,
1996 were worse than reported. Unison's independent directors took steps to
redirect the financial and executive leadership and direction of the Company. In
connection with these changes Mr. Walker ultimately was terminated as an officer
and employee of the Company and Messrs. Clark and Contris ultimately resigned as
executive officers, directors and employees of the Company. David A. Kremser, a
Unison director who served as president and CEO of Signature until it was
acquired by Unison in October 1996, has served as Chairman of the Executive
Committee of the Board of Directors since April 1997. Warren K. Jerrems has
served as the Company's Chief Accounting Officer since April 24, 1997.
The following table sets forth certain information with respect to the
current directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------------- ---- -------------------------------------------------
<S> <C> <C>
Phillip R. Rollins.......... 39 Executive Vice President-Operations,
Chief Operating Officer, Director
L. Robert Oberfield......... 59 President, Quest Pharmacies, Inc.
Paul G. Henderson........... 41 President, Sunbelt Therapy Management Services,
Inc.
Terry Troxell............... 46 Senior Vice President - Clinical Operations
William G. Allen, Jr........ 46 Senior Vice President - Operations
Bruce H. Whitehead(1)....... 44 Chairman of the Board, Director
John T. Casey(2)............ 51 Director
Tyrrell L. Garth(2)(3)...... 48 Director
David A. Kremser(1)(3)(4)... 49 Director
John T. Lynch, Jr.(1)(2).... 48 Director
Jerry M. Walker............. 52 Director
Mark W. White(2)(3)......... 57 Director
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Mr. Kremser became a director of Unison upon the closing of the Signature
Acquisition. Since April 1997, Mr. Kremser has served as Chairman of the
Executive Committee of the Board of Directors.
Phillip R. Rollins, 39, has served as the Executive Vice President and
Chief Operating Officer of Unison since it commenced operations in July 1992,
when he founded Unison with Mr. Walker and Mr. Contris. From June 1989 until
joining Unison, he worked with Mr. Walker and Mr. Contris as the Director of
Operations of Samaritan Senior Services, Inc. ("Samaritan"), a regional operator
of subacute and long-term care facilities based in Phoenix, Arizona. Prior to
joining Samaritan, Mr. Rollins was the Director of Medicare and Ancillary
Services for Life Care Centers of America, a private operator of long-term care
facilities headquartered in Cleveland, Tennessee. Mr. Rollins is a member of the
American College of Health Care Administrators.
L. Robert Oberfield, 59, has been President of Quest Pharmacies, Inc., a
subsidiary of Unison, since it was organized in March 1995. From December 1992
to March 1995, he was employed by Sunscript Pharmacy Corp., a subsidiary of Sun
Healthcare Company, most recently as President. From September 1990 to December
1992 he was employed by RDS Acquisition Corp. ("RDS"). RDS commenced bankruptcy
proceedings in December 1991. At the time the proceedings commenced, Mr.
Oberfield was the Senior Vice President of RDS, and he served as its President
thereafter until December 1992.
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<PAGE> 34
Paul G. Henderson, 41, has served as President of Sunbelt Therapy
Management Services, Inc. since the acquisition of Sunbelt by Unison in March
1996. For the past six years, Mr. Henderson has been active in the founding and
management of physical therapy service providers (such as Sunbelt) and in
providing patient care.
Terry Troxell, 46, has served as Director of Professional Services of
Unison since it commenced operations in July 1992. On November 15, 1994, she
became Vice President of Clinical Operations of Unison and on September 6, 1996
she became Senior Vice President of Clinical Operations. From July 1991 until
July 1992, Ms. Troxell served as Director of Professional Services of Samaritan
Senior Services, Inc. Prior to joining Samaritan Senior Services, she was
employed by the Arizona Department of Health from 1985 until 1991, where she
served as Program Manager of Health Care Facility Licensure and Enforcement,
overseeing the licensing, certification and enforcement of all licensed
healthcare facilities in Arizona. Ms. Troxell is a licensed Registered Nurse and
a Certified Gerontologist Clinical Specialist. She sits on the American Health
Care Association's national facility standards committee and Long-Term Care
Nurse Council. She is a member of the American Gerontological Nurses Association
and the Association for Professionals in Infection Control and Epidemiology.
William G. Allen, Jr., 46, has been Senior Vice President - Operations
since October 14, 1996. Prior thereto he was a Regional Vice President for
Unison (since November 1994), and before that he was Executive Director of
Plantation Manor Incorporated, a private operator of skilled nursing and
assisted living facilities.
Bruce H. Whitehead, 44, has served as the Chairman of the Board of Unison
since August 1995. He is also President and Chief Executive Officer of the
general partner of Whitehead Family Investments, Ltd. Prior to joining Unison,
Mr. Whitehead was Chairman of BritWill from its inception in 1992. From 1984
through 1992, Mr. Whitehead was President of The BritWill Company, which also
invested in and managed long-term care facilities.
John T. Casey, 51, has served as a Director of Unison since August 1995.
Mr. Casey is the Chief Executive Officer of InteCare LLC, a hospital management
firm in Irving, Texas. From October 1991 through August 1995, Mr. Casey was the
Chief Operating Officer of American Medical International, a publicly traded
hospital management company. Prior to October 1991, Mr. Casey was President of
Samaritan Health Services, a hospital and long-term care provider.
Tyrrell L. Garth, 48, has served as a Director of Unison since August 1995.
Mr. Garth became President of Cheyenne Capital in Beaumont, Texas, a personal
investment firm, in 1996. Prior thereto he was a partner in the law firm of
Moore, Landry, Garth, Jones, Barmeister and Hulett, LLP, which served as general
counsel to BritWill prior to its acquisition by Unison in August 1995.
David A. Kremser, 49, founded Signature Health Care Corporation in July
1987 and served as its Chairman, President, Chief Executive Officer and a
Director until it was acquired by Unison in October 1996. Mr. Kremser also
served as the Chief Executive Officer for each of the other Signature
Affiliates. From January 1985 through 1987, Mr. Kremser was a Director and
Executive Vice President of Columbia Corporation, a long-term care company, and
the President of Columbia West Corporation, a subsidiary of Columbia
Corporation. Prior to joining Columbia Corporation, he was affiliated with ARA
Services, Inc. ("ARA"), most recently with responsibility for ARA's operations
in California, Colorado, Wyoming and Texas.
John T. Lynch, Jr., 48, has been a director of Unison since June 1992. Mr.
Lynch was also a director of BritWill since 1992. In January 1990, he co-founded
Trouver Capital Partners, L.P. ("Trouver"), a private investment banking firm
and serves as one of its general partners. Mr. Lynch was Managing Director and a
member of the Health Care Finance Group of Furman Selz Incorporated, and was
Managing Director and head of Health Care Finance Groups at Thomson McKinnon
Securities, Inc. and Dean Witter Reynolds, Inc. for the period 1980 through
1990.
32
<PAGE> 35
Jerry M. Walker, 52, served as President and Chief Executive Officer of the
Company from the time it commenced operations in July 1992. From June 1989 until
joining the Company, he was the Chief Executive Officer of Samaritan. Mr. Walker
is a member of the American College of Health Care Administrators and is a
Certified Public Accountant.
Mark W. White, 57, has served as a Director of Unison since August 1995.
Mr. White has been an attorney in private practice since 1987. From 1983 to
1987, Mr. White served as Governor of the State of Texas.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Commission.
Specific due dates for these reports have been established, and the Company is
required to disclose any failure to file by these dates. The Company believes
that all of these filing requirements were satisfied during the year ended
December 31, 1996, except that Mr. Walker, Mr. Contris, Mr. Clark, Mr. Oberfield
and Ms. Troxell have not yet reported on a Form 5 for the year ended December
31, 1996 a repricing of options on January 16, 1996 and Mr. Rollins has not yet
amended a Form 5 to report the same repricings.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, with respect to the years ended December
31, 1996 and 1995, compensation awarded to, earned by or paid to (i) Unison's
Chief Executive Officer throughout 1996 and (ii) the four other executive
officers who were serving as executive officers at December 31, 1996 and whose
total salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
SALARY BONUS OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(2) COMPENSATION
- ---------------------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jerry M. Walker,........................ 1996 $275,000 $41,250 33,924
President, Chief Executive Officer(3) 1995 200,000 $37,500 33,924
1994 161,952
Phillip R. Rollins,..................... 1996 $220,000 $33,000 73,924
Executive Vice President - 1995 200,000 30,000 33,924
Operations, Chief Operating Officer 1994 138,515
Craig R. Clark,......................... 1996 $220,000 $33,000 133,924
Executive Vice President, 1995 184,373 30,000 33,924 $175,000(5)
Chief Financial Officer 1994 14,231 20,000 88,250(6)
Accounting Officer(4)
Paul J. Contris,........................ 1996 $220,000 $33,000 65,443
Executive Vice President - 1995 200,000 30,000 33,924
Acquisitions and Development(7) 1994 138,515
L. Robert Oberfield,.................... 1996 $136,800 16,185
President, Quest Pharmacies, Inc. 1995 64,000 6,185
</TABLE>
- ---------------
(1) Certain columns have been omitted where there has been no compensation paid
or awarded to or earned by any of the named executives required to be
reported in such columns.
(2) The amounts shown for 1996 include both new option grants and outstanding
options from prior years that were granted during 1995 and "repriced" during
1996.
(3) On May 22, 1997, but effective April 25, 1997, Mr. Walker was terminated as
an officer and employee of the Company pursuant to his employment contract.
33
<PAGE> 36
(4) Effective March 14, 1997, Mr. Clark resigned as Executive Vice President,
Chief Financial Officer, Chief Accounting Officer and as a Director.
(5) Represents a payment equal to one year's base salary in connection with the
termination of Mr. Clark's employment agreement with BritWill.
(6) Includes consulting fees of $87,750 paid by BritWill before Mr. Clark became
an employee of BritWill and $500 of fees as a director of BritWill. See
"-- Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements."
(7) Mr. Contris served as Unison's Executive Vice President - Finance and Chief
Accounting Officer from August 15, 1995 until June 1996. Effective March 15,
1997, Mr. Contris resigned as Executive Vice President -- Acquisitions and
Development and as a Director.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants during
the last fiscal year to the past and present executive officers named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE
NUMBER OF OPTIONS/ AT ASSUMED ANNUAL RATES
SECURITIES SARS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTION/SARS EMPLOYEES OR BASE FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ----------------------- ------------ ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Walker........ 0 0.00% -- --
Phillip R. Rollins..... 40,000 9.70% $9.50 9/6/2006 $238,980 $ 605,622
Craig R. Clark......... 100,000 24.25% $9.00-$9.50 9/6/2006 578,583 1,466,243
Paul J. Contris........ 40,000 9.70% $9.50 9/6/2006 238,980 605,622
L. Robert Oberfield.... 10,000 2.42% $9.50 9/6/2006 59,745 151,406
</TABLE>
- ---------------
(1) Consists entirely of stock options.
(2) Based on total grants during the fiscal year of 412,412.
(3) The options were granted with an exercise price of $13.75 per share and were
repriced in December 1996 to $9.50 per share.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% or 10% compounded
annually from the date the respective options were granted to their
expiration date and are not presented to forecast possible future
appreciation, if any, in the price of the Common Stock. The potential
realizable value of the foregoing options is calculated by assuming that the
market price of the underlying security appreciates at the indicated rate
for the entire term of the option and that the option is exercised at the
repriced exercise price and sold on the last day of its term at the
appreciated price.
34
<PAGE> 37
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE
TABLE(1)
The following table sets forth information with respect to the past and
present executive officers named in the Summary Compensation Table concerning
the number and value of options outstanding at the end of the last fiscal year.
There were no option exercises during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(1)
- -------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Jerry M. Walker......................................... 16,962/ 16,962 $69,968/$ 69,968
Phillip R. Rollins...................................... 16,962/ 56,962 69,968/ 214,968
Craig R. Clark.......................................... 16,962/116,962 69,968/ 462,468
Paul J. Contris......................................... 8,481/ 56,962 34,984/ 179,984
L. Robert Oberfield..................................... 2,474/ 13,711 10,205/ 46,455
</TABLE>
- ---------------
(1) Value as of December 31, 1996 is based upon closing bid price of $13.125 as
reported on the Nasdaq National Market for December 31, 1996, minus the
exercise price after repricing, multiplied by the number of shares
underlying the option.
COMPENSATION OF DIRECTORS
The nonemployee directors of Unison receive an annual retainer of $10,000,
$1,000 for each Board and Committee meeting attended, plus reimbursement of
expenses, and the right to participate in the Option Plan. Directors who are
also executive officers of Unison receive no additional compensation for serving
on the Board of Directors. Mr. Kremser receives compensation pursuant to a
services agreement described elsewhere herein. As compensation for services on
the Executive Committee, Mr. Lynch will receive additional fees in an amount yet
to be determined by the Board of Directors.
THE 1995 STOCK OPTION PLAN
Unison's 1995 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors effective July 10, 1995 and approved by the stockholders on
August 8, 1995. The Board of Directors approved on September 6, 1996, and
Unison's stockholders approved at the Unison Special Meeting on October 28,
1996, an amendment to the Option Plan (the "Option Plan Amendment") which
increased the number of shares of Unison Common Stock authorized for issuance
under the Option Plan from 511,046 to 800,000.
The Option Plan is divided into two separate components: (i) a
Discretionary Option Grant Program under which eligible individuals may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock at an exercise price determined by the Plan Administrator and (ii)
the Automatic Option Grant Program under which option grants will automatically
be made at periodic intervals to eligible non-employee Board members to purchase
shares of Unison Common Stock at an exercise price equal to 100% of their fair
market value on the grant date.
The Discretionary Option Grant Program is administered by the Compensation
Committee. The Compensation Committee as Plan Administrator has complete
discretion to determine which eligible individuals are to receive option grants,
the time or times when such option grants are to be made, the number of shares
subject to each such grant, the status of any granted option as either an
incentive stock option or a non-qualified stock option under the Federal tax
laws, the vesting schedule to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Upon an acquisition of Unison by merger, consolidation or reorganization,
each outstanding option may be substituted with shares of the acquiring company
or such option may be canceled in consideration for a cash payment to the
optionee of an amount per option share equal to the excess of the highest fair
market
35
<PAGE> 38
value of Unison Common Stock during the 60-day period preceding the acquisition
over the option exercise price. A similar cash payment will be made to each
optionee upon the dissolution or liquidation of Unison.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return for
the grant of new options for the same or different number of option shares with
an exercise price per share based upon the fair market value of Unison Common
Stock on the new grant date.
Under the Automatic Option Grant Program, each individual serving as a
non-employee member of the Board of Directors of Unison on the date of adoption
of the Option Plan by the Board of Directors received an option grant on such
date for 9,246 shares of Unison Common Stock, except that the Chairman of the
Board of Directors received an option for 10,496 shares. The Option Plan
Amendment increased these amounts. Nonemployee Directors are now entitled to
receive annual option grants in respect of 15,000 shares (17,500 shares in the
case of the Chairman of the Board) for 1996 and at each subsequent annual
meeting of stockholders.
Each automatic grant becomes exercisable 50% one year after the grant and
100% two years after the grant and has a term of 10 years, subject to earlier
termination following the optionee's removal from the Board of Directors for
cause.
The Board of Directors may amend or modify the Option Plan at any time. The
Option Plan will terminate on July 9, 2005, unless sooner terminated by the
Board of Directors.
Effective August 10, 1995, the Board of Directors granted options to
purchase 261,520 shares of Unison Common Stock in the aggregate under the 1995
Plan to certain employees of Unison, including each of the executive officers in
the following amounts: Jerry M. Walker, Philip R. Rollins, Craig R. Clark and
Paul J. Contris, 33,924 shares each, which vest over a two-year period from the
grant date; and to L. Robert Oberfield and Terry Troxell, 6,185 shares each,
which vest over a four-year period from the grant date. All of the options have
an exercise price (after repricing in January 1996) of $9.00 per share, the fair
market value of the Common Stock on the grant date, as determined by the Board
of Directors.
In September 1996 the Compensation Committee of the Board of Directors
confirmed a special, one-time grant (originally promised in July 1996 subject to
Compensation Committee Approval) of options for 60,000 shares to Craig R. Clark
having an exercise price of $9.50 per share, in conjunction with his assumption
of additional responsibilities as Unison's Chief Accounting Officer. On the same
date, the Compensation Committee recommended, and the full Board approved, the
issuance of options for an additional 324,350 shares to Unison employees at an
exercise price of $13.75 per share (subsequently repriced at $9.50 per share),
including options for 40,000 shares each to Messrs. Rollins, Contris and Clark,
options for 10,000 shares to each of Mr. Oberfield and Mr. Henderson, options
for 6,500 shares to William Allen and options for 7,500 shares to Ms. Troxell.
Mr. Allen received an additional option grant in October 1996 for 10,000 shares
at an exercise price of $10.50 per share. The following table sets forth stock
options granted in 1996.
1996 OPTION GRANTS
UNISON STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTION SHARES
---------------------------------------------------------------------- -------------
<S> <C>
Jerry M. Walker, President, CEO....................................... 0
Phillip R. Rollins, Executive Vice President.......................... 40,000
Craig R. Clark, Executive Vice President.............................. 100,000
Paul J. Contris, Executive Vice President............................. 40,000
L. Robert Oberfield, President,
Quest Pharmacies, Inc............................................... 10,000
Executive Group (8 persons)........................................... 224,000
Non-Executive Director Group.......................................... 92,500
Non-Executive Officer Employee Group.................................. 188,412
</TABLE>
36
<PAGE> 39
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
Prior to its initial public offering in 1995 Unison entered into employment
agreements with each of Messrs. Walker, Rollins and Contris, among others. Each
of these employment agreements provided that it would expire in August 1998,
subject to automatic renewal for successive one-year periods unless either
Unison or the employee gave notice of non-renewal 30 days prior to expiration.
As of December 31, 1996, the employment agreements provided for an annual base
salary of $275,000 for Mr. Walker and $220,000 for each of Messrs. Rollins and
Contris and the right to earn quarterly and annual incentive compensation
totalling at least 60% of base salary, based on Unison's attainment of its
quarterly and annual budget as reflected in its quarterly and annual filings
with the Commission. The employment agreements provided that in the event of
termination by Unison other than for cause, Unison would pay the employee one
year's base salary or his base salary for the remaining term of the agreement,
whichever is longer, and the employee's pro-rated performance bonus. If any of
the employment agreements were not renewed at the end of the initial or
subsequent term, the employee would be entitled to receive one year's base
salary plus the employee's pro-rated performance bonus. The employment
agreements contain a one-year nonsolicitation of employees and customers
provision. Each contract also permitted termination upon Unison's failure to
meet certain financial covenants under pledge agreements that secure Unison's
obligations incurred in the BritWill Acquisition. See "Compensation Committee
Interlocks and Insider Participation in Compensation Decisions." Each contract
also provided that the officer could be terminated for cause defined in part as
a material neglect of duties. In the event of a for cause termination, the
officer is entitled to the equivalent of one month's salary. Mr. Contris
resigned as an officer, director and employee of Unison effective May 1, 1997
and will receive in severance three month's salary ($55,000) plus accrued
vacation benefits. Mr. Walker was terminated as an officer and employee
effective April 25, 1997 and received as severance one month's salary ($22,917).
Unison initially entered into an employment agreement with Mr. Clark for an
eighteen-month term beginning in August 1995 at an annual base salary of
$200,000 and incentive compensation as described above. The employment agreement
provided that upon termination other than for cause, Mr. Clark would be entitled
to receive one year's base salary or his base salary for the remaining term of
the agreement, whichever was longer, and his pro-rated performance bonus. The
employment agreement contains a one-year nonsolicitation of employees and
customers provisions. Mr. Clark's employment agreement with BritWill was
terminated in connection with the BritWill Acquisition, and Mr. Clark received a
payment of $175,000 (equal to one year of base salary) pursuant thereto. Mr.
Clark resigned as an officer, director and employee in April 1997 and received
in severance an amount equal to one month's salary ($18,333) plus accrued
vacation benefits.
Unison entered into an employment agreement with Mr. Oberfield for a
one-year term beginning in May 1995, subject to automatic renewal for successive
one-year terms unless either Unison or Mr. Oberfield has given notice of
non-renewal 30 days prior to expiration. The employment agreement provides for
an initial annual base salary of $96,000. The annual base salary increased to
$136,800 as of January 1996 because Quest became profitable during 1995. Mr.
Oberfield is also entitled to participate in Unison's incentive compensation
program for key employees, up to a maximum award of 15% of his base salary. If
the employment agreement is not renewed by Unison other than for cause, Unison
must pay Mr. Oberfield one year's base salary and his pro-rated incentive
compensation. The employment agreement contains a one-year nonsolicitation of
employees and customers provision. During 1995, Mr. Oberfield was granted an
option to purchase 6,185 shares of Unison Common Stock under the Option Plan,
and in September 1996 he was granted an option to purchase an additional 10,000
shares at $13.75 per share which were subsequently repriced at $9.50 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Prior to August 1995, decisions concerning compensation of executive
officers were made by an Executive Committee of the Board of Directors,
consisting of Messrs. Walker, Rollins and Contris. On August 17, 1995, the Board
of Directors created a Compensation Committee consisting of Messrs. Garth, White
and Casey. See Item 10, "Directors and Executive Officers of the Registrant."
At the time that Unison acquired BritWill in August 1995, Mr. Garth was
outside counsel, a former director and a shareholder of BritWill, and Mr. White
was a director and shareholder of BritWill. Mr. Garth
37
<PAGE> 40
and Mr. White have (or had) direct or indirect material interests in the
following recent or anticipated transactions with BritWill or Unison.
- As former shareholders of BritWill, Mr. Garth and Mr. White have
participated and will participate pro rata in all acquisition payments
made and acquisition obligations incurred by Unison in connection with
the BritWill Acquisition (the "BritWill Acquisition Obligations"). The
BritWill Acquisition Obligations are secured by stock pledge agreements
from Messrs. Walker, Rollins, Clark and Contris. The BritWill Acquisition
Obligations paid through December 31, 1996 include $5.6 million of
principal, $853,000 of interest, $2.3 million of payment on monthly
contingent obligations and 561,815 shares of Unison Common Stock
delivered to the former BritWill shareholders. The proceeds from the sale
of the Original Notes were used (in part) to prepay in January 1997 the
remaining $8.0 million outstanding under the BritWill Note and $1.75
million of contingent payment obligations, after which the remaining
BritWill Acquisition Obligations are solely Additional Payment
Obligations totaling approximately $9.8 million ($14.1 million including
an interest component), primarily due on the earlier of Unison's next
public or private sale of debt or equity securities exceeding $10 million
or August 9, 2000.
- Mr. Garth had a $400,000 interest in a $2.5 million promissory note
payable by BritWill and bearing interest at the rate of 12% per annum
(the "Participation Note"). The Participation Note was refinanced by
BritWill when it was acquired by Unison, and the $3.4 million refinancing
note (the "Renewal Note") was ultimately repaid from the proceeds of
Unison's IPO in 1995.
- Mr. Garth's company, Cheyenne Capital, received consulting fees of
$24,000 per year from Unison through December 31, 1996, when the
consulting agreement was terminated.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Unison Common Stock at March 31, 1997 (December 31, 1996 in the
case of U.S. Bancorp) with respect to (i) each person known to Unison to own
beneficially more than five percent of the outstanding shares of Unison Common
Stock, (ii) each director of Unison, (iii) each of the executive officers listed
in the Summary Compensation Table set forth herein and (iv) all directors and
executive officers of Unison as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------------
IDENTITY OF STOCKHOLDER OR GROUP NUMBER PERCENT
- ------------------------------------------------------------------- --------- -------
<S> <C> <C>
David A. Kremser(2)................................................ 1,540,431 23.80%
Bruce H. Whitehead(3).............................................. 463,337 7.21
U.S. Bancorp
111 SW Fifth Avenue
Portland, Oregon 97204........................................... 369,100 5.75
Jerry M. Walker(4)................................................. 329,336 5.11
Phillip R. Rollins(5).............................................. 327,136 5.08
Paul J. Contris(6)................................................. 201,775 3.14
John T. Lynch, Jr.(7).............................................. 152,208 2.37
Craig R. Clark(8).................................................. 54,984 *
Mark W. White(9)................................................... 7,665 *
Tyrrell L. Garth(10)............................................... 4,623 *
John T. Casey(11).................................................. 6,623 *
L. Robert Oberfield(12)............................................ 3,724 *
All executive officers and directors as a group (14 persons)(13)... 3,170,737 48.32
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. In accordance with Commission rules, shares which may be
acquired upon exercise of stock options which are currently exercisable or
which become exercisable within 60 days of the date of the table are deemed
beneficially owned by the optionee. Except as indicated by
38
<PAGE> 41
footnote, and subject to community property laws where applicable, the persons
or entities named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(2) Includes 1,490,431 shares of Unison Common Stock issued to Mr. Kremser in
the Signature Acquisition, including additional shares issued to him as
part of the Equity Adjustment Amount, and 50,000 shares issuable pursuant
to vested options.
(3) Includes 458,089 shares of Unison Common Stock issued to Whitehead Family
Investments, Ltd. ("WFI") upon conversion of the Convertible Debenture
issued to the former shareholders of BritWill as partial payment of the
purchase price for the BritWill Acquisition. Mr. Whitehead has sole voting
and investment power with respect to the shares held by WFI. Does not
include 22,748 shares of Unison Common Stock issuable upon exercise of
outstanding options which will vest in August 1997 and thereafter. Includes
5,248 shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(4) Currently 265,518 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Includes 16,962
shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(5) Currently 132,759 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Does not include
56,962 shares of Unison Common Stock issuable upon exercise of options
which will vest in August 1997 and thereafter. Includes 16,962 shares of
Unison Common Stock issuable upon exercise of immediately exercisable
options.
(6) Currently 86,294 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Includes 8,481 shares
of Unison Common Stock issuable upon exercise of immediately exercisable
options.
(7) Includes 10,140 shares of Unison Common Stock as to which he currently
shares investment power with Bruce H. Whitehead. Excludes 19,623 shares of
Unison Common Stock issuable upon exercise of options which will vest in
August 1997 and thereafter. Includes 4,623 shares of Unison Common Stock
issuable upon exercise of immediately exercisable options.
(8) Includes 38,022 shares of Unison Common Stock as to which Mr. Clark
currently shares investment power with Bruce H. Whitehead, which shares are
pledged to secure payment of the deferred purchase price for the BritWill
Acquisition. Includes 16,962 shares of Unison Common Stock issuable upon
exercise of immediately exercisable options.
(9) Does not include 19,623 shares of Common Stock issuable upon exercise of
options which will vest in August 1997 and thereafter. Includes 4,623
shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(10) Does not include 19,623 shares of Unison Common Stock issuable upon
exercise of options which will vest in August 1997 and thereafter. Includes
4,623 shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(11) Includes 4,623 shares of Unison Common Stock issuable upon the exercise of
immediately exercisable options, but does not include another 19,623 shares
issuable upon exercise of options that will vest in August 1997 and
thereafter.
(12) Does not include 13,711 shares of Unison Common Stock issuable upon
exercise of options which will vest over a period beginning in August 1997.
Includes 2,474 shares of Unison Common Stock issuable upon exercise of
immediately exercisable options.
(13) Includes a total of 140,529 shares of Unison Common Stock issuable upon
exercise of immediately exercisable options (including those described in
the preceding footnotes).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
When Unison acquired BritWill in August 1995, Mr. Whitehead indirectly
owned approximately 81.5% of BritWill's outstanding stock and served as its
Chairman and as a director. As a result of this interest in the
39
<PAGE> 42
BritWill Acquisition Obligations, Mr. Whitehead currently is beneficially
Unison's second largest shareholder and one of its largest creditors. Mr. Clark
was a BritWill shareholder and served as BritWill's Executive Vice President and
Chief Financial Officer at the time Unison acquired BritWill. Messrs. Garth,
Lynch and White were also BritWill shareholders and directors. For information
concerning recent and anticipated transactions with BritWill or Unison in which
Messrs. Garth or White had or have a material direct or indirect interest, see
Item 11, "Executive Compensation -- Compensation Committee Interlocks and
Insider Participation in Compensation Decisions." Messrs. Clark, Lynch and
Whitehead also have pro rata interests in the BritWill Acquisition Obligations
described therein.
Mr. Whitehead has (or had) a direct or indirect material interest in the
following additional recent or anticipated transactions with BritWill or Unison.
- Prior to Unison's acquisition of BritWill, Mr. Whitehead sold certain
healthcare facilities or related interests to BritWill and acquired
certain other direct and indirect financial interests and obligations
related to BritWill's healthcare facilities, some of which have continued
thereafter. Through BritWill Texas, Mr. Whitehead is the indirect owner
and lessor of six of the long-term healthcare facilities that Unison
leases in Texas (including three of the Disposition Facilities that were
subleased to an unrelated party effective March 1, 1997) with 767
licensed beds and an annual base rental of $1.1 million, which is
approximately the amount of the annual payment obligations on the related
$10.2 million acquisition mortgage loan secured by those facilities from
Omega, an unrelated party, plus payments due on certain seller
subordinated notes incurred when BritWill Texas acquired the facilities.
The parties are currently in the process of restructuring the ownership
structure for three of the six facilities to eliminate BritWill Texas
from the chain of title. The parties anticipate that BritWill Texas will
convey fee title to the three facilities to Omega and that Omega will
then lease the facilities to BritWill Investments - II, Inc., a
subsidiary of Unison, on substantially the same economic terms that
existed under the BritWill Texas mortgage. Mr. Whitehead, who had
guaranteed the BritWill Texas loan, will remain liable under his guaranty
for all obligations owing under the new lease. Mr. Whitehead is also the
guarantor of BritWill's (now Unison's) obligations under the leases of
all fourteen other healthcare facilities that are leased from Omega.
- Mr. Whitehead directly or indirectly owned all of the interests in the
Participation Note and the Renewal Note (as described in Item 11 above)
that were not owned by Mr. Garth.
- From time to time both before and after Unison's acquisition of BritWill,
Mr. Whitehead has made loans and other financial accommodations to
BritWill (now Unison). In addition to the Renewal Note and a portion of
the BritWill Acquisition Obligations, $750,000 of loans from Mr.
Whitehead or his affiliates was repaid from the proceeds of the IPO. A
Unison subsidiary is obligated to repay to an affiliate of Mr. Whitehead
five unsecured promissory notes in the amounts at December 31, 1996 of
$1.2 million, $392,000, $319,000, $194,000, and $401,000 with interest at
rates currently ranging from 9.0% to 10.75% per annum and with scheduled
maturities in November 2001 and October 2004. Aggregate monthly payments
on these five notes total approximately $39,000. In addition,
approximately $1.1 million of the proceeds from a $7.5 million short-term
borrowing agreement (the "Bank Financing") was used to repay a loan from
Mr. Whitehead that bore interest at the rate of 12% per annum. The Bank
Financing was repaid from the proceeds of the sale of the Senior Notes.
- On April 21, 1997, the Company obtained a $2,950,000 loan for general
working capital purposes from Elk Meadows Investments, L.L.C. and
BritWill Investments Company, Ltd., as joint lenders. Elk Meadows
Investments, L.L.C. is controlled by David Kremser and BritWill
Investments Company, Ltd. is controlled by Bruce Whitehead. The loan
matures on the earlier of August 1, 1997, or 30 days after written demand
from the lenders, subject to earlier maturity in the event of
acceleration upon a default. Interest accrues on the loan at the Prime
Rate plus 2%, subject to an increase in the rate upon a default. Interim
payments on the loan are not required prior to maturity. The Company paid
a loan fee of $29,500 at the closing, and also agreed to pay all of the
lenders' out of pocket fees and costs, including attorneys fees and
costs, in an amount not yet determined or demanded by the lenders.
Repayment of the loan is secured by (i) a pledge from the Company of
approximately $5 million of
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<PAGE> 43
accounts receivable generated by certain of the Company's affiliates and
assigned to the Company, and (ii) a pledge from the Company of its stock in
those affiliates of the Company that either assigned their accounts receivable
to the Company so they could be pledged by the Company as security for the
subject loan or control the entities that assigned such accounts
receivable. The collateral securing the loan also secures repayment of
other obligations owing from the Company and its affiliates to Messrs.
Whitehead and Kremser, and to individuals and entities related to them.
In addition to his interests as a former director and shareholder of
BritWill, Mr. Lynch is a General Partner of Trouver. Trouver (a) earned
financial advisory fees of $675,000 in connection with Unison's acquisition of
BritWill, (b) assisted Unison in securing lease or management agreements in
respect of four long-term care facilities for which it is entitled to receive
fees of up to approximately $400,000 over the next seven years based on Unison's
management fees or earnings from those facilities over that period, and
(c)earned financial advisory fees of approximately $84,000 from Unison in
connection with the Ampro Acquisition. Trouver is not entitled to any
compensation in connection with the Signature Acquisition or the offering of the
Original Notes or the Exchange Notes. As compensation for his services on the
Executive Committee, Mr. Lynch will receive additional fees in an amount yet to
be determined by the Board of Directors.
The Board of Directors has entered into a services agreement with Mr.
Kremser commencing March 31, 1997. As compensation for his services to the
Company in all capacities, Mr. Kremser is entitled to cash compensation of
$7,500 per week plus expenses as well as options for 50,000 shares of Unison
common stock at an exercise price of $2.875 per share, fully vested. Mr. Kremser
and the Company are also parties to an indemnification agreement and a tolling
agreement in respect of claims he may have against the Company.
Mr. Oberfield, one of Unison's executive officers, serves as the president
and is the minority shareholder of its Quest subsidiary. He receives
compensation based in part upon the earnings of the subsidiary, and Unison is
required to repurchase his stock in the subsidiary at a formula price under
certain circumstances.
Effective February 1, 1996, Unison purchased 90% of the outstanding common
stock of Sunbelt from Mr. Henderson and Paige Plash. In consideration for the
stock of Sunbelt, Unison paid $800,000 in cash, issued term notes for $1.0
million in the aggregate (the "Notes") and issued subordinated convertible
debentures totaling $1.8 million in the aggregate (the "Debentures").
Approximately 56.2% of the purchase price was payable to Mr. Henderson. Interest
on the Notes and Debentures was 10.0% payable quarterly. The Notes and
Debentures were converted in January 1997 into 105,196 shares of Unison Common
Stock with the aggregate balance of $2.0 million paid in cash. In November 1996,
Unison purchased the remaining 10% of Sunbelt stock effective as of February 1,
1996. The aggregate purchase price, payable 50% to each of Mr. Henderson and Mr.
Plash, amounted to $1.4 million plus a guaranteed payment of $709,000.
Additional contingent payments of up to $1.4 million will be due if specified
income targets are achieved. Consideration for the purchase (excluding the
guaranteed payments) was comprised of promissory notes in the aggregate amount
of $1.2 million and 27,942 shares of Unison Common Stock.
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<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PAGE
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<S> <C>
UNISON HEALTHCARE CORPORATION
Report of Independent Auditors........................................................ F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995.......................... F-2
Consolidated Statements of Operations for the years ended December 31, 1996, 1995, and
1994................................................................................ F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December
31, 1996, 1995, and 1994............................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994................................................................................ F-5
Notes to Consolidated Financial Statements............................................ F-6
BRITWILL HEALTHCARE COMPANY
Report of Independent Auditors........................................................ F-18
Report of Independent Accountants..................................................... F-19
Consolidated Balance Sheet as of June 30, 1995........................................ F-20
Consolidated Statements of Operations for the year ended December 31, 1994, six months
ended June 30, 1995 and one month ended July 31, 1995............................... F-21
Consolidated Statements of Shareholders' Equity for the year ended December 31, 1994
and six months ended June 30, 1995.................................................. F-22
Consolidated Statements of Cash Flows for the year ended December 31, 1994, six months
ended June 30, 1995 and one month ended July 31, 1995............................... F-23
Notes to Consolidated Financial Statements............................................ F-24
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
UNISON HEALTHCARE CORPORATION
Schedule II Valuation and Qualifying Accounts......................................... S-1
BRITWILL HEALTH CARE COMPANY
Schedule II Valuation and Qualifying Accounts......................................... S-2
</TABLE>
All other schedules are omitted because they are not applicable or not
required.
3. EXHIBITS
<TABLE>
<C> <S>
2 Second Amended and Restated Purchase and Sale Agreement among Unison HealthCare
Corporation and Whitehead Family Investments, Ltd., as amended (incorporated by
reference to Exhibit 2 to Amendment No. 1 to the Registration Statement on Form
S-1 filed on November 16, 1995, File No. 33-97662)
2.1 Modification Agreement dated April 15, 1996 among Unison HealthCare Corporation,
BritWill HealthCare Company and Bruce H. Whitehead (incorporated by reference to
Exhibit 2.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
2.1.1 Modification Agreement dated August 28, 1996 among Unison HealthCare Corporation,
BritWill HealthCare Company and Bruce H. Whitehead (incorporated by reference to
Exhibit 2.1.1 to the Registration Statement on Form S-4 filed on September 18,
1996, File No. 333-12263)
</TABLE>
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<TABLE>
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2.2 Purchase and Sale Agreement effective as of February 1, 1996 by and among Unison
HealthCare Corporation, a Delaware corporation, Sunbelt Therapy Management
Services, Inc., an Arizona corporation, Paul G. Henderson and Paige B. Plash
(incorporated by reference to Exhibit 2.1 to the Form 8-K filed on April 12, 1996)
2.2.1 Agreement for Purchase of Shares as of November 24, 1996, among Unison Health Care
Corporation, Paul G. Henderson and Paige B. Plash*
2.3 Agreement and Plan of Merger among Unison HealthCare Corporation, Signature Health
Care Corporation, David A. Kremser and John D. Filkoski (incorporated by reference
to Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
2.3.1 Amendment to Agreement and Plan of Merger among Union HealthCare Corporation,
Signature Health Care Corporation, David A. Kremser and John D. Filkoski*
2.4 Agreement and Plan of Merger among Unison HealthCare Corporation, Arkansas, Inc.,
David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit 2.4 to
the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996)
2.5 Agreement and Plan of Merger among Unison HealthCare Corporation, Cornerstone
Care, Inc., David A. Kremser and John D. Filkoski (incorporated by reference to
Exhibit 2.5 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
2.6 Agreement and Plan of Merger among Unison HealthCare Corporation, Douglas Manor,
Inc., David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit
2.6 to the Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996)
2.7 Agreement and Plan of Merger among Unison HealthCare Corporation, Safford Care,
Inc., David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit
2.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996)
2.7.1 Amendment to Agreements and Plans of Merger among Unison HealthCare Corporation,
Arkansas, Inc., Cornerstone Care, Inc., Douglas Manor, Inc., Safford Care, Inc.,
David A. Kremser and John D. Filkoski*
2.8 Agreement and Plan of Merger among Unison HealthCare Corporation, a Delaware
corporation, Labco Acquisition Co., a Delaware corporation, and American
Professional Holding, Inc., a Utah corporation (incorporated by reference to the
Company's Current Report on Form 8-K dated July 31, 1996)
2.8.1 First Amendment to Agreement and Plan of Merger among Unison HealthCare
Corporation, a Delaware corporation, Labco Acquisition Co., a Delaware
corporation, and American Professional Holding, Inc., a Utah corporation
(incorporated by reference to Exhibit 2.8.1 to Amendment No. 1 to the Registration
Statement on Form S-4 filed on October 11, 1996, File No. 333-12263)
2.9 Agreement and Plan of Merger among Unison HealthCare Corporation, a Delaware
corporation, Memphis Acquisition Co., a Delaware corporation, and Memphis Clinical
Laboratory, Inc., a Tennessee corporation (incorporated by reference to the
Company's Current Report on Form 8-K dated July 31, 1996)
2.10 Stock Purchase Agreement among Unison HealthCare Corporation, Linda Redwine, David
A. Kremser and John D. Filkoski (incorporated by reference to the Company's
Current Report on Form 8-K dated October 10, 1996)
3.1 Restated Certificate of Incorporation of Unison HealthCare Corporation
(incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
3.1.1 Amendment to Restated Certificate of Incorporation of Unison HealthCare
Corporation*
3.2 Articles of Incorporation of SunQuest SPC, Inc.*
3.3 Certificate of Incorporation of BritWill HealthCare Company*
</TABLE>
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<PAGE> 46
<TABLE>
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3.4 Certificate of Incorporation of BritWill Investments-I, Inc.*
3.5 Certificate of Incorporation of BritWill Investments-II, Inc.*
3.6 Certificate of Incorporation of BritWill Funding Corporation*
3.7 Articles of Incorporation of Emory Care Center, Inc.*
3.8 Charter of Memphis Clinical Laboratory, Inc.*
3.9 Articles of Incorporation of American Professional Holding, Inc.*
3.10 Articles of Incorporation of Ampro Medical Services, Inc.*
3.11 Articles of Incorporation of Gamma Laboratories, Inc.*
3.12 Certificate of Incorporation of Signature Health Care Corporation*
3.13 Articles of Incorporation of Brookshire House, Inc.*
3.14 Articles of Incorporation of Christopher Nursing Center, Inc.*
3.15 Articles of Incorporation of Amberwood Court, Inc.*
3.16 Articles of Incorporation of The Arbors Health Care Center, Inc.*
3.17 Articles of Incorporation of Los Arcos, Inc.*
3.18 Articles of Incorporation of Pueblo Norte, Inc.*
3.19 Articles of Incorporation of Rio Verde Nursing Center, Inc.*
3.20 Articles of Incorporation of Signature Management Group, Inc.*
3.21 Articles of Incorporation of Cornerstone Care, Inc.*
3.22 Articles of Incorporation of Arkansas, Inc.*
3.23 Articles of Incorporation of Douglas Manor, Inc.*
3.24 Articles of Incorporation of Safford Care, Inc.*
3.25 Articles of Incorporation of RehabWest, Inc.*
3.26 Articles of Incorporation of Quest Pharmacies, Inc., and related Shareholder
Agreements*
3.27 Articles of Incorporation of Sunbelt Therapy Management Services, Inc. (AL)*
3.28 Articles of Incorporation of Decatur SportsFit & Wellness Center, Inc.*
3.29 Articles of Incorporation of Therapy Health Systems, Inc.*
3.30 Articles of Incorporation of Henderson & Associates Rehabilitation, Inc.*
3.31 Articles of Incorporation of Sunbelt Therapy Management Services, Inc. (AZ)*
3.32 Articles of Incorporation of Cedar Care, Inc.*
3.33 Articles of Incorporation of Sherwood Healthcare Corporation*
3.34 Partnership Agreement of BritWill Indiana Partnership*
3.35 Bylaws of Unison HealthCare Corporation (incorporated by reference to Exhibit 3.2
to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
3.36 Bylaws of Henderson & Associates Rehabilitation, Inc.*
3.37 Form of Bylaws of SunQuest SPC, Inc., The Arbors Health Care Center, Inc. and
Sunbelt Therapy Management Services, Inc. (AZ)*
3.38 Form of Bylaws of Brookshire House, Inc., Christopher Nursing Center, Inc.,
Amberwood Court, Inc., Los Arcos, Inc., Pueblo Norte, Inc., Rio Verde Nursing
Center, Inc., Signature Management Group, Inc., Cornerstone Care, Inc., Arkansas,
Inc., Douglas Manor, Inc., Safford Care, Inc. and RehabWest, Inc.*
3.39 Form of Bylaws of BritWill HealthCare Company, BritWill Investments-I, Inc.,
BritWill Investments-II, Inc., BritWill Funding Corporation and Signature Health
Care Corporation*
3.40 Bylaws of Therapy Health Systems, Inc.*
</TABLE>
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<PAGE> 47
<TABLE>
<C> <S>
3.41 Bylaws of Gamma Laboratories, Inc.*
3.42 Bylaws of Memphis Clinical Laboratory, Inc.*
3.43 Bylaws of Emory Care Center, Inc.*
3.44 Bylaws of Ampro Medical Services, Inc.*
3.45 Bylaws of American Professional Holding, Inc.*
3.46 Form of Bylaws of Cedar Care, Inc. and Sherwood Healthcare Corporation**
4.1 Specimen 12 1/4% Senior Note due 2006*
4.2 Securities Purchase Agreement dated as of October 28, 1996 between Unison
HealthCare Corporation and the Initial Purchasers*
4.3 Indenture dated as of October 31, 1996 among Unison HealthCare Corporation, the
Guarantors and First Bank National Association, as Trustee*
4.3.1 Supplement No. 1 dated as of February 1, 1997 to Indenture dated as of October 28,
1996*
4.4 Senior Note Registration Rights Agreement dated as of October 31, 1996 among
Unison HealthCare Corporation, the Guarantors and the Initial Purchasers*
9 Voting Agreement among the Company and Messrs. Walker, Rollins, Contris, Lynch,
Boystak and King (incorporated by reference to Exhibit 9 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.1 Promissory Note of Unison HealthCare Corporation to the Agent for the Former
BritWill Shareholders in the amount of $1,000,000 dated May 6, 1996 (incorporated
by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q filed
on May 15, 1996, File No. 0-27374)
10.1.1 Second Amended and Restated Subordinated Promissory Note of the Company to the
former shareholders of BritWill (incorporated by reference to Exhibit 10.1.1 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1995)
10.1.2 Contingent Payment Agreement dated April 15, 1996 among Unison HealthCare
Corporation, BritWill HealthCare Company and Bruce H. Whitehead (incorporated by
reference to Exhibit 10.1.2 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.2 Term Note of the Company to the former shareholders of BritWill (incorporated by
reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.3 Convertible Debenture of the Company issued to the former shareholders of BritWill
(incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.4 Renewal Note of BritWill to the former shareholders of BritWill (incorporated by
reference to Exhibit 10.4 to the Registration Statement on Form S-1 filed on
December 4, 1995, File No. 33-97662)
10.4.1 Letter agreement modifying the Term Note and the Renewal Note (incorporated by
reference to Exhibit 10.4.1 to Amendment No. 2 to the Registration Statement on
Form S-1 filed on December 4, 1995, File No. 33-97662)
10.5 $500,000 Supplemental Note of the Company to the former shareholders of BritWill
(incorporated by reference to Exhibit 10.5 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.5.1 Letter agreement regarding the $500,000 Supplemental Note (incorporated by
reference to Exhibit 10.5.1 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
</TABLE>
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<TABLE>
<C> <S>
10.6 $250,000 Supplemental Note of the Company to WFI (incorporated by reference to
Exhibit 10.6 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.7 Example of Stock Pledge Agreement of certain officers and the Former Shareholders
of BritWill (incorporated by reference to Exhibit 10.7 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.8 Registration Rights Agreement between the Company and WFI (incorporated by
reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.9 Employment Agreement of Jerry M. Walker (incorporated by reference to Exhibit 10.9
to Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.10 Employment Agreement of Phillip R. Rollins, Sr. (incorporated by reference to
Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-1 filed
on November 16, 1995, File No. 33-97662)
10.11 Employment Agreement of Craig R. Clark (incorporated by reference to Exhibit 10.11
to Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.12 Employment Agreement of Paul J. Contris (incorporated by reference to Exhibit
10.12 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.13 Employment and Non-Competition Agreement of L. Robert Oberfield (incorporated by
reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.14 Shareholders Agreement dated May 15, 1995, among Quest Pharmacies, Inc., the
Company and L. Robert Oberfield (incorporated by reference to Exhibit 10.14 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.15 Unison HealthCare Corporation 1995 Stock Option Plan, as amended*
10.16 [Intentionally Omitted]
10.17 Receivables Acquisition Agreement, dated November 14, 1994, as amended, with
HealthPartners Funding, L.P. (incorporated by reference to Exhibit 10.17 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.18 Agreements between the Company and Trouver Capital Partners, L.P. dated March 16,
1992 and July 10, 1995 (incorporated by reference to Exhibit 10.18 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.19 Agreement between BritWill and Trouver Capital Partners, L.P. dated September 15,
1992, as amended (incorporated by reference to Exhibit 10.19 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.20 Master Lease between BritWill -- I and Omega, dated as of November 1, 1992, for
Capital Care HealthCare Center, Cedar Crest HealthCare Center (Wellington Manor),
English Estates (Kingsbury Rehabilitation and HealthCare Center), Lockerbie
HealthCare Center, Parkview Manor and Sunset Manor (incorporated by reference to
Exhibit 10.20 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.21 Agreement of Acquisition and Lease between BritWill and Omega, dated as of
November 1, 1992 (incorporated by reference to Exhibit 10.21 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.22 Leasehold Mortgage between BritWill -- I and Omega, dated November 1, 1992
(incorporated by reference to Exhibit 10.22 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
</TABLE>
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<TABLE>
<C> <S>
10.23 Loan Agreement (Texas Facilities) between BritWill Investments -- Texas and Omega,
dated April 1, 1993 (incorporated by reference to Exhibit 10.23 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.24 [Intentionally Omitted]
10.25 Loan Agreement between BritWill Investments -- Texas and Omega, dated November 30,
1993 (incorporated by reference to Exhibit 10.25 to the Registration Statement on
Form S-1 filed on October 2, 1995, File No. 33-97662)
10.26 BritWill Master Guaranty between BritWill and Omega, dated November 30, 1993
(incorporated by reference to Exhibit 10.26 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.27 Letter of Credit Agreement between BritWill Investments -- II and Omega, dated
November 30, 1993 (incorporated by reference to Exhibit 10.27 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.28 Master Lease between BritWill -- II and Omega, dated as of November 30, 1993
(incorporated by reference to Exhibit 10.28 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.29 Agreement Regarding Financial Covenants Compliance and Amendment Agreement among
BritWill and Omega, dated December 13, 1994 (incorporated by reference to Exhibit
10.29 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
10.30 Master Lease between BritWill -- II and Omega, dated December 12, 1994
(incorporated by reference to Exhibit 10.30 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.31 Amendment Agreement between the Company and Omega, dated August 10, 1995
(incorporated by reference to Exhibit 10.31 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.32 Unison Master Guaranty to Omega, dated August 10, 1995 (incorporated by reference
to Exhibit 10.32 to the Registration Statement on Form S-1 filed on October 2,
1995, File No. 33-97662)
10.32.1 Letter Agreement among Unison HealthCare Corporation, Bruce H. Whitehead and Omega
dated October 31, 1996*
10.33 Subordinated Promissory Note in the amount of $2,475,000 of BritWill to WFI, dated
December 24, 1992 (incorporated by reference to Exhibit 10.33 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.34 Participation Agreement among BritWill, WFI and Garth Financial Services, Inc.,
dated December 24, 1992 (incorporated by reference to Exhibit 10.34 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.35 Bonus Participation Agreement between BritWill and WFI, dated December 24, 1992
(incorporated by reference to Exhibit 10.35 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.36 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $1,081,548.39, dated November, 1993 (incorporated by reference to
Exhibit 10.36 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.37 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $500,000, dated November, 1993 (incorporated by reference to Exhibit
10.37 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
10.38 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $660,000, dated November, 1993 (incorporated by reference to Exhibit
10.38 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
</TABLE>
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<TABLE>
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10.39 [Intentionally Omitted]
10.40 Management Services Agreement between Unison and Lake City Nursing Homes, Inc.,
dated December 1, 1993 (incorporated by reference to Exhibit 10.40 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.41 Lease Contract and Agreement between BritWill Investments -- Texas, as Lessor and
BritWill -- II, as Lessee, dated December 1, 1993, for Four States Care Center,
Heritage Plaza Nursing Center, Pine Haven Care Center, Reunion Plaza Senior Care
and Retirement Center and Texarkana Nursing Center (incorporated by reference to
Exhibit 10.41 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.42 Management Agreement between Sherwood HealthCare Corp. and BritWill Investments --
Indiana, dated November 1, 1991, as amended, for Capital Care, Parkview, Sunset
Manor, Boonville, Holiday Manor, Kendallville Manor and Owensville (incorporated
by reference to Exhibit 10.42 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.43 Management Agreement between Cedar Care, Inc. and BritWill Investments -- Indiana,
dated November 1, 1991, as amended, for Cedar Crest, Country Side, English, Harty,
Lockerbie and Willow Manor (incorporated by reference to Exhibit 10.43 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.44 [Intentionally Omitted]
10.44.1 Lease for Oakwood Nursing Care Center**
10.45 Lease for Elkhart Nursing Home (incorporated by reference to Exhibit 10.45 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.46 Management Services Agreement between the Company and Marshall Manor (Michigan),
dated September 15, 1992 (incorporated by reference to Exhibit 10.46 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.47 Leases for Center (aka Pine Grove Care Center) and Waxahachie (aka Pleasant Manor
Living Center) with BritWill Investments -- Texas (incorporated by reference to
Exhibit 10.47 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.48 Management Services Agreement between the Company and HP/HealthCare Acquirors,
Inc. for Windsor Manor (incorporated by reference to Exhibit 10.48 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.49 Management Services Agreement for Bayshore Convalescent Center (incorporated by
reference to Exhibit 10.49 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.50 Lease for Henry Clay Villa, dated July 1, 1995 (incorporated by reference to
Exhibit 10.50 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.51 Lease for Marshall Manor Nursing Home (Alabama) (incorporated by reference to
Exhibit 10.51 to Amendment No. 1 to the Registration Statement on Form S-1 filed
on November 16, 1995, File No. 33-97662)
10.52 [Intentionally Omitted]
10.53 [Intentionally Omitted]
10.54 [Intentionally Omitted]
10.55 Sublease for Ridgewood Health Care Center (incorporated by reference to Exhibit
10.55 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
</TABLE>
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<TABLE>
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10.56 Management Services Agreement for Peachtree Nursing Center (aka Smyrna Nursing
Center) and Rehabilitation Facility, dated September 15, 1993 (incorporated by
reference to Exhibit 10.56 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.57 Management Services Agreement for St. Barnabas Nursing Home, and Retirement
Apartments, dated January 12, 1995 (incorporated by reference to Exhibit 10.57 to
Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.58 [Intentionally Omitted]
10.59 Lease for Boonville Convalescent Center (incorporated by reference to Exhibit
10.59 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.60 [Intentionally Omitted]
10.61 [Intentionally Omitted]
10.62 [Intentionally Omitted]
10.63 Sublease for Holiday Manor (incorporated by reference to Exhibit 10.63 to
Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.64 [Intentionally Omitted]
10.65 [Intentionally Omitted]
10.66 Lease for Owensville Convalescent Center (incorporated by reference to Exhibit
10.66 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.67 [Intentionally Omitted]
10.68 [Intentionally Omitted]
10.69 [Intentionally Omitted]
10.70 Lease for Willow Manor Convalescent Center (incorporated by reference to Exhibit
10.70 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.71 Lease for Bonner Health Center, dated February 1, 1995 (incorporated by reference
to Exhibit 10.71 to Amendment No. 1 to the Registration Statement on Form S-1
filed on November 16, 1995, File No. 33-97662)
10.72 Lease for Hillside Care Center (aka Prairie Manor), dated February 1, 1995
(incorporated by reference to Exhibit 10.72 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.73 Lease for Oswego Manor, dated March 2, 1994 (incorporated by reference to Exhibit
10.73 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.74 [Intentionally Omitted]
10.75 Lease for SunCrest HealthCare Center, dated September 14, 1994 (incorporated by
reference to Exhibit 10.75 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.76 Sublease for The Oaks of Boise (aka Franciscan Health Care Center of Boise)
(incorporated by reference to Exhibit 10.76 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.77 Lease for Mountainside Care Center (aka Sandpoint Manor) and St. Francis Preschool
and Childcare Center (incorporated by reference to Exhibit 10.77 to Amendment No.
1 to the Registration Statement on Form S-1 filed on November 16, 1995, File No.
33-97662)
</TABLE>
49
<PAGE> 52
<TABLE>
<C> <S>
10.77.1 Sublease for Mountainside Care Center (incorporated by reference to Exhibit
10.77.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.78 [Intentionally Omitted]
10.79 Lease for White Pine Care Center, dated November 1, 1994 (incorporated by
reference to Exhibit 10.79 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.80 [Intentionally Omitted]
10.81 [Intentionally Omitted]
10.82 [Intentionally Omitted]
10.83 Lease for Green Acres Nursing Home, dated August 30, 1995 (incorporated by
reference to Exhibit 10.83 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.84 Lease for Hemphill Care Center, dated September 1, 1994 (incorporated by reference
to Exhibit 10.84 to Amendment No. 1 to the Registration Statement on Form S-1
filed on November 16, 1995, File No. 33-97662)
10.85 [Intentionally Omitted]
10.86 [Intentionally Omitted]
10.87 [Intentionally Omitted]
10.88 [Intentionally Omitted]
10.89 [Intentionally Omitted]
10.90 Lease for Nightingale West Nursing Home, dated August 24, 1995 (incorporated by
reference to Exhibit 10.90 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.91 Sublease for Twin Pines of Lewisville, dated September 8, 1995 (incorporated by
reference to Exhibit 10.91 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.92 Lease for Homestead of McKinney dated as of July 1, 1996 between Westminister
Healthcare, Inc. and BritWill Investments-II, Inc.*
10.93 [Intentionally Omitted]
10.94 Letter Agreement regarding licensing and operation of the Indiana facilities from
Cedar Care and Sherwood to the Company, dated August 10, 1995 (incorporated by
reference to Exhibit 10.94 to Amendment No. 2 to the Registration Statement on
Form S-1 filed on December 4, 1995, File No. 33-97662)
10.95 Agreement Regarding Conversion of the Convertible Debenture, dated December 1,
1995 (incorporated by reference to Exhibit 10.95 to Amendment No. 2 to the
Registration Statement on Form S-1 filed on December 4, 1995, File No. 33-97662)
10.96 Letter Agreement Regarding Consulting Services (incorporated by reference to
Exhibit 10.96 to Amendment No. 3 to the Registration Statement on Form S-1 filed
on December 12, 1995, File No. 33-97662)
10.97 Loan and Security Agreement dated February 16, 1996 by and between Unison
HealthCare Corporation, SunQuest SPC, Inc., BritWill HealthCare Company, BritWill
Investments-I, Inc., BritWill Funding Corporation, BritWill Investments-II, Inc.,
Emory Care Center, Inc., Cedar Care, Inc., Sherwood Healthcare Corp. (collectively
as borrowers) and HealthPartners Funding, L.P. (as lender) (incorporated by
reference to Exhibit 10.97 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
</TABLE>
50
<PAGE> 53
<TABLE>
<C> <S>
10.97.1 Letter Agreement dated October 4, 1996 between HealthPartners Funding, L.P. and
Unison HealthCare Corporation (incorporated by reference to Exhibit 10.97.1 to
Amendment No. 1 to the Registration Statement on Form S-4 filed on October 11,
1996, File No. 333-12263)
10.98 Security Agreement effective as of February 1, 1996 by and among Unison HealthCare
Corporation, a Delaware corporation, Sunbelt Therapy Management Services, Inc., an
Arizona corporation, Paul G. Henderson and Paige B. Plash (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on April 12, 1996)
10.99 Promissory Note of Unison HealthCare Corporation to Omega Healthcare Investors,
Inc. in the amount of $3,500,000, dated February 9, 1996 (incorporated by
reference to Exhibit 10.99 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.100 Lease dated November 30, 1994 between Monica R. Salusky and SunQuest SPC, Inc.
(commencement date: August 1, 1996) (incorporated by reference to the Company's
Current Report on Form 8-K dated August 14, 1996)
10.101 Modification of Lease dated as of July 31, 1996 between Monica R, Salusky,
SunQuest SPC, Inc. and Unison HealthCare Corporation (incorporated by reference to
the Company's Current Report on Form 8-K dated August 14, 1996)
10.102 Lease dated June 19, 1996 between Walla Walla Partners, L.P. and SunQuest SPC,
Inc. (commencement date: August 1, 1996) (incorporated by reference to the
Company's Current Report on Form 8-K dated August 14, 1996)
10.103 First Amendment to Lease dated July 26, 1996 between Walla Walla Partners, L.P.
and SunQuest SPC, Inc. (incorporated by reference to the Company's Current Report
on Form 8-K dated August 14, 1996)
10.109 Promissory Note of Unison HealthCare Corporation to Red Line Healthcare
Corporation in the amount of $771,004.60 dated August 30, 1996 (incorporated by
reference to Exhibit 10.109 to the Registration Statement on Form S-4 filed on
September 18, 1996, File No. 333-12263)
10.110 Receivables Purchase and Sale Agreement dated August 8, 1996 between
HealthPartners Funding, L.P., Sunbelt Therapy Management Services, Inc. (an
Arizona corporation), Henderson & Associates Rehabilitation, Inc., Decator
Sportsfit & Wellness Center, Inc., Therapy Health Systems, Inc., Sunbelt Therapy
Management Services, Inc. (an Alabama corporation), Quest Pharmacies, Inc. and
SunQuest SPC, Inc. (incorporated by reference to Exhibit 10.110 to the
Registration Statement on Form S-4 filed on September 18, 1996, File No.
333-12263)
10.111 Master Lease Agreement dated June 4, 1996 between Unison HealthCare Corporation
and LINC Anthem Corporation (incorporated by reference to Exhibit 10.111 to the
Registration Statement on Form S-4 filed on September 18, 1996, File No.
333-12263)
10.112.1 Promissory Note dated March 17, 1997 to David A. Kremser in partial payment of
Equity Adjustment Amount*
10.112.2 Form of Promissory Notes dated March 17, 1997, to former Signature shareholders in
partial payment of Equity Adjustment Amount*
10.113 Services Agrement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.114 Indemnification Agreement dated as of March 31, 1997, between the Registrant and
David A. Kremser*
10.115 Tolling Agreement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.116 Option Agreement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.117.1 Form of Loan and Security Agreement dated as of April 21, 1997 among the
Registrant, Elk Meadows Investments, L.L.C. and BritWill Investments Company,
Ltd.*
10.117.2 Form of Stock Pledge Agreement dated as of April 21, 1997 among Registrant, Elk
Meadows Investments, L.L.C. and BritWill Investments Company, Ltd.
</TABLE>
51
<PAGE> 54
<TABLE>
<C> <S>
10.118 Asset Purchase Agreement dated as of December 20, 1996, among Sunbelt Therapy
Management Services, Inc., Spine Rehabilitation and Physical Therapy Center, Inc.
and Douglas L. Bates*
10.119 Master Lease Agreement dated November 25, 1996, between Unison HealthCare
Corporation and Pacific Financial Company, relating to computer equipment and
software*
10.120 Form of sublease agreement dated as of March 1, 1997, between BritWill
Investments-II, Inc. and Hasmark East Ltd., relating to Four States Care Center,
Green Acres, Heritage Oaks and Texarkana Nursing Center*
10.121 Lease dated as of June 13, 1995, between AHP of Colorado, Inc. and Arkansas,
Inc.**
10.122 Lease dated as of June 13, 1995, between AHP of Colorado, Inc. and Cornerstone
Care, Inc.**
10.123 Lease dated as of July 28, 1995, between American Health Properties of Arizona,
Inc. and Safford Care, Inc.**
10.124 Lease dated as of July 28, 1995, between American Health Properties of Arizona,
Inc. and Douglas Manor, Inc.*
10.125 Promissory Note and related Term Loan Agreement and Form of Deed of Trust dated
March 30, 1994 in the original principal amount of $19.1 million between Signature
Health Care, Inc. and National Health Investors, Inc.*
10.126 Lease dated as of December 1, 1990 between Health Care Reit, Inc. and The Arbors
Health Care Center Inc.*
11.1 Unison HealthCare Corporation Statement Re: Computation of Per Share Earnings*
21 List of subsidiaries*
27 Financial Data Schedule (included only in the EDGAR filing)
99.1 Report of Ronald H. Ridgers, P.C. related to American Professional Holding, Inc.*
99.2 Report of Ronald H. Ridgers, P.C. related to Memphis Clinical Laboratory, Inc.*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(b) Reports on Form 8-K.
Unison filed the following reports on Form 8-K during the quarter ended
December 31, 1996:
(1) Report dated October 10, 1996 related to the Stock Purchase
Agreement between Unison and RehabWest, Inc.
(2) Report dated October 31, 1996 which included the following
financial statements: (i) audited financial statements of Signature
HealthCare Corporation for each of the three years ended December 31, 1995
and unaudited financial statements for the six months ended June 30, 1996
and 1995; (ii) audited combined financial statements of Arkansas, Inc.,
Cornerstone Care, Inc., Douglas Manor, Inc. and Safford Care, Inc. for each
of the three years ended December 31, 1995 and unaudited financial
statements for the six months ended June 30, 1996 and 1995; (iii) audited
financial statements of RehabWest, Inc. as of and for the years ended
December 31, 1995 and 1994 and unaudited financial statements for the six
months ended June 30, 1996 and 1995; (iv) audited financial statements of
American Professional Holding, Inc. for each of the three years ended
December 31, 1995 and unaudited financial statements for the six months
ended June 30, 1996 and 1995; and (v) audited financial statements of
Memphis Clinical Laboratory, Inc. for each of the three years ended
December 31, 1995 and unaudited financial statements for the six months
ended June 30, 1996 and 1995.
52
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Unison HealthCare Corporation
By: /s/ DAVID A. KREMSER
------------------------------------
David A. Kremser
Chairman, Executive Committee of
the Board of Directors*
Date: May 29, 1997
--------------------------------------
*Mr. Kremser is acting in the capacity of Principal Executive Officer and
Principal Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------------- -------------
<C> <S> <C>
/s/ DAVID A. KREMSER Director May 29, 1997
- -------------------------------------
David A. Kremser
/s/ PHILLIP R. ROLLINS Executive Vice President -- Operations, May 29, 1997
- ------------------------------------- Chief Operating Officer, Director
Phillip R. Rollins
/s/ WARREN K. JERREMS Vice President, Chief Accounting Officer May 29, 1997
- ------------------------------------- (Principal Accounting Officer)
Warren K. Jerrems
/s/ BRUCE H. WHITEHEAD Chairman of the Board of Directors May 29, 1997
- -------------------------------------
Bruce H. Whitehead
/s/ TYRRELL L. GARTH Director May 29, 1997
- -------------------------------------
Tyrrell L. Garth
/s/ JOHN T. LYNCH, JR. Director May 29, 1997
- -------------------------------------
John T. Lynch, Jr.
/s/ MARK W. WHITE Director May 29, 1997
- -------------------------------------
Mark W. White
/s/ JOHN T. CASEY Director May 29, 1997
- -------------------------------------
John T. Casey
Director May 29, 1997
- -------------------------------------
Jerry M. Walker
</TABLE>
<PAGE> 56
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
1. FINANCIAL STATEMENTS
UNISON HEALTHCARE CORPORATION
Report of Independent Auditors................................................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995.................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994.... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31,
1996, 1995 and 1994......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.... F-6
Notes to Consolidated Financial Statements.................................................... F-7
BRITWILL HEALTHCARE COMPANY
Report of Independent Auditors................................................................ F-27
Report of Independent Accountants............................................................. F-28
Consolidated Balance Sheet June 30, 1995...................................................... F-29
Consolidated Statements of Operations for the year ended December 31, 1994, six months ended
June 30, 1995 and one month ended July 31, 1995............................................. F-30
Consolidated Statements of Shareholders' Equity for the year ended December 31, 1994 and the
six months ended June 30, 1995.............................................................. F-31
Consolidated Statements of Cash Flows for the year ended December 31, 1994, six months ended
June 30, 1995 and one month ended July 31, 1995............................................. F-32
Notes to Consolidated Financial Statements.................................................... F-33
2. FINANCIAL STATEMENT SCHEDULES
UNISON HEALTHCARE CORPORATION
Schedule II Valuation and Qualifying Accounts................................................. S-1
BRITWILL HEALTH CARE COMPANY
Schedule II Valuation and Qualifying Accounts................................................. S-2
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Unison HealthCare Corporation:
We have audited the accompanying consolidated balance sheets of Unison
HealthCare Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedules listed in the index at
Item 14(a). These consolidated financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits. We did not audit the consolidated financial statements of American
Professional Holding, Inc. (Ampro) and Memphis Clinical Laboratory, Inc.
(Memphis), which statements reflect total assets constituting 5% at December 31,
1995 of the related consolidated totals, and which reflect net income
constituting approximately 123% and 121% of the consolidated totals for each of
the two years in the period ended December 31, 1995, respectively. Those
statements and the data relating to Ampro and Memphis included in the schedules
as they relate to December 31, 1995 and each of the two years in the period
ended December 31, 1995, listed in the index at Item 14(a) were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to data included for Ampro and Memphis, is based solely on the report of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 1995 and 1994, the report of
other auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Unison
HealthCare Corporation and subsidiaries as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, based on our
audits and, for 1995 and 1994, the report of other auditors, the related
financial statement schedules, as they relate to December 31, 1996 and 1995 and
each of the three years in the period ended December 31, 1996, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Phoenix, Arizona
May 16, 1997
F-2
<PAGE> 58
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 17,409,000 $ 6,169,000
Accounts receivable (Notes 2, 5, 10 and 13).................... 28,608,000 18,324,000
Prepaid expenses and other current assets (Note 6)............. 5,885,000 2,319,000
------------ -----------
Total current assets........................................ 51,902,000 26,812,000
Property and equipment, net
(Notes 7 and 13)............................................... 30,830,000 3,688,000
Lease operating rights and other intangible assets, net (Note
8)............................................................. 113,781,000 39,160,000
Goodwill, net (Note 2)........................................... 28,431,000 8,452,000
Security deposits and other assets (Note 9)...................... 5,977,000 3,189,000
------------ -----------
$230,921,000 $81,301,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit (Note 10)....................................... $ -- $ 789,000
Accounts payable (Note 11)..................................... 10,505,000 9,968,000
Accrued expenses (Note 12)..................................... 21,437,000 9,238,000
Current portion of notes payable and long-term debt, including
amounts due to related parties (Notes 13 and 17)............ 33,915,000 6,865,000
Deferred taxes (Note 18)....................................... -- 879,000
------------ -----------
Total current liabilities................................... 65,857,000 27,739,000
Notes payable and long-term, including amounts due to related
parties, less current portion (Notes 13 and 17)................ 123,223,000 19,083,000
Deferred taxes (Note 18)......................................... 24,791,000 8,173,000
Leasehold liability, net (Note 16)............................... 4,434,000 4,622,000
Other liabilities................................................ 927,000 781,000
------------ -----------
Total liabilities........................................... 219,232,000 60,398,000
Stockholders' equity (Note 14):
Preferred stock, $.001 par value; authorized 1,000,000 shares;
no shares issued or outstanding............................. --
Common stock, $.001 par value; authorized 25,000,000 shares in
1996 and 10,000,000 shares in 1995; issued and outstanding
6,078,000 shares in 1996 and 4,214,000 shares in 1995....... 5,000 3,000
Additional paid-in capital..................................... 34,723,000 20,501,000
Retained earnings (accumulated deficit)........................ (23,039,000) 399,000
------------ -----------
Net stockholders' equity.................................... 11,689,000 20,903,000
------------ -----------
$230,921,000 $81,301,000
============ ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 59
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Operating revenues:
Net patient service revenues..................... $146,379,000 $64,947,000 $17,070,000
Other operating revenues......................... 2,295,000 3,541,000 1,336,000
------------ ---------- -----------
Total operating revenues................. 148,674,000 68,488,000 18,406,000
Expenses:
Wages and related................................ 85,789,000 35,047,000 9,593,000
Other operating.................................. 64,771,000 24,032,000 6,462,000
Rent............................................. 15,658,000 6,673,000 1,406,000
Interest......................................... 5,824,000 1,176,000 147,000
Depreciation and amortization.................... 4,561,000 1,311,000 286,000
Impairment losses (Note 23)...................... 3,865,000 -- --
------------ ---------- -----------
Total expenses........................... 180,468,000 68,239,000 17,894,000
------------ ---------- -----------
Income (loss) before income taxes.................. (31,794,000) 249,000 512,000
Income tax expense (benefit)....................... (8,356,000) 132,000 172,000
------------ ---------- -----------
Net income (loss).................................. $(23,438,000) $ 117,000 $ 340,000
============ ========== ===========
Net income (loss) per share:....................... $ (5.01) $ 0.05 $ 0.19
Common shares used in per share calculation:....... 4,676,037 2,280,213 1,806,164
</TABLE>
See accompanying notes.
F-4
<PAGE> 60
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------ ADDITIONAL EARNINGS
NUMBER OF PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993
As previously reported............. 1,250,000 $ -- $ -- $ (103,000) $ (103,000)
Pooling adjustments................ 540,000 1,000 410,000 45,000 456,000
--------- ------ ----------- ------------ -----------
Balance as restated................ 1,790,000 1,000 410,000 (58,000) 353,000
Stock warrants issued................ -- -- 43,000 -- 43,000
Net income........................... -- -- -- 340,000 340,000
--------- ------ ----------- ------------ -----------
Balance at December 31, 1994......... 1,790,000 1,000 453,000 282,000 736,000
Sale of common stock in public
offering, net of stock issuance
costs.............................. 2,000,000 2,000 14,612,000 -- 14,614,000
Conversion of debenture.............. 424,000 -- 5,286,000 -- 5,286,000
Stock warrants issued................ -- -- 150,000 -- 150,000
Net income........................... -- -- -- 117,000 117,000
--------- ------ ----------- ------------ -----------
Balance at December 31, 1995......... 4,214,000 3,000 20,501,000 399,000 20,903,000
Costs of initial public offering..... -- -- (93,000) -- (93,000)
Stock warrants exercised............. 178,000 -- -- -- --
Conversion of debenture.............. 138,000 -- 1,714,000 -- 1,714,000
Common stock issued for
acquisitions....................... 1,537,000 2,000 12,701,000 -- 12,703,000
Stock options exercised.............. 11,000 -- 102,000 -- 102,000
Tax benefit associated with exercise
of stock options................... -- -- 11,000 -- 11,000
Repurchase of stock warrants......... -- -- (213,000) -- (213,000)
Net loss............................. -- -- -- (23,438,000) (23,438,000)
--------- ------ ----------- ------------ -----------
Balance at December 31, 1996......... 6,078,000 $5,000 $34,723,000 $(23,039,000) $ 11,689,000
========= ====== =========== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 61
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................................... $(23,438,000) $ 117,000 $ 340,000
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Impairment losses............................................. 3,865,000 -- --
Depreciation and amortization................................. 4,561,000 1,311,000 286,000
Provision for doubtful accounts............................... 2,742,000 29,000 128,000
Change in deferred taxes...................................... (9,238,000) (21,000) 8,000
Minority interest expense..................................... 138,000 21,000 --
Leasehold liability amortization.............................. (188,000) (78,000) --
Other charges and credits, net................................ (69,000) -- --
Changes in operating assets and liabilities, net of
acquisitions:
Increase in net accounts receivable --..................... (5,310,000) (8,694,000) (2,749,000)
(Increase) decrease in prepaids and other.................. 825,000 (607,000) (575,000)
Increase in accounts payable and accrued expenses.......... 2,454,000 6,990,000 2,519,000
------------ ----------- -----------
Net cash used in operating activities........................... (23,658,000) (932,000) (43,000)
------------ ----------- -----------
INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements................ (3,587,000) (1,333,000) (995,000)
Increase in intangibles and other assets........................ (2,707,000) (1,397,000) (155,000)
Increase in lease deposits...................................... (1,204,000) (272,000) (180,000)
Acquisitions, net of cash acquired.............................. (41,225,000) (677,000) (300,000)
------------ ----------- -----------
Net cash used in investing activities........................... (48,723,000) (3,679,000) (1,630,000)
------------ ----------- -----------
FINANCING ACTIVITIES:
Net increase (decrease) in revolving line of credit............. (789,000) (2,916,000) 950,000
Proceeds from sale of accounts receivable....................... -- 2,515,000 197,000
Proceeds from long-term borrowings.............................. 113,567,000 2,448,000 1,130,000
Payments on long-term borrowings................................ (24,808,000) (6,187,000) (482,000)
Repayment of other long-term liabilities........................ (2,779,000) -- --
Proceeds from public stock offering............................. -- 14,614,000 --
Bank overdrafts................................................. 3,043,000 -- --
Repurchase of stock warrants.................................... (213,000) -- --
Exercise of stock options....................................... 102,000 -- --
Increase in deferred financing costs............................ (4,502,000) -- --
------------ ----------- -----------
Net cash provided by financing activities....................... 83,621,000 10,474,000 1,795,000
------------ ----------- -----------
Net increase in cash.......................................... 11,240,000 5,863,000 122,000
Cash and cash equivalents at beginning of period................ 6,169,000 306,000 184,000
------------ ----------- -----------
Cash and cash equivalents at end of period...................... $ 17,409,000 $ 6,169,000 $ 306,000
============ =========== ===========
Supplemental disclosure:
Income taxes paid............................................. $ 124,000 $ 92,000 $ 172,000
Interest expense paid......................................... 3,014,000 1,127,000 130,000
Supplemental disclosure of noncash investing and financing
activities
Acquisitions:
Fair value of assets acquired................................. 122,420,000 58,744,000 --
Liabilities incurred and assumed.............................. 68,492,000 59,421,000 --
Common stock issued........................................... 12,703,000 -- --
------------ -----------
41,225,000 677,000 --
Conversion of debentures into shares of common stock............ 1,714,000 5,286,000 --
Acquisition of leasehold rights ($237,000) and equipment and
leasehold improvements ($126,000) through issuance of note
payable....................................................... -- -- 363,000
Common stock warrants issued (Note 16).......................... -- 150,000 --
Property and equipment purchased under capital leases........... 7,205,000 -- --
</TABLE>
See accompanying notes
F-6
<PAGE> 62
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF BUSINESS
Unison HealthCare Corporation ("Unison") is a provider of long-term and
specialty healthcare services. At December 31, 1996, Unison operated and managed
62 facilities, including long-term care and specialty care and
independent/assisted living facilities. Unison's operations are located in 13
states, principally in the midwest and southwest regions of the United States.
Unison changed its name from SunQuest HealthCare Corporation in November
1995. In August 1995, Unison acquired all of the common stock of BritWill
HealthCare Company ("BritWill"). In March 1996, Unison acquired 90% of the
Common Stock of four rehabilitation therapy centers (collectively "Sunbelt
Therapy") and in November 1996 retroactively acquired the remaining 10%. In
October 1996, Unison acquired all of the common stock of Signature Health Care
Corporation and four affiliated companies ("Signature"). In October 1996, Unison
completed a merger with two clinical laboratory companies, American Professional
Holding, Inc. ("Ampro") and Memphis Clinical Laboratory, Inc. ("Memphis"). (Note
4). Unison also operates a pharmacy operation and a Medicare Part B billing and
supply company.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Unison, its subsidiaries, and all of its leased facilities. Significant
intercompany transactions and balances have been eliminated in consolidation.
Revenues and expenses related to the operations acquired from BritWill,
Sunbelt Therapy, Signature and other acquisitions are included in Unison's
results of operations for periods subsequent to the date of acquisition. The
mergers with Ampro and Memphis have been accounted for as poolings of interests.
Accordingly the consolidated financial statements of Unison have been restated
to include the accounts of Ampro and Memphis for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Net Operating Revenues
Unison's revenues are derived primarily from providing long-term healthcare
services. Contractual adjustments resulting from agreements with various
organizations to provide services for amounts which differ from billed charges,
including services under Medicare and Medicaid, are recorded as deductions from
gross patient service revenue. The estimated third party payor settlements under
Medicare and Medicaid programs are recorded in the period the related services
are rendered and are subject to audit and final settlement by the fiscal
intermediary. Differences between the net amounts accrued and subsequent
settlement, if any, are recorded in operations at the time the final settlement
is determined. As of December 31, 1996 and 1995, Unison has approximately
$2,260,000 and $1,800,000, respectively, of Medicare routine cost limit
exceptions which are subject to audit and final approval by the fiscal
intermediary. Based on consultation with outside reimbursement specialists, it
is management's opinion that the ultimate resolution of third party payor
settlements will not have a material adverse impact on the consolidated
financial position or results of operations of Unison.
F-7
<PAGE> 63
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Unison receives management fees for the management of long-term care
facilities on behalf of the owners. Other operating revenues include management
fees amounting to $1.2 million in 1996, $1.7 million in 1995, and $1.1 million
in 1994.
Provision for doubtful accounts is made when the related revenue is
recorded and is included in other operating expense. The provisions totaled
$2,742,000 in 1996, $29,000 in 1995 and $128,000 in 1994. Accounts, when
determined to be uncollectible, are charged against the allowance for doubtful
accounts. The allowance for doubtful accounts is determined by management using
estimates of potential losses based on an analysis of current and past due
accounts, collection experience in relation to amounts billed, prior settlements
experience and other relevant information. The allowance for doubtful accounts
totaled $3,776,000 and $783,000 at December 31, 1996 and 1995, respectively.
Cash and cash equivalents
Cash and cash equivalents include amounts held in demand deposits at
financial institutions and all highly liquid investments that have an original
maturity of three months or less.
Inventories
Inventories are comprised primarily of nursing facility supplies and
pharmaceutical products and are stated at the lower of cost (first-in,
first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
for financial statement purposes are computed using the straight-line method
over the lesser of the respective lease term or the estimated useful life of the
respective asset.
Intangible Assets
Certain costs incurred in the acquisition of facilities such as assembled
workforce and covenants not to compete are amortized on a straight line basis
over five years. Lease operating rights (net of leasehold liabilities) recorded
in connection with lease arrangements or through acquisition have been
capitalized and are being amortized on a straight line basis over the respective
initial lease term, including probable renewal periods, not to exceed thirty
years.
Management believes that goodwill related to nursing home acquisitions has
an unlimited useful life and, therefore, assigned a forty-year amortization
period to goodwill resulting from such acquisitions. In determining its
unlimited useful life, management considered factors such as: policies of
similar public healthcare and long-term care companies, nature of the long-term
care industry which is positively impacted by the increasing age of the American
population as well as the continual transfer of patients from a high cost acute
care setting to a lower cost long-term care setting, profitability of companies
in the long-term care industry, and the fact that nursing care services provided
in nursing home facilities will be continuously needed in the future and are not
subject to obsolescence.
F-8
<PAGE> 64
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Goodwill resulting from various acquisitions is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
LIFE 1996 1995
---- ----------- ----------
<S> <C> <C> <C>
BritWill.................................................... 40 $ 7,000,000 $7,000,000
Pharmacy.................................................... 20 1,197,000 545,000
Gamma Labs.................................................. 15 1,087,000 1,087,000
Sunbelt..................................................... 20 5,425,000 --
Signature................................................... 40 9,300,000 --
RehabWest................................................... 20 5,029,000 --
----------- ----------
29,038,000 8,632,000
Accumulated amortization.................................... (607,000) (180,000)
----------- ----------
$28,431,000 $8,452,000
=========== ==========
</TABLE>
Unison periodically assesses the recoverability of intangible assets by
comparing the carrying amount of the intangible assets to the future benefits or
undiscounted cash flows derived from that asset. Impairments are recognized in
operating results if it is probable that the carrying value of the asset will
not be recovered from future cash flows derived from that asset (Note 23).
Income Taxes
Unison accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the use of an asset and liability approach for measuring deferred
taxes based on temporary differences between financial statement and tax bases
of assets and liabilities existing at each balance sheet date using enacted tax
rates for years in which the related taxes are expected to be paid or recovered.
Net Income (Loss) Per Share
Net income (loss) per share is calculated by dividing net income (loss) by
the weighted average number of common and dilutive equivalent shares
outstanding.
Reclassifications
Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform with the 1996 presentation.
3. LIQUIDITY
Unison incurred a loss from operations during 1996, and at December 31,
1996, has a working capital deficiency of $13,955,000 and is in default on
$18,640,000 of debt (Note 13). The 1996 loss resulted primarily from
non-recurring expenses including impairment losses on long-lived assets, costs
of failed acquisitions and related financing efforts, write-offs of non patient
receivables, penalties and fines, and similar items. The debt in default is
collateralized by nursing facilities with market values significantly in excess
of the debt. Management believes that the debt can be refinanced if payment on
the debt is accelerated, but has no reason to believe that the debt payments
will be accelerated.
In February 1997, members of Unison's Board of Directors formed an
Executive Committee which replaced members of senior management and which now
has responsibility for overseeing Unison's operations until new management is
secured. The Executive Committee subsequently initiated various revenue enhance-
F-9
<PAGE> 65
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
3. LIQUIDITY -- (CONTINUED)
ment and cost containment initiatives. Additionally, Unison has other assets,
such as its pharmacy and therapy companies, which could be sold to generate
additional cash flow if needed, and has access to a $10,000,000 line of credit.
The Company is attempting to develop lending relationships that will use the
Company's available accounts receivable and other available assets to reduce
overall borrowing costs and, if necessary, supply additional working capital.
The Company also intends to explore opportunities for a secured or unsecured
term loan or for equity financings, should that prove necessary or desirable.
There can be no assurance that such financings will be available or, if
available, that necessary funds will be available on terms favorable to Unison
and its shareholders.
The Executive Committee believes that the revenue enhancement and cost
containment initiatives and access to cash flows from draws on its line of
credit or, if necessary, proceeds from sales of unencumbered assets and
additional borrowings, will provide Unison with the liquidity necessary to meet
its obligations during 1997.
4. SIGNIFICANT BUSINESS TRANSACTIONS, ACQUISITIONS AND DISPOSITIONS
In August 1995, Unison acquired all of the common stock of BritWill,
another long-term care company operating approximately 28 facilities located in
Texas and Indiana. The terms of the BritWill acquisition were modified in April
1996, effective August 10, 1995, such that Unison acquired all of the
outstanding stock of BritWill for a total fixed purchase amount of $20,600,000
plus, to the extent applicable, monthly contingent payments if Unison's monthly
consolidated net patient revenues exceeded specified monthly amounts ranging
from $8,000,000 to $11,989,000 for the period from September 9, 1995 through
July 31, 2000. An additional lump sum contingent payment was payable on the
earlier of (i) August 9, 2000 if Unison had consolidated net patient revenues of
not less than $150,000,000 for the twelve-month period ended June 30, 2000 or
(ii) the sale by Unison of debt or equity securities exceeding $10,000,000. The
purchase price was comprised of a $5,602,000 term note (the "Term Note"), an
$8,000,000 subordinated promissory note (the "Subordinated Note"), and a
$7,000,000 noninterest bearing convertible subordinated debenture (the
"Convertible Debenture") (Note 13). During August 1996, as a result of the
proposed acquisition of the common stock of Signature, the contingent payments
became assured and Unison accrued the present value of the remaining contingent
payments related to the BritWill acquisition in an amount totaling $11,500,000
(the "Additional Payment Obligation") (Note 13). In connection with the BritWill
acquisition, Unison paid a financial advisory fee to Trouver Capital Partners,
L.P. ("Trouver") amounting to $675,000. One of Unison's directors is a partner
in Trouver. The acquisition was accounted for as a purchase. The contingent
portions of the purchase price were initially added to lease operating rights
when paid, and then in August 1996 when accrued. At December 31, 1996 and 1995,
contingent payments and accruals amounting to $19,523,000 and $567,000,
respectively, had been added to lease operating rights.
Effective February 1, 1996, Unison acquired 90% of the common stock of
Sunbelt Therapy, paying $800,000 in cash, and issuing term notes aggregating
$1,000,000 (the "Notes") and subordinated convertible debentures aggregating
$1,800,000 (the "Debentures"). The transaction was accounted for as a purchase.
In November 1996, Unison purchased the remaining 10% of Sunbelt Therapy
effective February 1, 1996. The aggregate purchase price amounted to $1,418,000
plus a guaranteed payment amounting to $709,000. Additional contingent payments
of up to $1,418,000 will be due if specified income targets are achieved.
Consideration for the purchase was comprised of promissory notes in the
aggregate amount of $1,876,000 and 27,942 shares of Unison common stock (Note
13).
On October 31, 1996, Unison, through a newly formed wholly owned
subsidiary, completed a merger with Ampro. The outstanding shares of Ampro
common stock were converted into the right to receive 521,000
F-10
<PAGE> 66
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
4. SIGNIFICANT BUSINESS TRANSACTIONS, ACQUISITIONS AND
DISPOSITIONS -- (CONTINUED)
shares of Unison common stock. Unison simultaneously completed a merger with
Memphis. Three shareholders who owned approximately 35% of the outstanding
shares of Memphis received pro rata portions of 19,000 shares of Unison common
stock and the holder of the remaining shares of Memphis received cash in the
amount of $237,000 and a promissory note in the amount of $250,000. The
transaction has been recorded as a pooling of interests.
Summarized results of operations of the separate companies for the period
from January 1, 1996 through October 31, 1996 are as follows (unaudited):
<TABLE>
<CAPTION>
UNISON AMPRO MEMPHIS
------------ ---------- --------
<S> <C> <C> <C>
Total revenues................................ $109,862,000 $5,137,000 $686,000
Net income (loss)............................. (12,728,000) 163,000 50,000
</TABLE>
Following is a reconciliation of restated revenues and net income (loss) to
amounts previously reported for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Total operating revenues:
As previously reported.................................. $61,285,000 $12,406,000
Merged companies (Ampro and Memphis).................... 7,203,000 6,000,000
----------- -----------
As restated............................................. $68,488,000 $18,406,000
=========== ===========
Net income (loss):
As previously reported.................................. $ (26,000) $ (80,000)
Merged companies (Ampro and Memphis).................... 143,000 420,000
----------- -----------
As restated............................................. $ 117,000 $ 340,000
=========== ===========
</TABLE>
On October 31, 1996, Unison acquired Signature, comprised of Signature
Health Care Corporation ("Signature Health Care") and four affiliated companies,
Douglas Manor, Inc. ("Douglas"), Safford Care, Inc. ("Safford"), Arkansas, Inc.
("Arkansas"), and Cornerstone, Inc. ("Cornerstone"). Signature operates 13
long-term care facilities in Colorado and Arizona. Outstanding shares of
Signature were converted into the right to receive cash and promissory notes
totaling approximately $38,200,000 and 1,509,434 shares of Unison's common
stock. In accordance with an adjustment provision of the Signature merger
agreements relating to the stockholders' equity, in March 1997 the former
shareholders of Signature received additional consideration of $2,511,000, paid
in convertible promissory notes ($1,827,000) and 238,052 shares of Unison common
stock ($684,000). In connection with the Signature acquisition, Unison also
acquired all of the outstanding stock of RehabWest, Inc. ("RehabWest"), a
related rehabilitation services company, for a cash purchase price of
$5,350,000. These acquisitions were accounted for as purchases.
On September 30, 1996, Unison announced a disposition plan designed to
improve its long-term financial strength and operating performance. The original
plan included the disposition of seven nursing facilities and was subsequently
modified to include an aggregate of eight facilities (the "Disposition
Facilities"). On March 1, 1997, Unison subleased four of the Disposition
Facilities to an unrelated party. The provision for disposal of these facilities
is included in impairment losses (Note 23). Of the remaining four Disposition
Facilities, one is closed and three remain in operation with an aggregate of 522
licensed beds.
Summarized below are the unaudited pro forma consolidated results of
operations of Unison for the periods indicated, assuming the acquisitions, lease
agreements and dispositions described above and the private placement of the
Senior Notes described in Note 13 were consummated as of January 1, 1995. The
F-11
<PAGE> 67
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
4. SIGNIFICANT BUSINESS TRANSACTIONS, ACQUISITIONS AND
DISPOSITIONS -- (CONTINUED)
unaudited pro forma consolidated results of operations have been prepared for
comparative purposes only and are not necessarily indicative of what would have
occurred had these transactions occurred at January 1, 1995 or of results which
may occur in the future.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues............................................ $182,382,000 $148,182,000
Net loss............................................ 19,039,000 5,652,000
Net loss per share.................................. $3.21 $1.66
</TABLE>
5. ACCOUNTS RECEIVABLE
In April 1995, Unison entered into a sales agreement with HealthPartners
Funding, L.P. ("Health Partners") to routinely sell eligible accounts
receivable, consisting primarily of Medicare and Medicaid receivables, up to
$3,000,000 for a discount fee of up to 1.583% of outstanding eligible
receivables purchased under the agreement. As of December 31, 1995, Unison had
sold approximately $2,515,000 of eligible accounts receivable to HealthPartners.
The proceeds from the sale were in the form of cash of $1,982,000 and
collateralization of accounts receivable of $533,000 (included in other current
assets) (Note 6). Under the terms of the sales agreement, Unison was required to
repurchase from HealthPartners all Medicare and Medicaid receivables which were
uncollected after 60 days, management receivables which were uncollected after
90 days and cost report settlement receivables which were uncollected after 120
days. As additional consideration, Unison granted to HealthPartners warrants to
purchase common stock equal to at least $150,000 (Note 14). In March 1996, the
sales agreement was terminated.
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of December 31 are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Prepaid expenses............................................ $1,615,000 $1,146,000
Deferred taxes (Note 18).................................... 3,332,000 --
Inventories................................................. 938,000 640,000
HealthPartners receivable (Note 5).......................... -- 533,000
---------- ----------
$5,885,000 $2,319,000
========== ==========
</TABLE>
7. PROPERTY AND EQUIPMENT
Property and equipment as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land and building......................................... $21,757,000 $ 205,000
Equipment................................................. 11,806,000 3,408,000
Leasehold improvements.................................... 2,386,000 1,148,000
----------- ----------
35,949,000 4,761,000
Less accumulated depreciation............................. (5,119,000) (1,073,000)
----------- ----------
$30,830,000 $ 3,688,000
=========== ==========
</TABLE>
F-12
<PAGE> 68
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
7. PROPERTY AND EQUIPMENT -- (CONTINUED)
Property and equipment includes assets acquired under capitalized leases of
approximately $7,205,000, net of $159,000 accumulated depreciation.
8. LEASE OPERATING RIGHTS AND OTHER INTANGIBLE ASSETS
Lease operating rights and other intangible assets as of December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Lease operating rights................................... $108,050,000 $36,999,000
Capitalized assembled workforce.......................... 1,845,000 1,250,000
Debt and bond issue costs................................ 5,200,000 194,000
Covenant not to compete.................................. 850,000 100,000
Other.................................................... 1,076,000 1,270,000
------------ -----------
117,021,000 39,813,000
Less amortization........................................ (3,240,000) (653,000)
------------ -----------
$113,781,000 $39,160,000
============ ===========
</TABLE>
Of the increase in lease operating rights during 1996, $55,234,000 was a
result of the acquisition of Signature and $18,500,000 represents the Additional
Payment Obligation of $11,500,000 and $7,000,000 of related deferred tax
liabilities relating to the BritWill acquisition (Note 4).
The significant increase in debt and bond issue costs is due to issue costs
capitalized in connection with the Senior Notes described in Note 13.
9. SECURITY DEPOSITS AND OTHER ASSETS
Security deposits and other assets as of December 31 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Security deposits........................................... $ 5,077,000 $2,735,000
Other....................................................... 900,000 454,000
---------- ----------
$ 5,977,000 $3,189,000
========== ==========
</TABLE>
In connection with certain lease agreements with Omega Healthcare
Investors, Inc. ("Omega"), Unison is required to maintain security deposits with
Omega. Omega invests these funds in a money market fund on behalf of Unison at
an approximate rate of 5% at December 31, 1996.
10. LINE OF CREDIT
In March 1996, Unison's revolving lines of credit were replaced by a
$10,000,000 credit facility. Borrowings under this credit facility bear interest
at the prime rate plus 2.0%, mature in 1998 and are collateralized by Unison's
eligible accounts receivable. A commitment fee of .5% is payable on the unused
portion. The agreement requires Unison to comply with certain financial and
operational covenants including limitations on additional borrowings and sale of
assets and alteration of Unison's existing capital structure. There were no
amounts outstanding under the line of credit at December 31, 1996.
F-13
<PAGE> 69
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
11. ACCOUNTS PAYABLE
Accounts payable as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Trade payables............................................. $ 7,462,000 $9,968,000
Checks drawn in excess of bank balance..................... 3,043,000 --
----------- ----------
$10,505,000 $9,968,000
=========== ==========
</TABLE>
12. ACCRUED EXPENSES
Accrued expenses as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Accrued compensation and benefits.......................... $ 8,487,000 $4,814,000
Purchase accounting liabilities............................ 2,688,000 879,000
Due to State Medicaid...................................... -- 470,000
Accrued interest........................................... 2,879,000 8,000
Accrued professional fees.................................. 1,090,000 --
Income and gross receipt taxes payable..................... 3,106,000 --
Other...................................................... 3,187,000 3,067,000
----------- ----------
Accrued expenses........................................... $21,437,000 $9,238,000
=========== ==========
</TABLE>
The purchase accounting liabilities at December 31, 1996 represent
additional consideration payable to the former shareholders of Signature
amounting to $2,511,000 (Note 4) and an accrual of $177,000 for severance, exit
and lease terminations. As of December 31, 1995, the accrual represents
estimated severance, exit and lease termination costs incurred in connection
with the BritWill acquisition (Note 4).
F-14
<PAGE> 70
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
13. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
Senior Notes...................................................... $100,000,000 $ --
Mortgage Note..................................................... 18,640,000 --
Notes in escrow................................................... 1,146,000 --
Additional Payment Obligation (Note 4)............................ 11,500,000 --
Subordinated Note (Note 4)........................................ 8,000,000 8,000,000
Term Note (Note 4)................................................ -- 5,602,000
Convertible Debenture (Note 4).................................... -- 1,714,000
Subordinated notes payable to related party....................... 2,547,000 4,199,000
Other notes payable to related parties............................ 4,676,000 --
Payable to State of Indiana Medicaid.............................. -- 3,741,000
Capital lease obligations (Note 16)............................... 7,759,000 --
Note payable in annual installments of $200,000 plus interest
at the prime rate, due January 1998............................. 400,000 --
Note payable in annual installments of $133,000 plus interest
at the published federal rate, due February 1998................ 267,000 400,000
10.0% subordinated note, payable monthly to 1998.................. 219,000 234,000
Noninterest bearing note payable to lessor due 1999,
net of unamortized discount..................................... 383,000 393,000
Notes payable to banks, interest at 8.0% to 10.5%, due 1997 to
2000, collateralized by certain assets of subsidiaries.......... 345,000 727,000
Unsecured notes payable to banks, variable interest rates, due
1997 to 1998.................................................... 433,000 --
Note payable to an individual, payable monthly with interest at
10.0%,
due 1998, collateralized by receivables of subsidiary........... 211,000 342,000
11.5% notes payable to lessor due 1997............................ 283,000 --
Other............................................................. 329,000 596,000
------------ -----------
157,138,000 25,948,000
Less current portion.............................................. (33,915,000) (6,865,000)
------------ -----------
$123,223,000 $19,083,000
============ ===========
</TABLE>
On October 31, 1996, Unison completed the private placement of $100,000,000
of 12 1/4% Senior Notes due 2006 (the "Senior Notes"). The net proceeds to
Unison in the amount of $94,550,000 were used to: (i) complete the acquisitions
of Signature and RehabWest (Note 4); (ii) repay certain debt and contingent
obligations and; for general corporate purposes. In January 1997, a portion of
the proceeds from the Senior Notes were used to (i) repay the Subordinated Note
and (ii) prepay $1,750,000 of the Additional Payment Obligation. Interest on the
Senior Notes is payable semiannually. The stated interest rate of 12 1/4% per
annum is subject to temporary increase if the Senior Notes (or Exchange Notes
with the same terms) are not registered with the Securities and Exchange
Commission within specified time periods. As of December 31, 1996, the interest
rate on the Senior Notes was 12.75% and as of May 16, 1997 the interest rate is
13.00%. The interest rate is subject to further increases of 0.25% on June 13,
1997 and every 90 days thereafter (up to a maximum rate of 14 1/4%) until such
registration becomes effective. The Senior Notes are guaranteed by all of
Unison's present and future subsidiaries. The Senior Note indenture contains
certain covenants, including limitations on additional indebtedness,
investments, transactions with affiliates, asset sales, payment of dividends and
certain other transactions. Because all of Unison's direct and indirect
subsidiaries have fully
F-15
<PAGE> 71
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
13. NOTES PAYABLE AND LONG-TERM DEBT -- (CONTINUED)
guaranteed Unison's obligations under the Senior Notes, separately audited
financial statements for the individual subsidiary guarantors would not be
meaningful to investors and so are not included herein.
In connection with the Signature acquisition, Unison assumed a 10.5%
mortgage loan (the "Mortgage Note") collateralized by property and equipment of
six of the Signature facilities. Principal and interest of $180,000 is payable
monthly with a balloon payment due in April 2004. The Mortgage Note requires
Unison to maintain consolidated net worth of at least $39,000,000, a minimum
current ratio (current assets to current liabilities) consolidated for the six
properties of at least 1.45 to 1 during 1996 and a debt service coverage ratio
(as defined) for the four preceding quarters consolidated for the six properties
of at least 1.5 to 1. While the minimum current ratio and debt service ratios
consolidated for the six properties were in compliance with the debt covenants,
the consolidated Unison net worth at December 31, 1996 was $11,689,000 and
accordingly, the Company was not in compliance with the net worth covenant.
Unison did not receive a waiver of this covenant violation and accordingly,
classified the entire obligation of $18,640,000 as current. In addition, the
Company has not met the financial reporting requirements of the Mortgage Note.
Also in connection with the Signature acquisition (Note 4) Unison placed
promissory notes in the aggregate amount of $1,146,000 in escrow. Of this
amount, and subject to any outstanding claims, $500,000 and $646,000 will be
released from escrow and paid to the former owners of Signature on October 31,
1997 and 1998, respectively.
In connection with the BritWill acquisition (Note 4), Unison incurred the
following indebtedness to the former shareholders of BritWill: (i) the Term Note
in the amount of $5,602,000; (ii) the Subordinated Note in the amount of
$8,000,000, (iii) the $7,000,000 noninterest-bearing Convertible Debenture
convertible into 561,815 shares of common stock and, (iv) the Additional Payment
Obligation of $11,500,000 which became assured during August 1996 (Note 4). The
Additional Payment Obligation represents the present value of the remaining
monthly payments, ranging from $99,000 to $166,000 at interest rates ranging
from 12% to 14% through the term of the loan with a balloon payment of $8.1
million due August 9, 2000. The Term Note, as amended, was repaid in January
1996. The Subordinated Note is payable in monthly installments of interest only
at 8% and was repaid in January 1997 with proceeds from the Senior Notes. The
holder of the Convertible Debenture converted a portion of the Convertible
Debenture in December 1995 into 424,251 shares of Unison common stock and
converted the remainder on March 28, 1996 into 137,564 shares of Unison common
stock.
The terms of the Subordinated Note require Unison to meet certain financial
covenants, including current and cash flow ratios.
Subordinated notes payable to a related party are payable to BritWill
Investments Texas, Ltd. ("BritWill Texas"), an affiliate of BritWill. The notes
are payable monthly with interest at 9% to 10% with the balance due in October
2004. As of December 31, 1995, the aggregate balance included a $1,400,000
advance from BritWill Texas for a lease security deposit. In 1996, this
liability was forgiven and the balance was recorded as a reduction of lease
operating rights in the consolidated balance sheet.
Other notes payable to related parties represent obligations to the former
owners of Sunbelt Therapy. In connection with the purchase of Sunbelt Therapy
(Note 4), Unison issued Notes and Debentures in the aggregate amount of
$2,800,000 with interest payable quarterly at 10.0% and convertible into Unison
common stock at a conversion price equal to 100% and 85% of the average closing
price of Unison's common stock for the 20 day trading period preceding the date
of conversion. In January 1997, the Notes and Debentures were converted into
105,196 shares of Unison common stock with the balance of $2,000,000 paid in
cash. Effective February 1, 1996, Unison purchased the remaining 10% minority
ownership in Sunbelt Therapy (Note 4).
F-16
<PAGE> 72
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
13. NOTES PAYABLE AND LONG-TERM DEBT -- (CONTINUED)
The purchase price included notes payable in the aggregate amount of $1,876,000.
Interest on the notes is payable quarterly beginning January 1997 at a rate of
9.0% per year, with scheduled principal reductions due annually through January
1999.
In March 1995, BritWill received an erroneous Medicaid reimbursement
payment of approximately $4,300,000 related to one of its Indiana facilities.
Negotiations with the State of Indiana's agent regarding such overpayment
resulted in BritWill retaining the funds subject to BritWill's payment of
interest thereon to the State of Indiana at the higher of the prime rate plus
3.25% or 12%. In April 1996, Unison agreed to repayment of the remaining
$3,741,000 balance by: (i) a $1,100,000 payment to the State of Indiana in April
1996; and (ii) withholding of Medicaid reimbursement payments due five of
Unison's facilities in Indiana to offset the amount due to the State until the
balance was paid in full in September 1996. Interest was payable at 14%.
Future maturities of notes payable and long-term debt at December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1997............................................. $ 33,915,000
1998............................................. 4,761,000
1999............................................. 2,951,000
2000............................................. 9,768,000
2001............................................. 1,607,000
Thereafter............................................ 104,136,000
------------
$157,138,000
============
</TABLE>
As of December 31, 1996, Unison was not in compliance with certain debt
covenants for the Mortgage Note, Subordinated Note, and certain capitalized
equipment leases. Because holders of these debt instruments have the right to
accelerate payment of the debt, these notes and leases have been classified as
current liabilities in the accompanying consolidated balance sheet.
14. STOCKHOLDER'S EQUITY
In December 1995 and January 1996, Unison completed an initial public
offering ("the IPO") resulting in the issuance of 2,000,000 shares of common
stock at $9.00 per share. Proceeds from the IPO amounted to $14,614,000, net of
expenses, of which $9,727,000 was used to repay debt (Notes 13 and 17). In
connection with the IPO, Unison issued warrants to the representatives of the
underwriters to purchase up to 120,000 shares of common stock, at an exercise
price of $11.70 per share, in exchange for certain advisory services to be
provided to Unison during the twelve-month period following the IPO. The
warrants are exercisable for a five-year period beginning in December 1996.
On August 10, 1995, Unison entered into a stock purchase warrant agreement
with HealthPartners. The agreement entitled HealthPartners to purchase shares of
Unison's common stock with an aggregate market value of $150,000, or
approximately 16,667 shares based on the IPO price of $9.00 per share. The
$150,000 has been capitalized as a deferred financing cost and is being
amortized over two years. In December 1996, HealthPartners exercised its option
which required Unison to repurchase the warrants for $213,000 in cash, which has
been recorded as a reduction of additional paid-in capital.
Effective December 31, 1994, Unison completed a stock purchase warrant
agreement to satisfy amounts due to an individual who actively negotiated
several of Unison's management and operating lease
F-17
<PAGE> 73
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
14. STOCKHOLDER'S EQUITY -- (CONTINUED)
agreements. The warrants were exercised in 1996, whereby 178,000 shares of
Unison common stock were purchased for $200. Since the warrants were granted at
less than fair market value, leasehold rights totaling $43,000 have been
capitalized and are being amortized over the respective initial lease term.
In August and October 1996, warrants to purchase an aggregate of 300,464
shares of common stock were issued to a commercial bank in connection with a
short-term loan agreement. The exercise prices of the warrants are $12.80 and
$13.00 and the warrants expire on October 31, 2001.
Unison's common stock has been traded on the Nasdaq Stock Market's National
Market System since December 19, 1995. As of December 31, 1996, Unison does not
currently satisfy the minimum tangible net worth criteria for maintaining the
listing of its common stock on the Nasdaq Stock Market.
15. STOCK OPTIONS
In July 1995, the Board of Directors approved the 1995 Stock Option Plan
(the "1995 Plan"). The 1995 Plan offers two types of options: (i) a
discretionary option grant program (the "Discretionary Program") under which
eligible individuals may, at the discretion of the Board of Directors, be
granted options to purchase shares of common stock at an exercise price
determined by the Board of Directors, and (ii) the automatic option grant
program (the "Automatic Program") under which grants of options will
automatically be made at periodic intervals to eligible non-employee Board
members to purchase shares of common stock at an exercise price equal to 100% of
their fair market value on the grant date. Each grant under the Automatic
Program vests over two years and is exercisable for ten years. Options granted
in 1995 under the Discretionary Program vest over periods of two to four years.
In January 1996, the 1995 Plan was amended by the Board of Directors to change
the exercise price of all outstanding options from $10.00 to $9.00 per share,
which was the IPO price (Note 14). The 1995 Plan was further amended in October
1996 to increase the number of shares of common stock authorized for issuance
under the 1995 Plan from 511,046 to 800,000.
Unison has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of Unison's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if Unison had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995, respectively: risk-free interest rates of 5.0% and 5.0%; dividend
yields of 0% and 0%; volatility factors of the expected market price of the
Company's common stock of .64 and .64; and a weighted-average expected life of
the option of 8 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Unison's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-18
<PAGE> 74
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
15. STOCK OPTIONS -- (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Unison's pro
forma information follows:
<TABLE>
<CAPTION>
1996 1995
------------ --------
<S> <C> <C>
Pro forma net loss......................................... $ 24,157,000 $ 72,000
Pro forma net loss per share............................... $ 5.16 $ 0.03
</TABLE>
Information regarding the 1995 Plan is as follows:
<TABLE>
<CAPTION>
DISCRETIONARY PROGRAM AUTOMATIC PROGRAM
----------------------------- -----------------------------
NUMBER WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
OF OPTIONS EXERCISE PRICE OF OPTIONS EXERCISE PRICE
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Shares under option:
Outstanding at December 31, 1994...... -- --
Granted............................. 261,520 $ 9.00 47,480 $ 9.00
Canceled............................ (8,684) 9.00 -- 9.00
------- -------
Outstanding at December 31, 1995...... 252,836 9.00 47,480 9.00
Granted............................. 412,412 9.47 92,500 9.50
Canceled............................ (40,664) 9.24 --
Exercised........................... (11,307) 9.00 --
------- -------
Outstanding at December 31, 1996...... 613,277 9.30 139,980 9.33
======= =======
Exercisable at December 31,
1995................................ -- --
1996................................ 127,998 9.00 23,740 9.00
Weighted-average fair value of options
granted:
1995................................ $ 6.18
1996................................ $ 6.39
</TABLE>
Exercise prices for options outstanding at December 31, 1996 ranged from
$9.00 to $10.50. The weighted-average remaining contractual life of those
options is 9.5 years.
At December 31, 1996, 35,436 shares of common stock were available under
the 1995 Plan for future awards.
16. LEASES
As of December 31, 1996, Unison operated 51 facilities under noncancelable
operating leases with lease terms ranging from five to twenty years plus renewal
options. The lease agreements provide for contingent rental provisions based on
increases in the consumer price index, Medicaid reimbursement rates, and number
of licensed beds. Certain of the leases have purchase options determined by a
specified formula. Unison is responsible for all taxes, maintenance and other
executory costs.
Unison leases 14 facilities from Omega, of which nine facilities are in
Indiana and five are in Texas. Each of the Omega leases expires in 2005 and
allows Unison up to three five-year renewal options. The Omega leases require
Unison to pay stated rent, with annual increases based upon the greater of 5% of
incremental revenues or the Consumer Price Index, but limited to a maximum
annual increase of 5%. The Omega leases
F-19
<PAGE> 75
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
16. LEASES -- (CONTINUED)
grant Unison the right, but not the obligation, to purchase the Omega facilities
upon the expiration of the initial lease term.
Unison leases six facilities located in Texas from BritWill Texas (the
"BritWill Texas Leases") for an initial term that expires in December 2005. The
lease agreement requires Unison to pay monthly amounts equal to (i) the amount
of monthly payments made by BritWill Texas to Omega pursuant to a loan agreement
which provided the financing for BritWill's purchase of the six facilities; (ii)
all payments due from lessees related to the facilities that are subleased; and
(iii) payment of certain third-party seller subordinated notes incurred in
connection with the acquisition of the six facilities.
At December 31, 1996, Unison was obligated to Omega as a tenant under three
master lease agreements covering 14 facilities having an aggregate minimum rent
of approximately $34.9 million (subject to increase) during the remainder of
their initial terms. The master leases require the Company to maintain specified
cash flow to rent ratio, cash flow to debt service ratios, minimum cash, current
ratio and tangible net worth ratio (each as defined). The BritWill Texas Leases
contain cross default provisions with the Omega leases by which if Unison is in
default with any Omega indebtedness or lease obligation, the Company is also in
default under the BritWill Texas Leases. Unison was not in compliance with these
covenants at December 31, 1996. Omega has waived all existing covenant
violations through April 11, 1997. The Company may not be in compliance with
these covenants subsequent to April 11, 1997 and, accordingly, is negotiating
with Omega to restructure the aforementioned covenants. Management is attempting
to renegotiate the leases; however, there can be no assurance that such
restructuring will be completed or that Omega will not exercise their remedies
of default under the master lease agreements.
The Company leases six facilities formerly affiliated with Signature for an
initial term which expires in 2005 and which allows Unison the option to renew
for three additional 10-year terms and the option to purchase the facilities
through the end of the initial term or any renewal periods. The leases provide
for certain restrictions on the maintenance and operation of the facilities and
an annual 2.5% increase in rent.
In connection with the BritWill acquisition (Note 4), Unison recorded a
leasehold liability in the amount of $4,700,000. This adjustment was based on an
independent appraisal which valued the present value of the BritWill lease
obligations based on market lease rates. The leasehold liability is being
amortized over the aggregate lease term of approximately 25 years.
F-20
<PAGE> 76
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
16. LEASES -- (CONTINUED)
Future minimum lease payments at December 31, 1996, by year and in the
aggregate, under noncancelable lease arrangements with initial or remaining
terms of one year or more consist of the following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL OPERATING
-------------------------------------------------- ----------- ------------
<S> <C> <C>
1997.............................................. $ 1,661,000 $ 15,492,000
1998.............................................. 1,714,000 15,591,000
1999.............................................. 1,700,000 15,362,000
2000.............................................. 1,352,000 14,727,000
2001.............................................. 1,294,000 13,975,000
Thereafter........................................ 5,894,000 89,596,000
---------- ------------
Total minimum lease payments...................... 13,615,000 $164,743,000
============
Less amount representing interest................. (5,856,000)
----------
Present value of net minimum lease payments....... 7,759,000
Less current portion.............................. (793,000)
----------
Long-term obligations............................. $ 6,966,000
==========
</TABLE>
Unison's lease payments are senior to all unsecured debt.
17. RELATED PARTY TRANSACTIONS
The Term Note, Subordinated Note and Convertible Debenture issued as
consideration for the BritWill acquisition were issued to the former
shareholders of BritWill (Note 13). The primary BritWill shareholder receiving
payments was Whitehead Family Investments, Ltd. ("WFI"), which owned 81.5% of
the stock of BritWill prior to the BritWill acquisition. Bruce H. Whitehead,
Chairman of the Board of Unison, is the president of the general partner of WFI
and, together with a family trust, owns 100% of WFI.
In connection with the BritWill acquisition, a note payable to WFI in the
amount of $3,375,000 was repaid with the proceeds from the IPO. Subsequent to
the BritWill acquisition, Unison also incurred notes payable to WFI in the
aggregate amount of $750,000 bearing interest at the rate of 12%. These notes
were repaid with the proceeds from the IPO.
Unison's lease payments to Omega, the owner of 14 facilities that the
Company leases in Indiana and Texas, are personally guaranteed to $13,500,000 by
the Chairman of the Board of Unison as well as collateralized by substantially
all the personal property of Unison. Unison also leases six facilities in Texas
from BritWill Texas. Lease expense on these facilities for the five months ended
December 31, 1995 and the year ended December 31, 1996 amounted to $505,000 and
$2,661,000, respectively (Note 16).
With the BritWill acquisition, Unison also assumed unsecured notes payable
to BritWill Texas with an aggregate balance at December 31, 1996 of $2,547,000
(Note 13). Interest expense on these notes amounted to $83,993 and $264,000 for
the five months ended December 31, 1995 and the year ended December 31, 1996,
respectively.
On April 21, 1997, the Company obtained a $2,950,000 loan for general
working capital purposes from Elk Meadows Investments, L.L.C. and BritWill
Investments Company, Ltd., as joint lenders. Elk Meadows Investments, L.L.C. is
controlled by David Kremser and BritWill Investments Company, Ltd. is controlled
by Bruce Whitehead. The loan matures on the earlier of August 1, 1997, or 30
days after written demand from the lenders, subject to earlier maturity in the
event of acceleration upon a default. Interest accrues on the loan
F-21
<PAGE> 77
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
17. RELATED PARTY TRANSACTIONS -- (CONTINUED)
at the Prime Rate plus 2%, subject to an increase in the rate upon a default.
Interim payments on the loan are not required prior to maturity. The Company
paid a loan fee of $29,500 at the closing, and also agreed to pay all of the
lenders' out of pocket fees and costs, including attorneys fees and costs, in an
amount not yet determined or demanded by the lenders. Repayment of the loan is
secured by (i) a pledge from the Company of approximately $5.0 million of
accounts receivable generated by certain of the Company's affiliates and
assigned to the Company and (ii) a pledge from the Company of its stock in those
affiliates of the Company that either assigned their accounts receivable to the
Company so they could be pledged by the Company as security for the subject loan
or control the entities that assigned such accounts receivable. The collateral
securing the loan also secures repayment of other obligations owing from the
Company and its affiliates to Messrs. Whitehead and Kremser, and to individuals
and entities related to them.
18. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................................ $ 698,000 $153,000 $128,000
State.......................................... 61,000 -- 1,000
Deferred:
Federal........................................ (7,777,000) (28,000) 43,000
State.......................................... (1,338,000) 7,000 --
----------- -------- --------
$(8,356,000) $132,000 $172,000
=========== ======== ========
</TABLE>
The difference between Unison's effective income tax rates and statutory
rates are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
------------ -------- --------
<S> <C> <C> <C>
Statutory federal income tax expense (benefit).......... $(10,810,000) $ 85,000 $174,000
Increases (decreases) resulting from:
Change in effective tax rate.......................... (495,000) -- --
Amortization of intangibles and nondeductible
expenses........................................... 1,060,000 91,000 --
State tax expense (benefit), net of federal benefit... (876,000) 5,000 1,000
Valuation allowance................................... 1,528,000 (56,000) 25,000
Current federal income taxes of subsidiaries not
consolidated for tax purposes...................... 698,000 -- --
Other................................................. 539,000 7,000 (28,000)
------------ -------- --------
Income tax expense (benefit)............................ $ (8,356,000) $132,000 $172,000
============ ======== ========
</TABLE>
Deferred income taxes reflect the tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Temporary differences are
primarily attributable to reporting for income tax purposes certain items of
income and expense using a cash basis of accounting and recognition of
depreciation using the accelerated cost recovery system.
F-22
<PAGE> 78
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
18. INCOME TAXES -- (CONTINUED)
Significant components of deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995
------------------------- -------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Deferred liabilities:
Intangibles............................... $ -- $(31,165,000) $ -- $(9,937,000)
Accelerated depreciation.................. -- 171,000 -- (30,000)
Cash to accrual adjustment................ (208,000) -- (1,085,000) --
---------- ------------ -------- -----------
Total liabilities........................... (208,000) (30,994,000) (1,085,000) (9,967,000)
Deferred assets:
Allowance for doubtful accounts........... 1,388,000 -- 206,000 --
Reserve for loss on disposition of
assets................................. 1,460,000 -- -- --
Vacation accruals......................... 692,000 -- -- --
Net operating loss
carryforward........................... -- 7,604,000 -- 1,794,000
Valuation allowance....................... -- (1,528,000) -- --
Other, net................................ -- 127,000 -- --
---------- ------------ -------- -----------
Total assets................................ 3,540,000 6,203,000 206,000 1,794,000
---------- ------------ -------- -----------
Total net asset (liability)................. $3,332,000 $(24,791,000) $ (879,000) $(8,173,000)
========== ============ ======== ===========
</TABLE>
The increase in deferred taxes and the elimination of the valuation reserve
was due to the application of the provisions of SFAS 109 with respect to the
treatment of basis differences between assets acquired and liabilities assumed
in the BritWill acquisition. At December 31, 1996, Unison has consolidated net
operating loss carryforwards which approximate $20,316,000 and begin to expire
in 2009 for federal income tax purposes and 1999 for state income tax purposes.
Certain of the net operating loss carryforwards could be subject to annual
limitations. Approximately $2,950,000 of certain subsidiaries' net operating
losses must be offset by taxable income of the same company.
19. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of Unison's financial instruments as
of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Notes payable and long-term debt, excluding capital
lease obligations..................................... $149,379,000 $153,664,000
------------ ------------
</TABLE>
The carrying amounts reported in the consolidated balance sheet for cash,
accounts receivable, lease deposits, accounts payable and borrowings under
revolving lines of credit approximate their fair value. The fair value of
Unison's long-term borrowings is estimated by discounting future cash flows at
current rates offered to Unison for debt of comparable types and maturities.
Because no market exists for these financial instruments, considerable judgment
is necessary in interpreting the data to develop estimates of fair value. The
use of different market assumptions may have a material effect on the estimated
fair value amounts.
F-23
<PAGE> 79
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
20. INSURANCE
Health care companies are subject to medical malpractice, personal injury
and other liability claims that are customary risks inherent in the operation of
health facilities and are generally covered by insurance. Unison maintains
property, liability and professional malpractice insurance policies through
commercial carriers on a claims made basis in amounts and with such coverages
and deductibles that are deemed appropriate by management, based upon historical
claims, industry standards and the nature and risks of its business. There can
be no assurance that a future claim will not exceed available insurance
coverages or that such coverages will continue to be available for the same
scope of coverages at reasonable premium rates. Any substantial increase in the
cost of such insurance or the unavailability of any such coverages could have an
adverse effect on Unison's business. However, based upon the evaluation of
Unison's historical asserted and unasserted claim experience, management
believes that the ultimate liability, if any, resulting from the settlement of
any future claim will not have a material impact on Unison's financial position,
operations or liquidity.
Unison maintains workers compensation coverage on its facilities with the
exception of certain facilities located in Texas. Management believes that the
reserve for incurred but not reported claims is adequate based on historical
results.
21. COMMITMENTS
Unison has entered into an agreement with Trouver to provide financial
advisory services in connection with Unison's financing and business acquisition
plans. Trouver is compensated by Unison based on a percentage, ranging from 1.5%
to 10.0%, dependent upon the type of transaction consummated (Note 4).
22. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Unison acquires or leases and operates long-term health care facilities,
and uses such facilities to develop networks offering a range of other
healthcare services. Unison and others in the healthcare industry are subject to
certain inherent risks, including the following:
- Substantial dependence on revenues derived from reimbursement under the
Medicare and Medicaid programs;
- Government regulation, budgetary constraints, and proposed legislative
and regulatory changes; and
- Lawsuits alleging malpractice and related claims.
Approximately 83% in 1996, 83% in 1995, and 70% in 1994 of Unison's
long-term care net patient service revenues were derived from reimbursement
under Medicare and Medicaid programs, and approximately 84% and 82% of Unison's
patient accounts receivable at December 31, 1996 and 1995, respectively, are due
from such programs.
Changes in Medicare and Medicaid reimbursement funding mechanisms, related
government budgetary constraints and differences between final settlements and
estimated settlements receivable under the Medicare and Medicaid programs, which
are subject to audit and retroactive adjustment, could have a significant
adverse effect on Unison. Unison's operations are also subject to a variety of
other Federal, state and local regulatory requirements. Failure to maintain
required regulatory approvals and licenses and/or changes in such regulatory
requirements could have a significant adverse effect on Unison.
Unison is from time to time subject to malpractice and related claims and
lawsuits, which arise in the normal course of business and which could have a
significant effect on Unison. Management believes that
F-24
<PAGE> 80
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
22. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES -- (CONTINUED)
adequate provision for these items has been made in the accompanying
consolidated financial statements and that their ultimate resolution will not
have a material effect on the consolidated financial statements.
Since its inception, Unison has grown through acquisitions. The
recoverability of acquisition costs, including excess costs over fair value of
net assets acquired, is dependent initially upon the consummation of the
acquisitions and subsequently upon Unison's ability to successfully integrate
and manage acquired operations. Also, Unison's development of healthcare
networks is dependent upon successfully effecting economies of scale, the
recruitment of skilled personnel and the expansion of services and related
revenues.
23. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 -- ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS NO. 121)
During 1996, Unison incurred an operating loss raising the possibility of
continuing losses associated with its income producing assets. Consequently,
Unison evaluated its long-lived assets for impairment in accordance with SFAS
No. 121. Unison estimated the undiscounted net cash flows from all business
units and determined that the carrying value of certain of Unison's long-lived
assets exceeded such undiscounted cash flows. Accordingly, Unison compared the
fair value of the assets based on the present value of the estimated future cash
flows for the facilities (which were estimated based on the remaining weighted
average useful lives of the assets, earnings history, and a discount rate
commensurate with the risks involved and market conditions and assumptions
reflecting internal operating plans and strategies) with the carrying value.
Unison determined that the fair value of certain facilities was less than
their carrying value and estimated the costs to sublease and exit from the
Disposition Facilities (Note 4) and, accordingly, recorded a loss on impairment
of $3,865,000 in the 1996 consolidated statements of operations.
24. SUBSEQUENT EVENTS
Effective January 1, 1997, Unison, through its Sunbelt Therapy subsidiary,
purchased the assets of a rehabilitation therapy services company located in
Mississippi. Consideration for the purchase was comprised of cash amounting to
$600,000 and a $300,000 promissory note. Interest on the note bears interest at
10.0%, payable quarterly, and the principal balance is due January 2, 2002.
Unison and certain of its current and former directors and officers are
named as defendants in several class action complaints seeking unspecified
damages following Unison's announcement in March 1997 that the Company expected
to restate its financial statements for the nine-month period ended September
30, 1996. To date, six such claims have been filed in federal district court in
Phoenix, Arizona alleging violations of Sections 10 and 20 of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. While the purported
class periods and the named defendants vary, the broadest class period to date
asserts that between May 14, 1996 (the date of Unison's announcement of first
quarter results) and March 10, 1997 (the date before Unison's March 11
announcement of the restatement) the defendants knew, or were reckless in not
knowing, that Unison's results for the first three quarters of 1996 were
materially overstated. In addition, the Company is informed that an action has
been filed in the Superior Court of the State of California (County of Orange)
against the Company, certain current and former officers and directors and
certain underwriting firms. The Orange County action is purportedly filed on
behalf of all persons who acquired Unison stock in the Company's December 1995
initial public offering ("IPO"); it essentially alleges that in connection with
the IPO, the defendants made positive statements about the Company's prospects
for which there was no basis, that accounts receivable were overstated, and that
the Company's statement of financial position as of September 30, 1995 was not
fairly presented. Unison's bylaws require the Company to indemnify
F-25
<PAGE> 81
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
24. SUBSEQUENT EVENTS -- (CONTINUED)
current and former officers and directors to the extent permitted by Delaware
law against such liabilities and related expenses. The Company denies the
material allegations in these complaints and intends to defend the actions
vigorously. Management believes that the costs of the ultimate disposition of
these matters, if any, will be substantially covered by insurance. An adverse
determination could have a material adverse effect upon Unison.
F-26
<PAGE> 82
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
BritWill HealthCare Company
We have audited the accompanying consolidated statement of operations and
cash flows of BritWill HealthCare Company for the month ended July 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of BritWill
HealthCare Company for the one month ended July 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Phoenix, Arizona
April 10, 1996
F-27
<PAGE> 83
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of BritWill HealthCare Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of BritWill
HealthCare Company and its subsidiaries at June 30, 1995, and the results of
their operations and their cash flows for the six month period ended June 30,
1995 and for the year ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Dallas, Texas
November 8, 1995
F-28
<PAGE> 84
BRITWILL HEALTHCARE COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1995
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................................. $ 858,606
Accounts receivable, less allowance for doubtful accounts of $997,246.................. 7,599,464
Due from third party payors, net....................................................... 2,290,066
Inventories............................................................................ 442,033
Due from affiliates.................................................................... 512,594
Prepaid expenses....................................................................... 486,874
Other receivables...................................................................... 31,151
Security deposits...................................................................... 637,517
Restricted cash........................................................................ 45,000
-----------
Total current assets................................................................ 12,903,305
Furniture, fixtures and equipment, net................................................... 2,210,682
Other assets, net........................................................................ 6,827,126
Deferred charges, net.................................................................... 537,321
Security deposits........................................................................ 2,237,944
-----------
Total assets........................................................................ $24,716,378
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 5,133,964
Accrued expenses....................................................................... 7,002,347
Notes payable due affiliates........................................................... 528,230
Income taxes payable................................................................... 92,126
-----------
Total current liabilities........................................................... 12,756,667
Revolving line of credit................................................................. 1,672,577
Subordinated long-term debt due affiliates............................................... 8,488,465
Other long-term debt..................................................................... 48,183
-----------
Total liabilities................................................................... 22,965,892
-----------
Commitments and contingencies
Shareholders' equity:
Common stock, $1.00 par value; authorized 1,000,000 shares; 424,050 issued and
outstanding......................................................................... 424,050
Additional paid-in capital............................................................. 4,714,469
Treasury stock, 54,650 shares, at par.................................................. (54,650)
Accumulated deficit.................................................................... (3,333,383)
-----------
Total shareholders' equity.......................................................... 1,750,486
-----------
Total liabilities and shareholders' equity.......................................... $24,716,378
===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-29
<PAGE> 85
BRITWILL HEALTHCARE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ONE MONTH
DECEMBER ENDED JUNE ENDED
31, 30, JULY 31,
1994 1995 1995
----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Patient care services, net........................... $53,800,520 $32,723,297 $ 5,655,071
Management fee from related parties.................. 251,186 40,430 --
Other income......................................... 373,239 228,426 207,270
----------- ----------- -----------
Total revenues.................................... 54,424,945 32,992,153 5,862,341
----------- ----------- -----------
Expenses:
Salaries and contract labor.......................... 32,634,732 19,812,601 3,467,433
Rent................................................. 8,263,642 4,448,134 775,136
Supplies............................................. 6,686,572 4,134,207 716,037
General and administrative........................... 6,252,183 3,255,917 614,191
Depreciation and
amortization...................................... 986,812 500,682 90,803
Bad debt............................................. 644,471 21,442 48,631
Other................................................ 71,529 10,731 121,900
----------- ----------- -----------
Total expenses.................................... 55,539,941 32,183,714 5,834,131
----------- ----------- -----------
Income (loss) from
operations........................................ (1,114,996) 808,439 28,210
Interest income (expense):
Interest income................................... 54,545 109,309 3,878
Interest expense.................................. (131,764) (226,587) (105,127)
Related party interest
expense......................................... (739,823) (485,265) (88,977)
----------- ----------- -----------
Income (loss) before income taxes.................... (1,932,038) 205,896 (162,016)
Provision for income taxes........................... 52,896 26,000 4,500
----------- ----------- -----------
Net income (loss).................................... $(1,984,934) $ 179,896 $ (166,516)
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-30
<PAGE> 86
BRITWILL HEALTHCARE COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994 AND SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------ PAID-IN ----------------- ACCUMULATED
SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT TOTAL
------- -------- ---------- ------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993....... 389,750 $389,750 $5,176,836 -- -- $(1,464,058) $ 4,102,528
Common stock issued............ 31,300 31,300 (23,475) -- -- -- 7,825
Employee receivable due to
common stock issued.......... -- -- (7,825) -- -- -- (7,825)
Rescission of shares due to
employee terminations........ -- -- 42,600 42,600 $(42,600) -- --
Excess consideration over
historical cost of assets
acquired in a purchase
combination
(Note 1)..................... -- -- (482,596) -- -- -- (482,596)
Net loss....................... (1,984,934) (1,984,934)
------- -------- ---------- ------ ------ ---------- ----------
Balance, December 31, 1994....... 421,050.. 421,050 4,705,540 42,600 (42,600) (3,448,992) 1,634,998
Common stock issued............ 3,000 3,000 (2,250) -- -- -- 750
Employee receivable due to
common stock issued.......... -- -- (750) -- -- -- (750)
Purchase of shares due to
employee terminations........ -- -- 11,929 12,050 (12,050) (64,287) (64,408)
Net income..................... -- -- -- -- -- 179,896 179,896
------- -------- ---------- ------ ------ ---------- ----------
Balance, June 30, 1995........... 424,050 $424,050 $4,714,469 54,650 $(54,650) $(3,333,383) $ 1,750,486
======= ======== ========== ====== ====== ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-31
<PAGE> 87
BRITWILL HEALTHCARE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED ONE MONTH
DECEMBER 31, JUNE 30, ENDED
1994 1995 JULY 31, 1995
------------ ----------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ (1,984,934) $ 179,896 $ (166,516)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization............................... 1,083,779 574,065 90,803
Increase in accounts receivable............................. (2,461,879) (743,748) (100,036)
(Increase) decrease in amounts due from third party
payors..................................................... (1,011,345) (1,140,747) 895,801
Decrease (increase) in inventories.......................... (114,066) (8,550) --
Increase in due from affiliates............................. (361,752) (143,360) --
Increase in prepaid expenses................................ (67,110) (86,567) (19,097)
(Increase) decrease in other receivables.................... 15,017 (12,320) (1,047)
(Increase) decrease in other assets and deferred
charges................................................... (69,733) (173,037) 67,370
Payment for restricted cash................................. (45,000) -- --
(Increase) decrease in security deposits.................... (141,344) 883 (13,119)
(Decrease) increase in accounts payable..................... 3,681,783 (1,115,972) (1,604,192)
Increase in accrued expenses................................ 1,156,766 3,506,897 90,725
Increase (decrease) in income taxes payable................. 1,146 39,230 (19,749)
----------- ----------- -----------
Net cash (used in) provided by operating activities......... (318,672) 876,670 (779,057)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment............................ (551,714) (485,009) (136,997)
Purchase of facilities from related party, net of liabilities
of $340,000................................................. (482,596) -- --
Construction in progress....................................... (170,904) (436,169) --
----------- ----------- -----------
Net cash used in investing activities....................... (1,205,214) (921,178) (136,997)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable........................ 2,283,823 -- --
Proceeds from revolving line of credit......................... -- 1,672,577 1,082,377
Payments on notes payable and long-term debt................... (364,922) (1,754,875) (117,894)
Receipt of restricted cash..................................... -- 600,000 --
Payment for debt issuance costs................................ (190,000) (111,059) --
Repurchase of shares........................................... -- (64,408) --
----------- ----------- -----------
Net cash provided by financing activities................... 1,728,901 342,235 964,483
----------- ----------- -----------
Net increase in cash and cash equivalents........................ 205,015 297,727 48,429
Cash and cash equivalents at beginning of period................. 355,864 560,879 858,606
----------- ----------- -----------
Cash and cash equivalents at end of period....................... $ 560,879 $ 858,606 $ 907,035
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................... $ 684,615 $ 296,562 $ 82,069
Income taxes................................................ 51,502
Supplemental schedule of noncash investing and financing
activities:
Security deposit with Omega through issuance of note........... 1,400,000
Acquisition of other intangibles through issuance of note...... 249,000
</TABLE>
See accompanying notes to the consolidated financial statements.
F-32
<PAGE> 88
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
BritWill HealthCare Company (the "Company") was organized as a Delaware
corporation on August 5, 1992. The Company leases and manages long-term care
facilities located throughout Texas and Indiana. The Company commenced
operations on December 24, 1992. At that time, BritWill Investments -- Indiana
L.P. (BI-Indy), an affiliate of the Company, managed thirteen long-term care
facilities owned by Cloverleaf Enterprises, Inc. Such facilities were leased and
operated by Sherwood Healthcare Corp. (Sherwood) and Cedar Care, Inc. (Cedar
Care). Under the terms of a management agreement, BI-Indy exercised its options
to acquire nine of these facilities and acquire the leasehold rights to the
remaining four facilities from Cloverleaf Enterprises, Inc. Concurrently, the
nine facilities were sold by BI-Indy to Omega Healthcare Investors, Inc. (Omega)
and leased back under a "Master Lease" agreement by BritWill Investments -- I
(BI-1), a subsidiary of the Company. The leasehold rights to the four facilities
were contributed to BI-1 by BI-Indy. Further, BI-Indy assigned the two
management agreements for these thirteen facilities to BI-1.
In December 1993, BritWill Investments Texas, Ltd. (BI-TX), an affiliate of
the Company, entered into purchase agreements for six long-term care facilities
and entered into lease agreements for three facilities with third-party lessors.
The total consideration paid by BI-TX was approximately $18,440,000. BI-TX
financed these transactions through two participating mortgages with Omega
totaling $14,760,000 and the sale of five facilities to Omega for $13,810,000.
BritWill Investments -- II (BI-2), a subsidiary of the Company, then entered
into a noncancelable operating lease ("Texas Master Lease") with Omega for the
five facilities sold by BI-TX and also entered into two noncancelable operating
lease and sublease agreements for six facilities either owned or leased by
BI-TX.
During 1993, BI-TX conveyed supply inventories and certain liabilities and
other accrued expenses from the facilities to BI-2. No consideration was paid by
BI-2 to BI-TX for the inventory and BI-TX did not give BI-2 any consideration
for the transfer of the liabilities and accrued expenses. The amount by which
the predecessor cost of the inventory exceeded the assumed liabilities, $77,009,
was recognized as additional paid-in capital.
Effective November 1, 1994, BI-2 purchased the net assets of two nursing
homes operated by Avalon Care, Inc. ("Avalon"), an affiliated company. The
nursing homes acquired were: Elkhart Manor ("Elkhart") and Oakwood Health Care
Center ("Oakwood") facilities. Avalon assigned the responsibilities and rewards
of the Elkhart and Oakwood operating leases to BI-2. As consideration for the
purchase of the leases, BI-2 forgave intercompany debt from Avalon. The amount
by which the consideration paid exceeded the predecessor cost of the acquired
assets less the assumed liabilities and forgiveness of debt, $482,496, was
recognized as a reduction of additional paid-in capital.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, consisting of BI-1 and BI-2. The financial statements
include the accounts of Cedar Care and Sherwood since December 24, 1992.
Although the Company has no ownership interest in Cedar Care or Sherwood, these
companies are consolidated because the Company has unilateral and perpetual
control over the assets and operations of these companies due to the management
agreements. Under these management agreements, managerial control and operating
proceeds have been transferred directly to BI-1. Fees under the management
agreements are based upon the revenues of Cedar Care and Sherwood from the
facilities, such that all net income of Cedar Care and Sherwood is paid to BI-1.
All significant intercompany accounts and transactions have been eliminated.
F-33
<PAGE> 89
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Cash and cash equivalents
Cash and cash equivalents include amounts held in demand deposits at
financial institutions and all highly liquid investments that have an original
maturity of three months or less.
Restricted cash
As of June 30, 1995, restricted cash consists of the $45,000 certificate of
deposit assigned to a third party as security for payment of insurance claims.
Revenue and accounts receivable
Revenues are derived from patient care services and management fees of
nursing homes not owned or leased by the Company. Credit risk exists to the
extent that the most significant source of revenue is reimbursement for patient
care from state sponsored Medicaid programs in Texas and Indiana and from
Medicare. However, management does not believe that there are any significant
credit risks associated with these governmental agencies. Payments from such
programs are based on cost as defined under the programs, and associated
revenues are presented net of provisions to reduce customary charges to amounts
receivable from such programs. Revenues from private sources are recognized
based upon established charges. Reserves are provided for receivables estimated
to be uncollectible and are adjusted periodically based on the Company's
evaluation of industry conditions, historical collection experience and other
relevant factors.
The following table summarizes the approximate percent of net patient
revenues and accounts receivable from such payors:
<TABLE>
<CAPTION>
NET REVENUE
---------------------------------------------- ACCOUNTS
SIX MONTHS ONE MONTH RECEIVABLE
---------- ---------- ----------
DECEMBER 31, JUNE 30, JULY 31, JUNE 30,
1994 1995 1995 1995
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Medicaid............................ 60.5% 53.7% 53.9% 62.8%
Medicare............................ 17.6 28.6 28.6 25.4
Private............................. 20.1 16.0 15.9 7.9
Other............................... 1.8 1.7 1.6 3.9
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
Inventories
Inventories consist of medical and other supplies necessary for delivering
resident care at the facilities. Inventories are recorded at the lower of cost
(determined by the first-in, first-out method) or market.
Furniture, fixtures and equipment
Furniture, fixtures and equipment are carried at cost. Depreciation is
recognized using the straight-line method over the estimated useful lives of the
assets, which range from five to ten years. Leasehold improvements are amortized
over the lesser of the estimated useful life or lease term. Maintenance cost and
repairs are expensed as incurred; betterments and leasehold improvements are
capitalized.
F-34
<PAGE> 90
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred charges
Deferred charges consist of costs incurred to acquire leases to the
long-term care facilities, which are amortized on the straight-line method over
the term of the lease. Amortization expense was $77,186, $38,366 and $6,436 for
the year ended December 31, 1994, the six months ended June 30, 1995 and the one
month ended July 31, 1995, respectively.
Income taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109). The
cumulative effect of the adoption of SFAS 109 was immaterial to the Company's
financial position. Under SFAS 109, the liability method is used to account for
income taxes. Under this method, the deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
financial reporting of existing assets and liabilities and their respective tax
basis. The Company's principal differences relate to the availability of tax net
operating loss carry forwards, certain reserves, accrued vacation, and
depreciation.
Interim financial data
The following table sets forth summarized results of operations for
BritWill for the periods indicated:
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
JULY 31,
---------------------------
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Total revenues.................................... $38,854,000 $29,857,000
Income (loss) from operations..................... 836,000 (1,365,000)
Income (loss) before income taxes................. 44,000 (1,886,000)
Net income (loss)................................. 13,000 (1,912,000)
</TABLE>
3. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment consists of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31, JUNE 30,
1994 1995
--------------- ----------
<S> <C> <C>
Furniture and fixtures....................... $ 1,202,684 $1,476,780
Leasehold improvements....................... 349,943 504,952
Construction in progress..................... 213,596 649,765
Land......................................... -- 55,904
---------- ----------
1,766,223 2,687,401
Less accumulated depreciation................ (367,007) (476,719)
---------- ----------
$ 1,399,216 $2,210,682
========== ==========
</TABLE>
Depreciation expense was $162,143, $109,712 and $23,468 for the year ended
December 31, 1994, the six months ended June 30, 1995 and the one month ended
July 31, 1995, respectively.
F-35
<PAGE> 91
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995
-----------
<S> <C>
Leasehold rights -- BI-Indy................................... $ 4,103,338
Leasehold rights -- BI-TX..................................... 3,331,547
Deferred financing costs...................................... 1,131,224
-----------
8,566,109
Less accumulated amortization................................. (1,738,983)
-----------
$ 6,827,126
===========
</TABLE>
The leasehold rights -- BI-Indy were recorded at the cost of the
predecessor and are being amortized to rent expense over ten years, the term of
the lease.
The leasehold rights -- BI-TX were recorded at the amount of the obligation
entered into to obtain the right to operate nursing homes acquired by BI-TX in
June and December 1993 and are being amortized to rent expense over ten years,
the term of the lease. See Note 10.
Other deferred financing costs include additional acquisition costs and
debt closing costs which are being amortized to interest expense over periods of
three to ten years. The total amount charged to interest expense was $73,838,
$83,483 and $13,446 for the year ended December 31, 1994, the six months ended
June 30, 1995 and the one month ended July 31, 1995, respectively.
Total amortization expense relating to these assets was $747,483, $352,604
and $60,934 for the year ended December 31, 1994, the six months ended June 30,
1995 and the one month ended July 31, 1995, respectively.
5. SECURITY DEPOSIT
Security deposits consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995
----------
<S> <C>
Lease deposit -- BI-Indy....................................... $1,335,000
Liquidity deposit -- BI-TX..................................... 1,400,000
Other deposits................................................. 140,461
----------
2,875,461
Less current portion........................................... (637,517)
----------
$2,237,944
==========
</TABLE>
In connection with the Indiana transaction discussed in Note 1, the Company
is required to maintain a security deposit equal to seven months minimum lease
obligation. These funds are held in escrow and restricted until certain
financial covenants have been met, including but not limited to net worth and
net operating cash flow requirements. These funds are currently invested by the
lessor in a mutual fund on behalf of the Company and bear interest at 5.5% on
June 30, 1995. Accrued interest receivable on these funds is $72,389 at June 30,
1995. This deposit has been classified as noncurrent.
In connection with the Texas transaction discussed in Note 1, BI-TX
advanced BI-2 $1,400,000. This advance, as described in Note 7, matures in
December 2003 and is classified as a long-term liability. These funds were used
as a liquidity deposit with OMEGA (the "lessor") and are currently invested by
the lessor on
F-36
<PAGE> 92
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
behalf of the Company and bear interest at 5.25% to 6.0%. The underlying note
between BI-2 and BI-TX has interest payable at the same term as the interest
earned on the security deposit. A portion of this deposit, $500,000, has been
classified as current as the terms of the Texas master lease allow for the use
of a letter of credit in place of a security deposit. The Company has a $500,000
letter of credit available through a third party.
Other deposits, primarily lease and utility, have been classified as
current at June 30, 1995. Due to the subsequent event described in Note 12, the
Dallas, Texas operations of the Company will be relocated to Phoenix, Arizona by
March 1996.
6. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995
----------
<S> <C>
Amounts due Medicaid -- Indiana.................................. $3,741,188
Accrued salaries and benefits.................................... 1,205,922
Payroll withholding taxes........................................ 481,522
Ancillary expense................................................ 620,142
Property taxes................................................... 396,700
Rent............................................................. 245,547
Financing costs..................................................
Other............................................................ 311,326
----------
$7,002,347
==========
</TABLE>
In March 1995, the Company received an erroneous Medicaid reimbursement
payment of approximately $4,300,000 related to one of its Indiana facilities.
Negotiations with the state of Indiana's agent regarding such overpayment
resulted in the Company retaining the money paid subject to the Company's
payment of interest thereon to the state of Indiana. Future amounts due the
Company by the state will be offset against the interest-bearing obligation
until March 25, 1996 at which time the Company must reimburse the state for the
unused portion. The unreimbursed Medicaid payment accrues interest at prime plus
3.25% or 12% per annum, whichever is higher. The Company recorded $72,000 of
interest expense during the six-month period ended June 30, 1995 and $74,440 of
interest expense during the one-month period ended July 31, 1995.
F-37
<PAGE> 93
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. NOTES PAYABLE AND LONG-TERM DEBT
Subordinated notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1995
-----------
<S> <C>
Subordinated notes payable to an affiliate, secured by a $1,400,000 liquidity
deposit bearing interest at 5.2% to 12.0%, due January 1995 through December
2003 payable quarterly...................................................... $ 8,776,782
Note payable to bank, bearing interest at prime plus 2.0% payable monthly, due
October 1998................................................................ 48,183
Subordinated notes payable to third party, bearing interest at 10.0% payable
monthly, due August 1998.................................................... 239,913
Revolving line of credit advances bearing interest at the commercial paper 30
day weighted average rate plus 4.25% payable monthly........................ 1,672,577
-----------
10,737,455
Less current portion.......................................................... (528,230)
-----------
$10,209,225
===========
</TABLE>
The maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1995....................................... $ 1,280,741
1996....................................... 831,918
1997....................................... 254,049
1998....................................... 2,496,647
1999....................................... 286,349
Thereafter................................. 5,670,051
-----------
$10,819,755
===========
</TABLE>
The stated interest rate for the line of credit and note payable to bank
bear interest at 2.0% over prime (9.0% at June 30, 1995).
On January 31, 1995, the Company completed a three-year revolving credit
line for $6,000,000. The credit line is collateralized by existing and future
accounts receivable of the Company. The credit line requires the Company to
maintain quarterly financial covenants including fixed charge ratio
requirements, cash velocity test requirements, accounts receivable
day-sales-outstanding requirements and positive earnings test requirements. As
of June 30, 1995, the Company was in compliance with all such quarterly
covenants.
F-38
<PAGE> 94
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The components of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
---------- ---------
DECEMBER 31, JUNE 30, JULY 31,
1994 1995 1995
------------ ---------- ---------
<S> <C> <C> <C>
Current:
Federal.....................................
State and local............................. $ 52,896 $ 26,000 $ 4,500
------- ------- -------
52,896 26,000 4,500
Deferred:
Federal.....................................
------- ------- -------
$ 52,896 $ 26,000 $ 4,500
======= ======= =======
</TABLE>
A reconciliation of the provision for income taxes to the amount computed
by applying the statutory income tax rate to income before income taxes is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
---------- ---------
DECEMBER 31, JUNE 30, JULY 31,
1994 1995 1995
------------ ---------- ---------
<S> <C> <C> <C>
Income taxes computed at statutory U.S.
federal income tax rates.................... $ (533,067) $ 70,005 $(55,080)
Limitation on (utilization of) NOL............ 473,479 (101,239) 50,080
State and local income taxes.................. 52,896 26,000 4,500
Permanent differences......................... 59,588 31,234 5,000
--------- --------- ---------
$ 52,896 $ 26,000 $ 4,500
========= ========= =========
</TABLE>
At June 30, 1995 and July 31, 1995, the Company has federal tax net
operating loss carry forwards of approximately $2,100,000 and $2,100,000,
respectively, which expire at various dates through 2008. Under section 382 of
the Internal Revenue Code of 1986, as amended, the utilization of net operating
loss carry forwards may be delayed or permanently lost if there has been a
cumulative change in ownership during the past three years of more than 50%.
Such a change occurred in August 1995 as described in Note 12. Therefore, the
annual limitation on the Company's net operating loss carry forward is
approximately $1,500,000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-39
<PAGE> 95
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the Company's net deferred tax assets and liabilities
were as follows:
<TABLE>
<CAPTION>
JUNE 30,
1995
-----------
<S> <C>
Deferred tax assets:
Vacation accrual............................................................ $ (107,086)
Net operating loss carry forward............................................ (1,034,568)
Capital leases.............................................................. (880,088)
Leasehold rights............................................................ (55,191)
Allowance for bad debts..................................................... (292,621)
-----------
Gross deferred tax assets................................................ (2,369,554)
Valuation allowance........................................................... 2,369,554
-----------
Net deferred tax assets....................................................... --
Deferred tax liabilities...................................................... --
-----------
Net deferred tax liabilities.................................................. $ --
===========
</TABLE>
9. LEASES
The Company has noncancelable operating leases on substantially all of its
buildings and equipment which expire at various dates through the year 2003.
BI-1 and BI-2 lease sixteen facilities from Omega under the "Master Lease" and
"Texas Master Lease" Agreements.
The approximate future minimum rental commitments at December 31, 1994
under the operating leases are as follows:
<TABLE>
<S> <C>
1995.................................................... $ 8,098,047
1996.................................................... 7,804,644
1997.................................................... 7,886,491
1998.................................................... 7,901,301
1999.................................................... 7,910,753
Thereafter.............................................. 35,869,739
-----------
$ 75,470,975
===========
</TABLE>
Rent expense under operating leases was $8,263,642, $4,448,134 and $750,636
during the year ended December 31, 1994, the six months ended June 30, 1995 and
the one month ended July 31, 1995, respectively.
The lease terms are generally from eight to ten years with two or three
five-year renewal options. Minimum rentals increase annually based upon the
greater of 5.0% of incremental revenues or the Consumer Price Index, but limited
to a maximum annual increase of 3.5%. Upon exercise of a renewal option, the
rental payments continue in the same fashion as the original lease. The Company
and certain affiliated entities have options to purchase certain properties at
various times at prices determined by a specified formula. The Company and its
subsidiaries have guaranteed performance on the mortgages and lease payments to
Omega as discussed in Note 1 totaling $35,500,000 at December 31, 1994.
The lease payments are personally guaranteed to $13,500,000 by the chairman
of the board whose family trust is a majority shareholder of the Company, as
well as secured by substantially all the personal property and equity of the
Company. Lease rental payments are senior to all unsecured debt. The Company is
responsible for all taxes, maintenance and other executory costs.
F-40
<PAGE> 96
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Covenants to the Master Lease and Texas Master Lease include, but are not
limited to, current ratio requirements, cash flow to rent and debt service
requirements, minimum net worth requirements, and minimum cash requirements. In
March 1994, Omega consolidated and amended certain financial covenants related
to the Indiana and Texas Master Leases and the participating mortgages. Certain
payments to affiliates are subordinate to the lease payments made to Omega. As
of June 30, 1995, the Company was in compliance with these covenants.
10. RELATED PARTY TRANSACTIONS
BritWill HealthCare Company is a member of a group of affiliated companies
and has extensive transactions and relationships with members of the group.
Management of the Company believes that the terms of these transactions are not
materially different than those which would result from transactions among
wholly unrelated parties.
In December 1992, the Company entered into a transaction with BI-Indy in
which the Company exchanged 75% of its common stock for leasehold rights with a
value of $4,100,000. BI-Indy contributed furniture and equipment and $623,466 of
other costs incurred and capitalized as part of the transaction.
In December 1992, certain affiliates of a director of the Company loaned
the Company $400,000; and Whitehead Family Investments (WFI), a related party,
loaned the Company $2,075,000 which, combined with the director loan, is
recorded as subordinated long-term debt. The loans are subordinate to the lease
obligations on the Company's Indiana facilities. Interest expense on the loans
totaled $297,000 for 1994 and $148,500 and $28,875 for the six months ended June
30, 1995 and one month ended July 31, 1995, respectively. In addition, the
lenders are entitled to a minimum quarterly bonus. The expense for this bonus
agreement totaled $40,000 for 1994 and $20,000 for the six months ended June 30,
1995 and $3,333 for the one month ended July 31, 1995.
On December 23, 1993, an officer of the Company, loaned the Company
$70,000, at 12.0% annual interest, for working capital. The loan renewed a
$60,000 loan issued on October 23, 1993. At December 31, 1994, the outstanding
principal balance amounted to $49,000. Such principal balance was repaid in
1995. Interest expense on these loans amounted to approximately $5,880 in 1994.
In December 1993, the Company entered into a transaction with BI-TX in
which BI-TX contributed $2,800,000 of leasehold rights and $510,000 of working
capital to the Company in exchange for a note payable of $3,310,000. The
outstanding principal balance totaled $2,901,782 at June 30, 1995. Interest
expense on this loan amounted to approximately $226,476, $121,365 and $31,943 in
1994, for the six months ended June 30, 1995 and for the one month ended July
31, 1995, respectively.
In December 1994, certain affiliates of a director of the Company loaned
the Company $1,500,000 at 12.0% annual interest. A portion of the loan,
$500,000, represents a renewal of a $250,000 loan issued on December 1, 1994.
Interest expense on these loans amounted to approximately $1,500 in 1994,
$85,562 for the six months ended June 30, 1995 and $15,068 for the one month
ended July 31, 1995.
On June 1, 1994, the Company renewed a $600,000 note payable (in addition
to the above mentioned note) to WFI for working capital at an annual interest
rate of 12.0%. The note was renewed from a loan of the same amount issued on
June 1, 1993. Interest expense on these loans amounted to $72,000, $36,000 and
$6,000 for the year ended December 31, 1994, the six months ended June 30, 1995
and the one month ended July 31, 1995, respectively.
The Company manages nursing homes owned by an affiliate. Management fee
revenues charged the affiliate totaled $251,186, $40,430 and $0 during the year
ended December 31, 1994, the six months ended June 30, 1995 and the one month
ended July 31, 1995, respectively.
F-41
<PAGE> 97
BRITWILL HEALTHCARE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
Estimated third party settlements
Final determination of amounts earned under cost-reimbursed programs is
subject to review by appropriate governmental authorities or their agents. In
the opinion of management, adequate provision has been made for any adjustments
that could result from such reviews. In addition, the state of Indiana has
reviewed the Indiana Medicaid reimbursement structure. The ultimate impact to
healthcare providers in that state has been estimated and management believes
there will not be a material adverse effect on the financial position or results
of operations of the Company.
Medical malpractice and self-insured risks
The Company has obtained medical malpractice coverage with liability limits
of $5,000,000 per claim and in the aggregate. The Company has also obtained
workers' compensation coverage in Indiana but is uninsured with respect to
certain facilities located in Texas. The Company believes that the provision of
$20,550 recorded at June 30, 1995 for asserted and/or unasserted claims is
adequate based on historical results.
12. SUBSEQUENT EVENT
On August 10, 1995, Sunquest HealthCare Corporation, another long-term care
company operating approximately 21 facilities in eleven states, acquired the
Company's outstanding stock for a fixed payment of $26,000,000, plus contingent
amounts of up to approximately $9.8 million if the company achieves specified
revenue targets. The purchase price was comprised of two promissory notes
amounting to $19,000,000, in total, and a $7,000,000 noninterest bearing
convertible subordinated debenture.
In November 1995, a retroactive restatement and correction of the purchase
agreement reduced the fixed purchase price by $6,000,000. The purchase agreement
includes a related contingent purchase price obligation of up to $9,800,000
depending upon future revenues.
F-42
<PAGE> 98
SCHEDULE II
UNISON HEALTHCARE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED
BALANCE AT TO COST CHARGED BALANCE AT
BEGINNING AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful
accounts........................ $164,000 $ 128,000 $ $ (2,000)(1) $ 290,000
Year ended December 31, 1995
Allowance for doubtful
accounts........................ $290,000 $ 29,000 $801,000(2) $(337,000)(1) $ 783,000
Year ended December 31,1996
Allowance for doubtful
accounts........................ $783,000 $2,742,000 $672,000(3) $(420,000)(1) $3,776,000
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Represents the allowance for doubtful accounts recorded by BritWill at July
31, 1995.
(3) Represents the allowance for doubtful accounts recorded by Signature at
October 31, 1996.
S-1
<PAGE> 99
SCHEDULE II
BRITWILL HEALTHCARE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
CHARGED
BALANCE AT TO COST CHARGED BALANCE AT
BEGINNING AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for uncollectible
accounts........................ $ (480,039) $(644,471) $127,264(2) $(997,246)
Six Months ended June 30, 1995
Allowance for uncollectible
accounts........................ $ (997,246) $ (21,442) $227,821(2) $(790,867)
One Month ended July 31, 1995
Allowance for uncollectible
accounts........................ $ (790,867) $ (48,631) $ 38,724(2) $(800,774)
</TABLE>
- ---------------
(1) Adjustment related to increasing accounts receivable and the allowance to
reconcile to accounts receivable agings.
(2) Uncollectible accounts written off, net of recoveries.
S-2
<PAGE> 1
Exhibit 2.2.1
UNISON -- PLASH/HENDERSON
AGREEMENT FOR PURCHASE OF SHARES
AS OF NOVEMBER 24, 1996
This Agreement is by and among Unison HealthCare Corporation, a
Delaware corporation ("Unison"), Paul G. Henderson ("Henderson") and Paige B.
Plash ("Plash" and together with Henderson, "Sellers").
Unison desires to buy and Sellers desire to sell all of the issued and
outstanding stock of four corporations, namely, Decatur SportsFit & Wellness
Center, Inc., an Alabama corporation, Therapy Health Systems, Inc., a
Mississippi corporation, Henderson & Associates Rehabilitation, Inc., an Alabama
corporation, and Sunbelt Therapy Management Services, Inc., an Alabama
corporation (collectively, "Sunbelt"), owned by Sellers, on the terms and
conditions set forth in this Agreement (the "Transaction").
1. The Sale of Stock. Effective as of January 1, 1996, or such later
date as the parties may determine, but subject to the approval of this
transaction by Unison's Board of Directors and such other approvals, if any, as
may be required pursuant to Unison's Indenture dated October 31, 1996, in
respect of its Senior Notes due 2006, Sellers shall transfer to Unison all of
the shares of issued and outstanding common stock of Sunbelt owned by them or
either of them (the "Shares"). The Shares shall include all issued and
outstanding shares of Sunbelt which are not currently owned by Unison. At the
time of the transfer of the Shares, all of the Shares shall be owned
beneficially and of record by Sellers, and shall be free and clear of liens,
encumbrances, security agreements, options, claims, charges and restrictions of
any type.
2. Purchase Price. The purchase price for the Shares (the "Purchase
Price") shall be $1,417,500, plus a contingency payment determined in accordance
with Section 2(c), all of which shall be payable at the times and in the manner
described in Sections 2(a) through 2(f). For purposes of this Agreement, the
notes described in Sections 2(a) and 2(b) are described collectively as the
"Notes."
(a) $125,000 shall be payable to each of the Sellers in the form
of a note dated November 27, 1996, in the principal amount of
$125,000, which shall bear simple interest at a rate of 9% per
year, with all principal and interest payable on January 17,
1997.
(b) $458,750 shall be payable to each of the Sellers in the form
of a note dated November 27, 1996, in the principal amount of
$458,750, which shall bear simple interest at a rate of 9% per
year, with interest payable on January 17, 1997 and quarterly
on the first business day of each quarter thereafter beginning
in April 1997, and all principal due in a single payment on
January 5, 1998.
<PAGE> 2
Unison -- Plash/Henderson
November 24, 1996
Page 2
(c) An additional amount (the "Contingency Payment") shall be paid
to Sellers on the basis of the extent to which Sunbelt
achieves its budgeted pretax profit for 1997. Such payments
will be calculated in the manner set forth in this Section
2(c), and 50% of any amount so calculated will be paid to each
of the Sellers.
(i) If Sunbelt achieves 100% of its budgeted pretax
profit for 1997, Sellers shall be entitled to receive
a Contingency Payment totalling $1,417,500. If
Sunbelt achieves a higher or lower percentage of its
budgeted pretax profit for 1997, the same percentage
shall be applied to $1,417,500 in determining the
amount of the Contingency Payment; provided that the
total Contingency Payment shall never be less than
$708,750 (the "Guaranteed Amount"), nor more than
$2,126,250. Thus, by way of example, if Sunbelt
achieves 110% of its budgeted pretax profit, the
total Contingency Payment will equal 110% of
$1,417,500, or $1,559,250. Similarly, if Sunbelt
achieves only 90% of its budgeted pretax profit, the
total contingency will equal 90% of $1,417,500, or
$1,275,750.
(ii) Budgeted pretax profits for Sunbelt for 1997 shall be
as determined by the Board of Directors of Unison,
but shall not exceed $6,715,000.
(d) The Guaranteed Amount ($708,750) shall bear simple interest at
a rate of 9% per year from November 27, 1996. Interest on the
Guaranteed Amount shall be payable on January 17, 1997 and
quarterly on the first business day of each quarter thereafter
beginning in April 1997. The actual amount of the Contingency
Payment will be determined by the Unison Board promptly after
the completion of Unison's audit for the fiscal year ending
December 31, 1997. One half of the Contingency Payment, plus
all accrued but unpaid interest on the Guaranteed Amount,
shall be payable to each of the Sellers, in a single payment,
on January 4, 1999.
(e) No later than five days before the principal payment date of
any of the Notes, or the date on which the Contingency Payment
is due to be paid, either Unison or Sellers may notify the
other parties to this Agreement that a portion of the
principal or Contingent Payment, which may not exceed 50%,
will be paid in Unison Common Stock. The number of shares of
Unison Common Stock used in payment of such principal or
Contingent Payment shall be determined by dividing the dollar
amount for which the shares are being issued by the average
closing price for Unison Common Stock for the 20 trading days
immediately preceding the date on which the note in question
becomes due.
<PAGE> 3
Unison -- Plash/Henderson
November 24, 1996
Page 3
(f) Promptly after the execution of this Agreement, Unison will
issue to each Seller 13,971 shares of Unison's Common Stock.
The number of shares issuable to each Seller was calculated by
dividing $125,000 by $8.94685, which is the average closing
price for Unison Common Stock for the 20 trading days
immediately preceding November 27, 1996.
(g) Unison, Sunbelt Therapy Management Services, Inc., an Arizona
corporation, and Sellers entered into a Purchase and Sale
Agreement dated as of February 1, 1996 (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, Unison and
Sellers agreed to the terms and conditions of a registration
rights agreement covering the shares of Unison Common Stock
issuable upon conversion of the Convertible Debentures and
Notes (collectively, the "Convertible Instruments") issued by
Unison to Sellers under the Purchase Agreement but did not
execute a writing evidencing such rights. Unison and Sellers
now agree to execute and deliver a registration rights
agreement on substantially the following terms: (i) extension
of the registration rights previously granted to shares of
Unison Common Stock issued pursuant to Sections 2(e) and 2(f),
above; (ii) Sellers will have three demand registration rights
on Form S-3; (iii) Sellers will not be entitled to
registration of shares if the shares may then be sold under
Rule 144; (iv) registration may be limited by a managing
underwriter as necessary to complete an offering and
reasonably postponed by Unison under limited, customary
circumstances; (v) agreements of Sellers to execute any
underwriting agreements; (vi) customary provisions relating to
mutual indemnification and responsibility for registration and
selling costs; and (vii) a mutually acceptable time period for
exercise of such rights.
3. Investigation. Unison hereby grants to Sellers, and the agents,
accountants, attorneys and representatives of Sellers, full and complete access
to all of the books, records, financial statements, facilities, key personnel
and other documents and materials relating to Unison's financial condition,
assets, liabilities and business.
4. Representations and Warranties of Sellers. Each Seller hereby
represents and warrants to Unison that:
a. Such Seller owns good and marketable title to all of his Shares,
free and clear of all liens, encumbrances, security agreements, options, claims,
charges and restrictions of any type and has full right, and all necessary power
and authority, to enter into this Agreement, to sell assign, transfer and
deliver the Shares to Unison as contemplated herein and to enter into all
documents contemplated hereby, to perform his obligations hereunder and
thereunder and
<PAGE> 4
Unison -- Plash/Henderson
November 24, 1996
Page 4
to consummate the transactions contemplated hereby and thereby. Such Seller is
not party to any voting trust agreement or similar arrangement restricting
voting rights or transferability of any of the Shares.
b. The Notes to be acquired by such Seller hereunder and any of
Unison's Common Stock issuable with respect to the Notes are being acquired by
such Seller for his own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933 (the "1933 Act"). Such Seller understands that
neither the Notes nor the shares of Unison Common Stock issuable upon conversion
of the Notes have been registered under the 1933 Act by reason of their issuance
in transactions exempt from the registration and prospectus delivery
requirements of the 1933 Act pursuant to Section 4(2) thereof and agrees to
deliver to Unison, if requested by Unison, an investment letter in customary
form. Such Seller understands that neither the Notes, nor any interest therein,
nor the Unison Common Stock may be sold, transferred or otherwise disposed of
without registration under the 1933 Act or an exemption therefrom, and that in
the absence of an effective registration statement covering the Unison Common
Stock, or an available exemption from registration under the 1933 Act, the
Unison Common Stock must be held indefinitely. In particular, such Seller is
aware that no interest in the Notes, or Unison Common Stock may be sold pursuant
to Rule 144 promulgated under the Securities Act unless all of the conditions of
that Rule are met. Such Seller further understands that the Notes and the
certificates representing the Unison Common Stock will bear the a legend
substantially in the following form and agrees that he will hold such Notes and
such shares subject thereto:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND ANY SHARES THAT MAY
BE ISSUED UPON THE CONVERSION OF SUCH SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR
INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
<PAGE> 5
Unison -- Plash/Henderson
November 24, 1996
Page 5
c. (i) Such Seller has such knowledge and experience in financial and
business matters that he is capable of evaluating independently the risks and
merits of purchasing Unison's Notes and Common Stock; (ii) Such Seller has
independently evaluated the risks and merits of purchasing Unison's Notes and
Common Stock and has independently determined that Unison's Notes and Common
Stock are suitable investments for such Seller; and (iii) such Seller has
sufficient financial resources to bear the loss of his entire investment in
Unison's Notes and Common Stock.
d. Such Seller further represents that he has had an opportunity to ask
questions and receive answers from the officers and directors of Unison
regarding the business, properties, prospects and financial condition of Unison
and to obtain additional information (to the extent Unison possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Seller or
to which such Seller had access.
5. Publicity. Sellers each agree that they will not make public
statements regarding the Transaction contemplated by this Agreement without
first consulting Unison in order that such public statement shall be jointly
issued by the parties.
6. Counterparts. This Agreement may be executed by facsimile or manual
signatures. It may be executed in several counterparts, each of which shall be
deemed an original, but such counterparts shall together constitute one
agreement.
UNISON HEALTHCARE CORPORATION
By: /S/ Phillip R. Rollins
Name: Phillip R. Rollins
Title: Executive Vice President
<PAGE> 6
Unison -- Plash/Henderson
November 24, 1996
Page 6
ACCEPTED AND AGREED TO
The foregoing correctly sets forth our mutual agreement.
SELLERS
/S/ Paul G. Henderson
---------------------
Paul G. Henderson
/S/ Paige B. Plash
---------------------
Paige B. Plash
<PAGE> 1
Exhibit 2.3.1
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER is dated as of
October 9, 1996 and is by and among Unison HealthCare Corporation, a Delaware
corporation ("Parent"), Safford Care, Inc., a Colorado corporation ("Safford
Care"), David A. Kremser, an individual resident in Colorado ("Mr. Kremser") and
John D. Filkoski, an individual resident in Colorado ("Mr. Filkoski"), and
relates to the Agreement and Plan of Merger dated as of August 2, 1996 by and
among Parent, Safford Care, Mr. Kremser and Mr. Filkoski (the "Agreement").
Capitalized terms not defined herein shall have the meanings set forth in the
Agreement.
WHEREAS, as provided for in Sections 7.13 and 8.7 of the Agreement,
Parent, Safford Care, Mr. Kremser and Mr. Filkoski initially anticipated that
Parent would enter into a definitive agreement to acquire the assets and
business of RehabWest, Inc. for an aggregate purchase price of $5,500,000 as a
condition to Closing; and
WHEREAS, Parent will actually enter into a definitive agreement to
acquire the assets and business of RehabWest, Inc. for an aggregate purchase
price of $5,350,000; and
WHEREAS, pursuant to Section 11.9 of the Agreement, Parent, Safford
Care, Mr. Kremser and Mr. Filkoski desire to amend the Agreement to reflect the
revised purchase price for RehabWest, Inc.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Section 7.13 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
Section 2. Section 8.7 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 to Agreement and Plan of Merger as of the date first written
above.
UNISON HEALTHCARE CORPORATION
By: /S/ Paul J. Contris
------------------------------
Paul J. Contris
Executive Vice President
SAFFORD CARE, INC.
By: /S/ David A. Kremser
------------------------------
David A. Kremser
President
DAVID A. KREMSER
/S/ David A. Kremser
------------------------------
JOHN D. FILKOSKI
/S/ John D. Filkoski
------------------------------
-2-
<PAGE> 3
POST-EFFECTIVE AMENDMENT NO. 2
DATED AS OF MARCH 17, 1997
TO
AGREEMENT AND PLAN OF MERGER
AMONG
UNISON HEALTHCARE CORPORATION
SIGNATURE HEALTHCARE CORPORATION
DAVID A. KREMSER
AND
JOHN D. FILKOSKI
DATED AS OF AUGUST 2, 1996
Background
The parties have entered into that certain Agreement and Plan of Merge
dated as of August 2, 1996 (the "Original Agreement") pursuant to which
Signature HealthCare Corporation merged with and into a wholly-owned subsidiary
of Unison HealthCare Corporation on or about October 31, 1996. Pursuant to the
Original Agreement, the parties provided structured the transaction in a manner
intended to qualify as a tax-free reorganization for purposes of the Internal
Revenue Code. However, because the financial results of Signature were not and
could not be known with certainty at the time of the merger, the Original
Agreement provided that the Equity Adjustment Amount would be determined and
would be paid to the party or parties entitled thereto pursuant to the Equity
Adjustment Procedure, all as more fully described in Sections 2.9 and 2.10 of
the Original Agreement.
The parties have now determined that the Equity Adjustment Amount for
Signature is $1,457,802. Of this amount, the parties intend that $684,400 shall
be paid in the form of Parent Shares (valued at $2.875 per share) and the
balance shall be paid by delivery of one or more promissory notes in
substantially the form of Exhibit X hereto. To accomplish the foregoing intent,
the parties agree as set forth below.
Agreement
1. Equity Adjustment Amount. The parties hereby agree
that the Equity Adjustment Amount is $1,457,802.
2. Amendment to Section 2.5(a), The parties hereby agree that
Section 2.5(a) of the Original Agreement shall be amended to
read as follows:
"(a) Each Share shall, by virtue of the Merger and without any
action on the part of
-3-
<PAGE> 4
Newco, the Company or the holder thereof, be converted into:
(i) that number of Parent Shares determined by
determining (i) the sum of (a) 1,509,434 Parent
Shares (valued at $13.25 per share) plus (b) the
number of Parent Shares determined by dividing
$684,400 of the Equity Adjustment Amount payable by
Parent pursuant to Sections 2.9 and 2.10 by $2.875;
and then dividing such sum by the number of Shares
(the "Per Share Conversion Amount").
Plus
(ii) an amount of cash (the "Per Share Cash
Amount") determined by dividing
(A) $10,200,000 minus the aggregate Spread
on employee options retired by the Company
after the date hereof and prior to the
Effective Time (such excess being referred
to herein as the "Base Amount"), by
(B) the number of Shares.
Plus
(iii) $773,402 of the Equity Adjustment Amount
divided by the number of Shares, payable by delivery
of promissory notes to each of Messrs. Kremser and
Filkoski, in substantially the form of Exhibit X.
3. Amendment to Section 2.10(b). The parties hereby agree that
the second sentence of Section 2.10(b) shall be deleted.
4. Ratification of Original Agreement. The Original Agreement, as
amende hereby, is hereby ratified and affirmed in all other
respects.
IN WITNESS WHEREOF, and pursuant to Section 11.8 of the Original
Agreement, the parties have executed this Amendment No.
2 as of the 17th day of March, 1997.
UNISON HEALTHCARE CORPORATION
By: /s/ Phillip R. Rollins
----------------------
Name: Phillip R. Rollins
Title: EVP/COO
-4-
<PAGE> 5
SIGNATURE HEALTHCARE
CORPORATION
By: /s/ David Kremser
-------------------------
Name: David Kremser
Title: President
DAVID A. KREMSER
By: /s/ David A. Kremser
-------------------------
David A. Kremser, Personally
JOHN D. FILKOSKI
By: /s/ John D. Filkoski
-------------------------
John D. Filkoski, Personally
-5-
<PAGE> 1
Exhibit 2.7.1
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER is dated as of
October 9, 1996 and is by and among Unison HealthCare Corporation, a Delaware
corporation ("Parent"), Arkansas, Inc., a Colorado corporation ("Arkansas"),
David A. Kremser, an individual resident in Colorado ("Mr. Kremser") and John D.
Filkoski, an individual resident in Colorado ("Mr. Filkoski"), and relates to
the Agreement and Plan of Merger dated as of August 2, 1996 by and among Parent,
Arkansas, Mr. Kremser and Mr. Filkoski (the "Agreement"). Capitalized terms not
defined herein shall have the meanings set forth in the Agreement.
WHEREAS, as provided for in Sections 7.13 and 8.7 of the Agreement,
Parent, Arkansas, Mr. Kremser and Mr. Filkoski initially anticipated that Parent
would enter into a definitive agreement to acquire the assets and business of
RehabWest, Inc. for an aggregate purchase price of $5,500,000 as a condition to
Closing; and
WHEREAS, Parent will actually enter into a definitive agreement to
acquire the assets and business of RehabWest, Inc. for an aggregate purchase
price of $5,350,000; and
WHEREAS, pursuant to Section 11.9 of the Agreement, Parent, Arkansas,
Mr. Kremser and Mr. Filkoski desire to amend the Agreement to reflect the
revised purchase price for RehabWest, Inc.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Section 7.13 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
Section 2. Section 8.7 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 to Agreement and Plan of Merger as of the date first written
above.
UNISON HEALTHCARE CORPORATION
By: /S/ Paul J. Contris
---------------------------
Paul J. Contris
Executive Vice President
ARKANSAS, INC.
By: /s/ David A. Kremser
---------------------------
David A. Kremser
President
DAVID A. KREMSER
/S/ David A. Kremser
JOHN D. FILKOSKI
/S/ John D. Filkoski
<PAGE> 3
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER is dated as of
October 9, 1996 and is by and among Unison HealthCare Corporation, a Delaware
corporation ("Parent"), Cornerstone Care, Inc., a Colorado corporation
("Cornerstone"), David A. Kremser, an individual resident in Colorado ("Mr.
Kremser") and John D. Filkoski, an individual resident in Colorado ("Mr.
Filkoski"), and relates to the Agreement and Plan of Merger dated as of August
2, 1996 by and among Parent, Cornerstone, Mr. Kremser and Mr. Filkoski (the
"Agreement"). Capitalized terms not defined herein shall have the meanings set
forth in the Agreement.
WHEREAS, as provided for in Sections 7.13 and 8.7 of the Agreement,
Parent, Cornerstone, Mr. Kremser and Mr. Filkoski initially anticipated that
Parent would enter into a definitive agreement to acquire the assets and
business of RehabWest, Inc. for an aggregate purchase price of $5,500,000 as a
condition to Closing; and
WHEREAS, Parent will actually enter into a definitive agreement to
acquire the assets and business of RehabWest, Inc. for an aggregate purchase
price of $5,350,000; and
WHEREAS, pursuant to Section 11.9 of the Agreement, Parent,
Cornerstone, Mr. Kremser and Mr. Filkoski desire to amend the Agreement to
reflect the revised purchase price for RehabWest, Inc.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Section 7.13 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
Section 2. Section 8.7 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 to Agreement and Plan of Merger as of the date first written
above.
UNISON HEALTHCARE CORPORATION
By: /S/ Paul J. Contris
----------------------------------
Paul J. Contris
Executive Vice President
CORNERSTONE CARE, INC.
By: /S/ David A. Kremser
----------------------------------
David A. Kremser
President
DAVID A. KREMSER
/S/ David A. Kremser
----------------------------------
JOHN D. FILKOSKI
/S/ John D. Filkoski
----------------------------------
-4-
<PAGE> 5
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER is dated as of
October 9, 1996 and is by and among Unison HealthCare Corporation, a Delaware
corporation ("Parent"), Douglas Manor, Inc., a Colorado corporation ("Douglas
Manor"), David A. Kremser, an individual resident in Colorado ("Mr. Kremser")
and John D. Filkoski, an individual resident in Colorado ("Mr. Filkoski"), and
relates to the Agreement and Plan of Merger dated as of August 2, 1996 by and
among Parent, Douglas Manor, Mr. Kremser and Mr. Filkoski (the "Agreement").
Capitalized terms not defined herein shall have the meanings set forth in the
Agreement.
WHEREAS, as provided for in Sections 7.13 and 8.7 of the Agreement,
Parent, Douglas Manor, Mr. Kremser and Mr. Filkoski initially anticipated that
Parent would enter into a definitive agreement to acquire the assets and
business of RehabWest, Inc. for an aggregate purchase price of $5,500,000 as a
condition to Closing; and
WHEREAS, Parent will actually enter into a definitive agreement to
acquire the assets and business of RehabWest, Inc. for an aggregate purchase
price of $5,350,000; and
WHEREAS, pursuant to Section 11.9 of the Agreement, Parent, Douglas
Manor, Mr. Kremser and Mr. Filkoski desire to amend the Agreement to reflect the
revised purchase price for RehabWest, Inc.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Section 7.13 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
Section 2. Section 8.7 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 to Agreement and Plan of Merger as of the date first written
above.
UNISON HEALTHCARE CORPORATION
By: /S/ Paul J. Contris
----------------------------------
Paul J. Contris
Executive Vice President
DOUGLAS MANOR, INC.
By: /S/ David A. Kremser
----------------------------------
David A. Kremser
President
DAVID A. KREMSER
/S/ David A. Kremser
----------------------------------
JOHN D. FILKOSKI
/S/ John D. Filkoski
----------------------------------
-6-
<PAGE> 7
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER is dated as of
October 9, 1996 and is by and among Unison HealthCare Corporation, a Delaware
corporation ("Parent"), Safford Care, Inc., a Colorado corporation ("Safford
Care"), David A. Kremser, an individual resident in Colorado ("Mr. Kremser") and
John D. Filkoski, an individual resident in Colorado ("Mr. Filkoski"), and
relates to the Agreement and Plan of Merger dated as of August 2, 1996 by and
among Parent, Safford Care, Mr. Kremser and Mr. Filkoski (the "Agreement").
Capitalized terms not defined herein shall have the meanings set forth in the
Agreement.
WHEREAS, as provided for in Sections 7.13 and 8.7 of the Agreement,
Parent, Safford Care, Mr. Kremser and Mr. Filkoski initially anticipated that
Parent would enter into a definitive agreement to acquire the assets and
business of RehabWest, Inc. for an aggregate purchase price of $5,500,000 as a
condition to Closing; and
WHEREAS, Parent will actually enter into a definitive agreement to
acquire the assets and business of RehabWest, Inc. for an aggregate purchase
price of $5,350,000; and
WHEREAS, pursuant to Section 11.9 of the Agreement, Parent, Safford
Care, Mr. Kremser and Mr. Filkoski desire to amend the Agreement to reflect the
revised purchase price for RehabWest, Inc.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Section 7.13 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
Section 2. Section 8.7 of the Agreement is amended by replacing the
term "$5,500,000" with the term "$5,350,000."
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment No. 1 to Agreement and Plan of Merger as of the date first written
above.
UNISON HEALTHCARE CORPORATION
By: /S/ Paul J. Contris
----------------------------------
Paul J. Contris
Executive Vice President
SAFFORD CARE, INC.
By: /S/ David A. Kremser
----------------------------------
David A. Kremser
President
DAVID A. KREMSER
/S/ David A. Kremser
----------------------------------
JOHN D. FILKOSKI
/S/ John D. Filkoski
----------------------------------
-8-
<PAGE> 9
POST-EFFECTIVE AMENDMENT NO. 2
DATED AS OF MARCH 17, 1997
TO FOUR
AGREEMENTS AND PLANS OF MERGER
AMONG
UNISON HEALTHCARE CORPORATION
DAVID A. KREMSER
AND
JOHN D. FILKOSKI
AND
EACH OF
ARKANSAS, INC.
CORNERSTONE CARE, INC.
DOUGLAS MANOR, INC.
SAFFORD CARE, INC.
EACH DATED AS OF AUGUST 2, 1996
Background
The parties have entered into those certain Agreements and Plans of
Merger dated as of August 2, 1996 (the "Original Agreements") pursuant to which
each of Arkansas, Inc., Cornerstone Care, Inc., Douglas Manor, Inc. and Safford
Care, Inc. (the "S Corporations") merged with and into a wholly owned subsidiary
of Unison HealthCare Corporation on or about October 31, 1996. Because the
financial results of the S Corporations were not and could not be known with
certainty at the time of the merger, the Original Agreements provided that the
Equity Adjustment Amount, as defined therein, would be determined and would be
paid to the party or parties entitled thereto pursuant to the Equity Adjustment
Procedure, all as more fully described in Sections 2.9 and 2.10 of the Original
Agreements.
The parties have now determined that the net Equity Adjustment Amount
for the S Corporations is $1,053,010. The parties intended that this amount
would be paid in immediately available funds. The parties now desire to amend
the Original Agreements to provide that the Equity Adjustment Amount will be
paid in the form of one or more promissory notes in substantially the form of
Exhibit X hereto. To accomplish the foregoing intent, the parties agree as set
forth below.
Agreement
1. Equity Adjustment Amount. The parties hereby agree that the
net Equity Adjustment Amount under the Original Agreements is
$1,053,010.
<PAGE> 10
2. Amendment to Section 2.10(b). The parties hereby agree that
Section 2.10(b) of each of the Original Agreements shall be
amended by deleting the second sentence thereof in its
entirety and inserting therefor the following: "Payments may
be made either in immediately available funds or by one or
more promissory notes of Parent in form and substance
reasonably acceptable to the Company and the Warranting
Shareholders."
3. Ratification of Original Agreements. Each of the Original
Agreements, as amended hereby, is hereby ratified and affirmed
in all other respects.
IN WITNESS WHEREOF, and pursuant to Section 11.9 of each of the
Original Agreements, the parties have executed this Amendment No. 1 as of the
date set forth above.
UNISON HEALTHCARE
CORPORATION
By: /s/Phillip R. Rollins
---------------------------------
Name: Phillip R. Rollins
Title: EVP/COO
ARKANSAS, INC.
CORNERSTONE CARE, INC.
DOUGLAS MANOR, INC.
SAFFORD CARE, INC.
By: /S/ David Kremser
---------------------------------
Name: David Kremser
Title: President
DAVID A. KREMSER
By: /S/ David A. Kremser
---------------------------------
David A. Kremser, Personally
JOHN D. FILKOSKI
By: /S/ John D. Filkoski
---------------------------------
John D. Filkoski, Personally
-10-
<PAGE> 1
Exhibit 3.1.1
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
UNISON HEALTHCARE CORPORATION
The undersigned hereby certifies that the Certificate of Incorporation
of Unison HealthCare Corporation is hereby amended as follows:
FIRST: Section 4 is deleted and a new Section 4 is inserted as follows:
4. Authorized Capital. The Corporation shall have the
authority to issue 25,000,000 shares of common stock, par value $.001 par value
per share (the "Common Stock"), and 1,000,000 shares of preferred stock, $.001
par value per share (the "Preferred Stock").
SECOND: All of the other provisions of the Certificate of Incorporation
shall remain unchanged and in full force and effect.
THIRD: The amendment was duly adopted in accordance with Section 242 of
the General Corporation Law of Delaware.
Dated: November 8, 1996.
UNISON HEALTHCARE CORPORATION
By: /s/ Phillip R. Rollins
-----------------------------------
Phillip R. Rollins, Secretary
<PAGE> 1
Exhibit 3.2
ARTICLES OF INCORPORATION
OF
SUNQUEST SPC, INC.
1. Name. The name of the Corporation is SunQuest SPC, Inc.
2. Purpose. The purpose for which this Corporation is
organized is the transaction of any or all lawful business for which
corporations may be incorporated under the laws of the State of Arizona, as they
may be amended from time to time.
3. Initial Business. The Corporation initially intends to
conduct the business of leasing and operating nursing homes.
4. Authorized Capital. The Corporation shall have the
authority to issue 400,000 shares of common stock, par value $.001, and 100,000
shares of preferred stock, $.001 par value per share.
5. Preferred Stock.
5.1 Series. The board of directors is authorized,
subject to limitations prescribed by law and these Articles of Incorporation, to
provide for the issuance of the shares of preferred stock in series, and by
filing a certificate pursuant to the applicable law of the State of Arizona, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
5.2 Rights and Limitations. The authority of the
board of directors with respect to each series of preferred stock shall include,
without limitation, determination of the following:
(a) The number of shares constituting that
series and the distinctive designation of that series;
(b) The dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of dividends on
shares of that series;
(c) Whether that series shall have voting
rights, in addition to the voting rights provided by law, and if so, the terms
of such voting rights;
(d) Whether that series shall have
conversion privileges, and if so, the terms and conditions of such conversion,
including provisions for adjustment of the conversion rate in such events as the
board of directors shall determine;
(e) Whether or not the shares of that series
shall be redeemable, and if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
<PAGE> 2
(f) Whether that series shall have a sinking
fund for the redemption or purchase of shares of that series, and if so, the
terms and amount of such sinking fund;
(g) The rights of the shares of that series
in the event of voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(h) Any other relative rights, preferences
and limitations of that series.
5.3 Dividends. Dividends on outstanding shares of
preferred stock shall be paid or declared and set apart for payment before any
dividends shall be paid or declared and set apart for payment on the common
shares with respect to the same dividend period.
5.4 Liquidation. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets available
for distribution to holders of shares of preferred stock of all series shall be
insufficient to pay such holders the full preferential amount to which they are
entitled, then such assets shall be distributed ratably among the shares of all
series of preferred stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.
6. Statutory Agent. The name and address of the initial
statutory agent of the Corporation is MBBJ Service Co., 4722 North 24th Street,
Suite 400, Phoenix, Arizona 85016.
7. Initial Directors and Officers. The initial board of
directors shall consist of four directors. The names and addresses of the
persons who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and qualify are:
Jerry M. Walker
9342 N. Fanfol Road
Paradise Valley, Arizona 85253
Robert J. Bowersox
3402 E. Mission Lane
Phoenix, Arizona 85028
Phillip Rollins
12835 E. Gail
Scottsdale, Arizona 85259
Paul J. Contris
5800 W. Kesler Street
Chandler, Arizona 86226
The number of persons to serve on the board of directors
thereafter shall be fixed by the Bylaws. The persons who are to serve as
officers at the pleasure of the board of directors are:
Jerry M. Walker President
Robert J. Bowersox Vice President
Paul J. Contris Treasurer
Phillip Rollins Secretary
8. Incorporators. The incorporators of the Corporation, and
their addresses are:
Jerry M. Walker
<PAGE> 3
9342 N. Fanfol Road
Paradise Valley, Arizona 85253
Paul J. Contris
5800 W. Kesler Street
Chandler, Arizona 86226
All powers, duties and responsibilities of the incorporators shall cease at the
time of delivery of these Articles of Incorporation to the Arizona Corporation
Commission for filing.
9. Distributions from Capital Surplus. The board of directors
of the Corporation may, from time to time, distribute on a pro rata basis to its
shareholders out of the capital surplus of the Corporation a portion of its
assets, in cash or property.
10. Indemnification of Officers and Directors.
10.1 The Corporation shall indemnify to the full
extent authorized or permitted by law (as now or hereafter in effect) any person
made, or threatened to be made, a defendant or witness to any threatened,
pending or completed action, suit or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his administrator, executor or
intestate, is or was a director or officer of the Corporation or by reason of
the fact that such director or officer, at the request of the Corporation, is or
was serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity. Nothing contained herein
shall affect any rights to indemnification to which employees other than
directors and officers may be entitled by law. No amendment or repeal of this
Section 10.1 shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
10.2 In furtherance and not in limitation of the
powers conferred by statute:
(a) the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of law; and
(b) the Corporation may create a trust fund,
grant a security interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements), as well as
enter into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to any or
all of the foregoing to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
11. Director Liability. A director of the Corporation shall
not be personally liable to the Corporation or its
<PAGE> 4
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
authorizing the unlawful payment of a dividend or other distribution on the
Corporation's capital stock or the unlawful purchase of its capital stock, (iv)
for any transaction from which the director derived an improper personal
benefit, or (v) for a violation of Section 10-041 of the Arizona General
Corporation Law. If the Arizona General Corporation Law is amended after
approval by the shareholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Arizona General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification. No amendment to the Arizona Revised Statutes that further
limits the acts, omissions or transactions for which elimination or limitation
of liability is permitted shall affect the liability of a director for any act,
omission or transaction which occurs prior to the effective date of such
amendment.
12. Repurchase of Shares. The board of directors of the
Corporation may, from time to time, cause the Corporation to purchase its own
shares to the extent of the unreserved and unrestricted earned and capital
surplus of the Corporation.
EXECUTED this 26 day of July , 1991.
/s/ Jerry M. Walker
------------------------------
Jerry M. Walker
/s/ Paul J. Contris
------------------------------
Paul J. Contris
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
BRITWILL HEALTHCARE COMPANY
* * * * *
1. The name of the corporation is
BRITWILL HEALTHCARE COMPANY
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is one million (1,000,000) and the par value of
each of such shares is One Dollar ($1.00) amounting in the aggregate to One
Million Dollars ($1,000,000).
The holders of common stock shall, upon the issuance or sale
of shares of stock of any class (whether now or hereafter authorized) or any
securities convertible into such stock, have the right, during such period of
time and on such conditions as the board of directors shall prescribe, to
subscribe to and purchase such shares or securities in proportion to their
respective holdings of common stock, at such price or prices as the board of
directors may from time to time fix as may be permitted by law.
5A. The name and mailing address of each incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
L. B. Rush 811 Dallas Avenue
Houston, Texas 77002
D. Page 811 Dallas Avenue
Houston, Texas 77002
K. S. Hood 811 Dallas Avenue
Houston, Texas 77002
5B. The name and mailing address of each person, who is to
serve as a director until the first annual meeting of the stockholders or until
a successor is elected and qualified, is as follows:
<PAGE> 2
NAME MAILING ADDRESS
---- ---------------
Bruce H. Whitehead 5950 Berkshire, Suite 1100
Dallas, Texas 75225
Rudy Michalek 5950 Berkshire, Suite 1100
Dallas, Texas 75225
Dale Patterson 5950 Berkshire, Suite 1100
Dallas, Texas 75225
Vicki Lund 5950 Berkshire, Suite 1100
Dallas, Texas 75225
Terri Sharp 5950 Berkshire, Suite 1100
Dallas, Texas 75225
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provision of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
<PAGE> 3
9. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make this certificate,
hereby declaring and certifying that this is our act and deed and the facts
herein stated are true, and accordingly have hereunto set our hands this 4th day
of August, 1992.
/s/
----------------------------------
L. B. Rush
/s/
----------------------------------
D. Page
/s/
----------------------------------
K. S. Hood
<PAGE> 1
Exhibit 3.4
CERTIFICATE OF INCORPORATION
OF
BRITWILL INVESTMENTS - I, INC.
* * * * *
1. The name of the corporation is
BRITWILL INVESTMENTS - I, INC.
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is one million (1,000,000) and the par value of
each of such shares is One Dollar ($1.00) amounting in the aggregate to One
Million Dollars ($1,000,000).
The holders of common stock shall, upon the issuance or sale
of shares of stock of any class (whether now or hereafter authorized) or any
securities convertible into such stock, have the right, during such period of
time and on such conditions as the board of directors shall prescribe, to
subscribe to and purchase such shares or securities in proportion to their
respective holdings of common stock, at such price or prices as the board of
directors may from time to time fix and as may be permitted by law.
5A. The name and mailing address of each incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
K. S. Hood 811 Dallas Avenue
Houston, Texas 77002
V. S. Alfano 811 Dallas Avenue
Houston, Texas 77002
D. Page 811 Dallas Avenue
Houston, Texas 77002
5B. The name and mailing address of each person, who is to
serve as a director until the first annual meeting of the stockholders or until
a successor is elected and qualified, is as follows:
<PAGE> 2
NAME MAILING ADDRESS
---- ---------------
Bruce H. Whitehead 5950 Berkshire, Suite 1100
Dallas, Texas 75225
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, in sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
9. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit.
<PAGE> 3
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make this certificate,
hereby declaring and certifying that this is our act and deed and the facts
herein stated are true, and accordingly have hereunto set our hands this 29th
day of September, 1992.
/s/
--------------------------------
K. S. Hood
/s/
--------------------------------
V. S. Alfano
/s/
--------------------------------
D. Page
3
<PAGE> 1
Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
BRITWILL INVESTMENTS - II, INC.
* * * * *
1. The name of the corporation is
BRITWILL INVESTMENTS - II, INC.
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is one million (1,000,000) and the par value of
each of such shares is One Dollar ($1.00) amounting in the aggregate to One
Million Dollars ($1,000,000).
The holders of common stock shall, upon the issuance or sale
of shares of stock of any class (whether now or hereafter authorized) or any
securities convertible into such stock, have the right, during such period of
time and on such conditions as the board of directors shall prescribe, to
subscribe to and purchase such shares or securities in proportion to their
respective holdings of common stock, at such price or prices as the board of
directors may from time to time fix and as may be permitted by law.
5A. The name and mailing address of each incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
L. J. Bice 811 Dallas Avenue
Houston, Texas 77002
V. S. Alfano 811 Dallas Avenue
Houston, Texas 77002
W. Erwin 811 Dallas Avenue
Houston, Texas 77002
5B. The name and mailing address of each person, who is to
serve as a director until the first annual meeting of the stockholders or until
a successor is elected and qualified, is as follows:
1
<PAGE> 2
NAME MAILING ADDRESS
---- ---------------
Bruce H. Whitehead 5950 Berkshire, Suite 1100
Dallas, Texas 75225
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
9. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit.
2
<PAGE> 3
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make this certificate,
hereby declaring and certifying that this is our act and deed and the facts
herein stated are true, and accordingly have hereunto set our hands this 22nd
day of June, 1992.
/s/
-----------------------------------
L. J. Bice
/s/
-----------------------------------
V. S. Alfano
/s/
-----------------------------------
W. Erwin
3
<PAGE> 1
Exhibit 3.6
CERTIFICATE OF INCORPORATION
OF
BRITWILL FUNDING CORPORATION
ARTICLE ONE: The name of the corporation is BritWill Funding
Corporation (the "Corporation").
ARTICLE TWO: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County. The
Corporation's registered agent for service of process at that address is The
Corporation Trust Company.
ARTICLE THREE: The purposes of the Corporation are:
(a) to purchase or otherwise acquire accounts receivable
related to the provision of healthcare services ("Receivables") including, but
not limited to, Receivables of which the account obligors are Medicare,
Medicaid, the Civilian Health & Medical Program of the Uniform Services
(CHAMPUS), private insurers, health maintenance organizations and preferred
provider organizations and to borrow money secured by such Receivables;
(b) to provide (or arrange for the provision of) services
necessary for the collection of such Receivables and the maintenance of the
ownership of such Receivables and the proceeds thereof; and
(c) to engage in such activities and to exercise such powers
permitted to corporations under the laws of the State of Delaware that are
necessarily incident to or connected with the foregoing or necessary to
accomplish the foregoing.
ARTICLE FOUR: The name and mailing address of the sole incorporator is
Andrew R. Mylott, Esq., 1301 Avenue of the Americas, New York, New York 10019.
ARTICLE FIVE: The aggregate number of shares which the Board of
Directors of the Corporation shall have authority to issue is 1,000 shares and
the par value of each such share is $1.00. All such shares are of one class and
are designated common shares.
ARTICLE SIX: The Corporation shall be operated in such a manner that it
would not be substantively consolidated in the trust estate of any other
individual, corporation, partnership, joint venture, trust or unincorporated
organization or any other legal entity, whether acting in an individual,
fiduciary or other capacity (each, a "Person") in the event of a bankruptcy or
insolvency of such Person and in such regard, the Corporation shall:
(a) not become involved in the day-to-day management of any
other Person;
1
<PAGE> 2
(b) not engage in transactions with any other Person other
than those activities described in ARTICLE THREE hereof and matters necessarily
incident thereto;
(c) maintain separate corporate records and books of accounts
and a separate business office from any other Person;
(d) maintain its assets separately from the assets of any
other Person (including through the maintenance of a separate bank account);
(e) maintain separate financial statements, books and records
from any other Person;
(f) not guarantee any other Person's obligation or advance
funds to, or accept funds from, any other Person for the payment of expenses or
otherwise;
(g) conduct all business correspondence of the Corporation and
other communications in the Corporation's own name, on its own stationery and
through a separately-listed telephone number; and
(h) not act as an agent of any other Person in any capacity.
ARTICLE SEVEN: At all times, at least one of the directors (the
"Independent Director") of the Corporation shall be an independent director who
(i) shall at no time be a shareholder, or a director, officer, employee,
affiliate or associate of any shareholder, of the Corporation and (ii) shall be
acceptable to General Electric Capital Corporation.
ARTICLE EIGHT: Notwithstanding any other provision of the Certificate
of Incorporation any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without the affirmative vote of the
Independent Director:
(a) institute proceedings to be adjudicated insolvent, or
consent to the institution of any bankruptcy or insolvency case or proceeding
against it, or file or consent to a petition under any applicable federal or
state law relating to bankruptcy, seeking the Corporation's liquidation or
reorganization or any other relief for the Corporation as debtor, or consent to
the appointment of a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of the Corporation or a substantial
part of its property, or make any assignment for the benefit of creditors, or
admit in writing its inability to pay its debts generally as they become due, or
take any corporate action in furtherance of any action;
(b) amend, alter, change or repeal ARTICLE THREE, SIX or SEVEN
hereof or this ARTICLE EIGHT;
(c) engage in any business or activity other than as
authorized by ARTICLE THREE hereof;
2
<PAGE> 3
(d) dissolve or liquidate, in whole or in part; or
(e) consolidate with or merge into any other entity or convey,
transfer or lease its properties and assets substantially as an entirety to any
entity, or permit any entity to merge into the Corporation or convey, transfer
or lease its property and assets substantially as an entirety to the
Corporation.
IN WITNESS WHEREOF, the undersigned, being the sole incorporator
hereinbefore named, does hereby certify that the statements contained herein are
true and, accordingly, does hereby sign this Certificate of Incorporation this
14th day of November, 1994.
/s/ Andrew R. Mylott
--------------------------------
Andrew R. Mylott, Esq.
Sole Incorporator
3
<PAGE> 1
Exhibit 3.7
ARTICLES OF INCORPORATION
OF EMORY CARE CENTER, INC.
ARTICLE ONE
The name of the corporation is Emory Care Center, Inc.
ARTICLE TWO
The period of duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Texas Business Corporations Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have
authority to issue is One Hundred Thousand (100,000), without par value.
ARTICLE FIVE
The corporation will not commence business until it has received for
the issuance of shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done or property actually received.
ARTICLE SIX
The street address of its initial registered office is 1717 Main
Street, Suite 3700, Dallas, Texas 75201, and the name of its initial registered
agent at such address is Scott R. Erickson.
ARTICLE SEVEN
The number of directors constituting the initial board of directors is
one (1), and the name and address of the person who is to serve as director
until the first annual meeting of the shareholders or until their successors are
elected and qualified is:
Robert S. Greenlaw
P. O. Box 31173
Walnut Creek, California 94598
<PAGE> 2
ARTICLE EIGHT
The name and address of the incorporator is:
Scott R. Erickson
1717 Main Street
Suite 3700
Dallas, Texas 75201
/s/ Scott R. Erickson
---------------------------------
2
<PAGE> 1
Exhibit 3.8
CHARTER
OF
MEMPHIS CLINICAL LABORATORY, INC.
The undersigned natural person or persons, having capacity to contract
and acting as incorporator or incorporators of a corporation under the Tennessee
General Corporation Act, adopt the following charter for such corporation:
1. The name of the corporation is MEMPHIS CLINICAL LABORATORY,
INC.
2. The duration of the corporation is perpetual.
3. The address of the principal office of the corporation in
the State of Tennessee shall be 4088 Barton, Memphis, Tennessee, 38116.
4. The corporation is for profit.
5. The purposes for which the corporation is organized are:
a. To provide laboratory services to hospitals,
nursing homes, physicians and others.
b. To process Medical Insurance claims.
c. To provide computer processing.
d. To provide consulting for laboratory
management and to conduct seminars.
e. To own, hold, and lease property.
f. To borrow and loan money.
6. The maximum number of shares which the corporation shall
have the authority to issue is One Thousand (1,000) shares, with no par value.
7. The corporation will not commence business until
consideration of One Thousand ($1,000.00) Dollars have been received for the
issuance of Five Hundred (500) shares.
<PAGE> 2
8. The registered agent for service of process as designated
by this corporation is Terry D. Smart, 208 Poplar Avenue, Memphis, Tennessee,
38301.
Dated: April 11, 1986
/s/
----------------------------
Incorporator
/s/
----------------------------
Incorporator
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, William R. Seals and Terry D.
Smart the within named incorporators of Memphis Clinical Laboratory, Inc. whom I
am personally acquainted, and who acknowledged that as such Incorporators, they
executed the within application for Charter of Incorporation for the purposes
therein contained and expressed.
Witness my hand and seal of office, this the 11th day of
April, 1986.
/s/
----------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires May 2, 1987
---------------------------------
2
<PAGE> 1
Exhibit 3.9
ARTICLES OF INCORPORATION
OF
TECHNOMEDICAL PROPERTIES, INC.
We, the undersigned natural persons acting as incorporators of the
corporation under the Utah Business Corporations Act adopt the following
Articles of Incorporation for such corporation.
ARTICLE I
Name. The name of the corporation (hereinafter called
"Corporation") is TECHNOMEDICAL PROPERTIES, INC.
ARTICLE II
Period of Duration. The period of duration of the Corporation
is perpetual.
ARTICLE III
Purposes and Powers. The purpose for which this Corporation is
organized is to engage in the business of investing in investments of all forms
and nature and to engage in any and all other lawful business.
ARTICLE IV
Capitalization. The Corporation shall have the authority to issue
50,000,000 shares of stock having a par value of one mil ($.001). All stock of
the Corporation shall be of the same class and shall have the same rights and
preferences. Fully paid stock of this Corporation shall not be liable for
further call or assessment. The authorized trading shares shall be issued at the
discretion of the Directors.
ARTICLE V
Commencement of Business. The Corporation shall not commence business
until at least One Thousand Dollars ($1,000) has been received by the
Corporation as consideration for the issuance of its shares.
ARTICLE VI
Initial Registered Office and Initial Registered Agent. The address of
the initial registered office of the Corporation is 1549 South 1300 East, Salt
Lake City, Utah 84105, and the initial registered agent of the Corporation at
such address is W. Sterling Mason, Jr.
ARTICLE VII
Directors. The Corporation shall be governed by a Board of Directors
consisting of no less than three (3) and no more than nine (9) directors.
Directors need not be stockholders in the Corporation but shall be elected by
the stockholders of the Corporation. The number of Directors constituting the
initial Board of directors is three (3) and the name and post office address of
the persons who shall serve as Directors until their successors are elected and
qualified are:
Kurtis D. Hughes
2325 Arbor Lane
Salt Lake City, Utah 84117
R. Kenneth Jarrell
1504 Browning Avenue
Salt Lake City, Utah 84105
Sharon Lundskog
<PAGE> 2
1168 Sunnyside Avenue
Salt Lake City, Utah 84102
ARTICLE VIII
Incorporators. The name and post office address of each incorporator
is:
Kurtis D. Hughes
2325 Arbor Lane
Salt Lake City, Utah 84117
R. Kenneth Jarrell
1504 Browning Avenue
Salt Lake City, Utah 84105
Sharon Lundskog
1168 Sunnyside Avenue
Salt Lake City, Utah 84102
ARTICLE IX
Preemptive Rights. There shall be no preemptive right to acquire
unissued and/or treasury shares of the stock of the Corporation.
ARTICLE X
Voting of Shares. Each outstanding share of common stock of the
Corporation shall be entitled to one vote on each matter submitting to a vote at
the meeting of the stockholders. Each stockholder shall be entitled to vote his
or its shares in person or by proxy, executed in writing by such stockholder, or
by his duly authorized attorney-in-fact. At each election of Directors, every
stockholder entitled to vote in such election shall have the right to vote in
person or by proxy the number of shares owned by him or it for as many persons
as there are directors to be elected and for whose election he or it has the
right to vote, but the shareholder shall have no right to accumulate his or its
votes with regard to such election.
ARTICLE XI
Declaration Of Partial Liquidating Dividends. The Board of Directors
shall have the authority to declare, in its discretion, any dividends permitted
by law including dividends in cash and property and shall, in addition, have
authority to declare partial liquidating dividends by the Corporation without
the consent or vote of the shareholders.
/s/
- -----------------------------------
/s/
- -----------------------------------
/s/
- -----------------------------------
STATE OF UTAH )
: SS
COUNTY OF SALT LAKE )
On the 6th day of February, 1984, personally appeared before me Kurtis
D. Hughes, R. Kenneth Jarrell and Sharon Lundskog and duly acknowledged to me
that they are persons who signed the foregoing instrument as incorporators and
that they have read the foregoing instrument and know the contents thereof and
that the same is true of their own knowledge except as to those matters upon
which they operate on information and belief and as to those matters believe
them to be true.
/s/
- -----------------------------------
NOTARY PUBLIC
<PAGE> 3
Residing in Salt Lake City, UT.
My Commission Expires
May 20, 1987
- -----------------------------------
<PAGE> 4
ARTICLES OF AMENDMENT
OF TECHNOMEDICAL PROPERTIES, INC.
1. The Present Name of this Corporation is. Technomedical
Properties, Inc.
2. The Articles of Incorporation of this Company shall be amended
as to Article I which shall now read as follows:
Name. The name of the corporation (hereinafter called "Corporation")
is American Professional Holding, Inc.
3. The aforementioned amendment was adopted by the shareholders on
July 30, 1993.
4. The number of shares of the Company that are outstanding is and was on
the date of the adoption of the amendment 1,250,000 shares and the number of
shares entitled to vote was 1,250,000 shares.
5. The number of shares that voted for the aforementioned amendment was
750,000 shares, with no shares voting against.
/s/ Kurtis D. Hughes
- ---------------------------------
Kurtis D. Hughes, President
/s/ Sharon Lundskog
- ---------------------------------
Sharon Lundskog, Secretary
[SEAL]
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
Personally appeared before me Kurtis D. Hughes and Sharon Lundskog,
President and Secretary, respectively, of Technomedical Properties, Inc., who
duly acknowledged that the foregoing statements are true and correct to the best
of their knowledge.
/s/ Melinda K. Orth
- ---------------------------------
Notary Public
My Commission Expires: 4/15/96
Residing In: Salt Lake City, Utah
[SEAL]
<PAGE> 1
Exhibit 3.10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of article 4.04 of the Texas Business
Corporation Act ("TBCA"), the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is American Med Services, Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the corporation on October 22, 1992 to change the name of
the corporation from American Med Services, Inc. to Ampro Medical Services, Inc.
The amendment alters or changes Article One of the original Articles of
Incorporation and the full text of the altered provision is as follows:
"ARTICLE ONE
"NAME
"The name of the corporation is Ampro Medical Services, Inc."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 1,000 of common stock; and the number of shares entitled to vote
thereon was 1,000 of common stock.
The designation and number of outstanding shares of each class entitled
to vote thereon as a class were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES VOTED
For Against
<S> <C> <C>
Common 1,000 0
------ ----- -----
</TABLE>
ARTICLE FOUR
The number of shares voted for such amendment was 1,000; and the number
of shares voted against such amendment was 0.
The holders of all the shares outstanding and entitled to vote on said
amendment have signed a consent in writing pursuant to Article 9.10 of the TBCA
adopting said amendment and any written notice required by Article 9.10 of the
TBCA has been given.
Dated as of October 22, 1992.
AMERICAN MED SERVICES, INC.
By: /s/ John Maguire
----------------------------------
John Maguire, President
<PAGE> 2
ARTICLES OF CORRECTION
The undersigned submits these Articles of Correction pursuant to Texas
Civil Statutes article 1302-7.01 to correct a document that is an inaccurate
record of the entity action.
ARTICLE ONE
The name of the entity is Ampro Medical Services, Inc.
ARTICLE TWO
The document to be corrected is the Articles of Amendment to the
Articles of Incorporation that was filed in the Office of the Secretary of State
on the 28th day of December, 1992 reflecting the vote of all the issued and
outstanding shares of stock.
ARTICLE THREE
The inaccuracy to be corrected is:
The number of shares entitled to vote should be 10,000 instead of 1,000
as indicated in the Articles of Amendment filed on December 28, 1992.
ARTICLE FOUR
As corrected, the inaccurate portions of the document read as follows:
"ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 10,000 of common stock; and the number of shares entitled to vote
thereon was 10,000 of common stock.
The designation and number of outstanding shares of each class entitled
to vote thereon as a class were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES VOTED
For Against
<S> <C> <C>
Common 10,000 0
------ ------ -----
</TABLE>
ARTICLE FOUR
The number of shares voted for such amendment was 10,000; and the
number of shares voted against such amendment was 0."
AMPRO MEDICAL SERVICES, INC.
By: /s/ John Maguire
-----------------------------
John Maguire
President
<PAGE> 1
Exhibit 3.11
Articles of Incorporation
(To be submitted in duplicate by an attorney or an incorporator)
HONORABLE JAMES C. KIRKPATRICK
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MO. 65101
The undersigned natural person(s) of the age of eighteen years or more
for the purpose of forming a corporation under The General and Business
Corporation Law of Missouri adopt the following Articles of Incorporation:
ARTICLE ONE
The name of the corporation is: Gamma Laboratories, Inc.
ARTICLE TWO
The address, including street and number, if any, of the corporation's
initial registered office in this state is: 106 South Second Street, P. O. Box
1, Poplar Bluff, Missouri 63901 and the name of its initial agent at such
address is: W. Robert Cope.
ARTICLE THREE
The aggregate number, class and par value, if any, of shares which the
corporation shall have authority to issue shall be:
30,000 shares of common stock having a par value of $1.00 per share
The preferences, qualifications, limitations, restrictions, and the
special or relative rights, including convertible rights, if any, in respect of
the shares of each class are as follows: No stock in the corporation shall be
sold by any shareholder without the shareholder first offering his stock for
sale to the other shareholders of the corporation on a proportionate basis.
ARTICLE FOUR
The extent, if any, to which the preemptive right of a shareholder to
acquire additional shares is limited or denied.
None
ARTICLE FIVE
The name and place of residence of each incorporator is as follows:
Name Street City
Robert W. Cope 29 Tomaro Trail Poplar Bluff,
Missouri 63901
ARTICLE SIX
(Designate which and complete the applicable paragraph)
[ ] The number of directors to constitute the first board of directors is
___________. Thereafter the number of directors shall be fixed by, or in the
manner provided in the bylaws. Any changes in the number will be reported to the
Secretary of State within thirty calendar days of such change.
or
[X] The number of directors to constitute the board of directors is three. (The
number of directors to constitute the board of directors must be stated herein
if there are to be less than three directors. The persons to constitute the
first board of directors may, but need not, be named).
<PAGE> 2
the persons to constitute the first board of directors are George C. McAnelly,
Jr., Mary McAnelly, and W. Robert Cope.
ARTICLE SEVEN
The duration of the corporation is perpetual.
ARTICLE EIGHT
The corporation is formed for the following purposes: To own, operate
and maintain a general laboratory business and testing facility and to buy, sell
and generally deal in supplies and equipment dealing with said laboratory and
testing facility.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed
this 15th day of December, 1981.
/s/ W. Robert Cope
----------------------------
W. ROBERT COPE
STATE OF MISSOURI
ss.
COUNTY OF BUTLER
I, Judy M. Church, a notary public, do hereby certify that on the 15th
day of December, 1981, personally appeared before me, W. Robert Cope (xxxxx,)
who being by me first duly sworn, (xxxxxx) declared that he is (xxxxxx) the
person(x) who signed the foregoing document as incorporator(x), and that the
statements therein contained are true.
/s/ Judy M. Church
----------------------------
JUDY M. CHURCH
Notary Public
My commission expires February 27, 1983.
<PAGE> 1
Exhibit 3.12 RESTATED CERTIFICATE OF INCORPORATION
OF
SIGNATURE HEALTH CARE CORPORATION
Originally Filed with the Secretary of State
of the State of Delaware
on October 13, 1987
Duly adopted in accordance with Section 245 of the
General Corporation Law of the State of Delaware
ARTICLE I
The name of the corporation is Signature Health Care
Corporation (the "Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE III
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,700,000 sh ares, consisting of
700,000 shares of Convertible Preferred Stock, .01 per value (the "Preferred
Stock"), and 1,000,000 shares of Common Stock, .01 per value (the "Common
Stock").
The designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof in respect of the Preferred Stock and the
Common Stock are as follows:
a. PREFERRED STOCK
i. Dividends. The holder of each share of Preferred Stock
shall be entitled to receive dividends on an as converted basis in an amount per
share equal to the amount per share received by the holders of the Common Stock.
All payments due under this Section A.1 to any holder of shares of Preferred
Stock shall be made to the nearest cent. No rights shall accrue to holders of
Preferred Stock by reason of the fact that dividends on such shares are not
declared in any prior period.
ii. Rights on Liquidation, Dissolution, Winding-Up. (i) In the
event of any liquidation, dissolution or winding-up of the affairs of the
Corporation (collectively, a "Liquidation"), the holders of shares of Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation legally available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be made to the holders of
any stock ranking on liquidation junior to the Preferred Stock (with respect to
rights on liquidation, dissolution or winding-up, the Preferred Stock shall rank
prior to the Common Stock) an amount per share equal to 2.86, plus an amount
equal to declared but unpaid dividends, if any, to the date of payment. If upon
any Liquidation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of the Preferred
Stock the full amounts to which they respectively shall be entitled, the holders
of shares of the Preferred Stock shall share ratably in any distribution of
assets according to the respective amounts which would be payable in respect of
the shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in
<PAGE> 2
full. In the event of any Liquidation, after payment shall have been made to the
holders of shares of Preferred Stock in the full amount to which they are
entitled as aforesaid, the holders of shares of Common Stock shall be entitled
to all remaining assets of the Corporation available for distribution to its
stockholders.
(ii) In the event _______ and simultaneously with the closing
of an Event of Sale (as hereinafter defined), the Corporation shall (unless
otherwise prevent by law) redeem all the shares of Preferred Stock then
outstanding for a cash amount per share of Preferred Stock redeemed equal to
$2.86 plus an amount equal to declared and unpaid dividends, if any, to the date
of payment (said redemption being referred to herein as a "Special Redemption").
The date upon which the Special Redemption shall occur is sometimes referred to
herein as the "Special Redemption Date." The Corporation shall cause notice of
such Special Redemption to be sent by first class certified mail, return receipt
requested, postage prepaid, to the holders of record of shares of Preferred
Stock at their respective addresses as the same shall appear on the books of the
Corporation. Such notice shall be mailed prior to or at the same time as any
notice of a stockholders meeting to be held for the purpose of voting on such
Event of Sale or as any request for consent in lieu of such meeting or, if not
such notice or consent is required, the notice of such Special Redemption shall
be mailed no later than 10 days prior to such Special Redemption Date, each
holder of record of shares of Preferred Stock to be redeemed on such Special
Redemption Date shall be entitled to receive the applicable Special Redemption
Price upon actual delivery to the Corporation or its agents of the certificates
representing the shares to be redeemed. Anything contained herein to the
contrary notwithstanding, the provision of this Section 2 with respect to the
redemption of all of the shares of Preferred Stock may be waived, at the option
of the holders of a majority of shares of the Preferred Stock by delivery of
written notice to the Corporation prior to the closing of any Event of Sale
waiving such redemption, in which event the Corporation shall not redeem any
shares of such series of Preferred Stock with respect to which redemption has
been waived. If upon any redemption the assets of the Corporation available for
redemption shall be insufficient to pay the holders of the shares of Preferred
Stock the full amounts to which they shall be entitled, the holders of shares of
Preferred Stock to be redeemed shall share ratably in any such redemption based
upon their respective ownership of outstanding shares of Preferred Stock. On and
after any Special Redemption Date, all rights in respect of the shares of
Preferred Stock to be redeemed, except the right to receive the applicable
Special Redemption Price as herein provided, shall cease and terminate (unless
default shall be made by the Corporation in the payment of the applicable
Special Redemption Price as herein provided, in which event such rights shall be
exercisable until such default is cured), and such shares shall no longer be
deemed to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation. For purposes of this Section 2, an
"Event of Sale" shall mean (A) the merger or consolidation of the Corporation
into or with another corporation,
<PAGE> 3
partnership, joint venture, trust or other entity or the merger or consolidation
of any other corporation into or with the Corporation (in which consolidation or
merger the shareholders of the Corporation receive distributions of cash or
securities as a result of such consolidation or merger in exchange for their
shares of capital stock of the Corporation), or (B) the sale or other
disposition of all or substantially all the assets of the Corporation or the
purchase or other acquisition of all or substantially all the assets of any
other corporation, partnership, joint venture, trust or other entity, unless,
upon consummation of such merger or consolidation or sale or purchase of assets,
the holders of voting securities of the Corporation immediately prior to such
transaction continue to own directly or indirectly not less than a majority of
the voting power of the surviving corporation.
iii. Redemption. (i) The Corporation shall (unless otherwise
prevented by law) redeem on each of the seventh, eighth and ninth anniversaries
of the Original Issuance Date at a redemption price per share equal to $4.30,
the lesser of (i) 1/3 of the shares of Preferred Stock outstanding on the
seventh anniversary of the Original Issuance Date or (ii) all of the share of
Preferred Stock then outstanding. The date on which the Corporation shall redeem
shares of Preferred Stock is hereinafter referred to as a "Redemption Date", the
total sum payable per share of Preferred Stock on the Redemption Date is
hereinafter referred to as the "Redemption Price", and the payment to be made on
the Redemption Date is hereinafter referred to as the "Redemption Payment".
(ii) On and after the Redemption Date (unless default shall be
made by the Corporation in the payment of the Redemption Price as hereinafter
provided, in which event such rights shall be exercisable until such default is
cured), all rights in respect to the shares of Preferred Stock to be redeemed,
except the right to receive the Redemption Price as hereinafter provided, shall
cease and terminate; and such shares shall no longer be deemed to be
outstanding, whether or not the certificates representing such shares have been
received by the Corporation.
(iii) Notice of redemption pursuant to this Section A.3 shall
be sent by first-class, certified mail, return receipt requested, postage
prepaid, to the holders of shares of Preferred Stock at their respective
addresses appearing on the books of the Corporation. Such notice shall be mailed
not less than 30 nor more than 60 days in advance of the Redemption Date, and
the holders of record of shares of Preferred Stock to be redeemed on such
Redemption Date shall be entitled to receive the Redemption Price upon actual
delivery to the Corporation or its agent of the certificate representing the
shares to be redeemed. If upon any redemption the assets of the Corporation
available for redemption shall be insufficient to pay the holders of the shares
of Preferred Stock the full amount to which they shall be entitled, the holders
of shares of Preferred Stock shall share ratably in any such redemption
according to the respective amounts which would be payable thereof if all
amounts payable on or with respect to such shares were paid in full.
<PAGE> 4
(iv) The Corporation shall not, and shall not permit any
subsidiary of the Corporation to, purchase or acquire any shares of Preferred
Stock otherwise than pursuant to the terms of this Section A.3 or pursuant to an
offer made on the same terms of to all holders of shares of Preferred Stock at
the time outstanding.
(v) Anything contained in this Section A.3 to the contrary
notwithstanding, the holders of shares of Preferred Stock shall have the right,
exercisable at any time up to the close of business on the Redemption Date
(unless default shall be made by the Corporation in the payment of the
Redemption Price as herein provided, in which event such right shall be
exercisable until such default is cured), to convert all or any part of such
shares requested by such holder to be redeemed as herein provided into shares of
Common Stock pursuant to Section A.5. If, and to the extent, any shares of
Preferred Stock so entitled to redemption are converted into shares of Common
Stock by the holders thereof prior to the close of business on the Redemption
Date, the total number of shares of Preferred Stock otherwise to be redeemed on
such Redemption Date shall be reduced by the number of shares of Preferred Stock
so converted.
iv. Voting. (i) In addition to the rights specified in Section
A.4(b) below and any other rights provided in the Corporation's By-laws or by
law, each share of Preferred Stock shall entitle the holder thereof to such
number of votes per share ash shall equal the number of shares of Common Stock
(including any fraction to one decimal place) into which each share of Preferred
Stock is then convertible, and shall further entitle the holder thereof to vote,
together with the holders of Common Stock as one class, on all matters as to
which holders of Common Stock shall be entitled to vote, in the same manner and
with the same effect as such holders of Common Stock.
(ii) (i) the Corporation shall not, without the affirmative
approval of the holders of shares representing at least 60% of the voting power
of the Preferred Stock then outstanding, acting separately as one class, given
by written consent in lieu of a meeting or by vote at a meeting called for such
purpose for which notice shall have been given to the holders of the Preferred
Stock, (A) sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets other than in the ordinary course
of its business, (B) purchase, lease or otherwise acquire all or substantially
all of the assets of another entity, (C) pay any dividend or make any
distribution with respect to any shares of its capital stock or, except as
required by Section B.2 hereof or any agreement with an employee providing for
the repurchase by the Corporation of such employee's capital stock of the
Corporation, make any payment on account of the purchase , redemption or other
retirement of any shares of its capital stock, or distribute to holders of
shares of Common Stock shares of the Corporation's capital stock (other than
Common Stock) or other securities of other entities, evidences of indebtedness
issued by the Corporation or other entities, or other assets or options or
rights (excluding options to purchase and rights to subscribe for shares of
Common Stock or the securities of the Corporation convertible into or
exchangeable for shares of Common Stock), (D)
<PAGE> 5
merge or consolidate with or into, or permit any subsidiary to merge or
consolidate with or into, any other corporation, corporations or other entity or
entities, (E) create any shares of capital stock which is senior to or on a
parity with the Preferred Stock, (F) in any manner alter or change the
designations, powers, preferences, rights, qualifications, limitations or
restrictions of the Preferred Stock, (G) take any action to cause any amendment,
alteration or repeal of any of the provisions of this Certificate of
Incorporation or the By-laws of the Corporation, (H) except for the issuance of
shares of capital stock or other securities constituting shares of Excluded
Stock (as defined in Section A.5(e)(ii) below), authorize, issue or agree to
issue any shares of the Corporation's capital stock or any security, right,
option or warrant convertible into, or exercisable or exchangeable for, shares
of the Corporation's capital stock or any debt security or capitalized lease
with an equity feature of the Corporation or (I) enter into a Related
Transaction (as defined in the Convertible Preferred Stock Purchase Agreement
(the "Purchase Agreement") dated on or about the Original Issuance Date, among
the Corporation and the other signatories thereto) involving more than $25,000,
individually or in the aggregate or on terms no less favorable than those
available at the same time from non-affiliated persons.
(ii) The Corporation shall not, without the affirmative
approval of the Board of Directors of the Corporation, including the Preferred
Representative (A) acquire, purchase, lease or control in any manner any health
care facility or (B) approve any salary or salary increase of any person
employed by the Corporation whose salary is in excess of $75,000 per annum,
including any consultants employed by the Company.
v. Conversion. (i) The holder of any shares of Preferred Stock
shall have the right, at any time or from time to time, to convert any or all of
such holder's shares of Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock as is equal to the quotient obtained by
dividing (A) $2.86 multiplied by the number of shares of Preferred Stock being
converted, by (B) the Preferred Conversion Price (as last adjusted and then in
effect) for the shares of Preferred Stock being converted, by surrender of the
certificates representing the shares of Preferred Stock to be converted in the
manner provided in Section A.5(b) below. The Preferred Conversion Price per
share at which shares of Common Stock shall be issuable upon conversion of
shares of Preferred Stock shall be $2.86; provided, however, that such Preferred
Conversion Price shall be subject to adjustment as set forth in Section A.5(e)
below.
(ii) The holder of any shares of Preferred Stock may exercise
the conversion right pursuant to Section A.5(a) above by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted, duly endorsed or assigned in blank or to the Corporation (if
required by it), accompanied by written notice stating that such holder elects
to convert such shares and stating the name or names (with address) in which the
certificate or certificates for
<PAGE> 6
the shares of Common Stock are to be issued. Such conversion shall be deemed to
have been effected on the date when the aforesaid delivery is made, and such
date is referred to herein as the "Conversion Date". As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written order
of such holder, at the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled and a check or cash in respect of any fractional interest in a
shares of Common Stock, as provided in Section A.5(d) below, payable with
respect to the shares of Preferred Stock so converted up to and including the
Conversion Date. The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a stockholder of
record on the applicable Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such holder shall be deemed
to have become a stockholder of record on the next succeeding date on which the
transfer books are open, but the Preferred Conversion Price shall be that in
effect on the Conversion Date. Upon conversion of only a portion of the number
of shares covered by a certificate representing shares of Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Preferred
Stock representing the unconverted converted portion of the certificate so
surrendered, which new certificate shall entitle the holder thereof to dividends
on the shares of Preferred Stock represented thereby to the same extent as if
the certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(iii) Upon the occurrence of an Event of Conversion (as
hereinafter defined), all shares of Preferred Stock then outstanding shall, by
virtue of, and simultaneously with the occurrence of the Event of Conversion and
without any action on the part of the holder thereof, be deemed automatically
converted into such whole number of fully paid and nonassessable shares of
Common Stock as is equal to the quotient obtained by dividing (A) $2.86
multiplied by the number of shares of Preferred Stock being converted by (B) the
Preferred Conversion Price (as last adjusted and then in effect) for the shares
of Preferred Stock being converted. As used herein, the term "Event of
Conversion" shall mean the consummation of an underwritten public offering on a
firm commitment basis of shares of Common Stock pursuant to the Securities Act
of 1933 at a net selling price per share of Common Stock (as constituted on the
date hereof) of not less than $8.58 and which results in aggregate gross cash
proceeds (prior to deduction of underwriters' commissions and expenses, if any)
to the Corporation equal to not less than $5,000,000.
(iv) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. If more than one share of Preferred
Stock shall be surrendered for conversion at any one time by the same holder,
the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the
<PAGE> 7
basis of the aggregate number of shares of Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Preferred Stock the Corporation shall
pay a cash adjustment in respect of such fractional interest in an amount equal
to the then Current Market Price (as hereinafter defined) of a share of Common
Stock multiplied by such fractional interest. Fractional interests shall not be
entitled to dividends, and the holders of fractional interests shall not be
entitled to any rights as stockholders of the Corporation in respect of such
fractional interest.
(v) The Preferred Conversion Price shall be subject to
adjustment from time to time as follows:
(i) If the Corporation shall at any time or from
time to time after the Original Issuance Date, issue any shares of Common Stock,
Preferred Stock or other securities convertible into or exchangeable or
exercisable for shares of Common Stock, in each case other than Excluded Stock
(as hereinafter defined), without consideration or for a consideration per share
less than the Preferred Conversion Price in effect immediately prior to the
issuance of such Common Stock, Preferred Stock or other security, the Preferred
Conversion Price in effect immediately prior to each such issuance shall
forthwith (except as provided in this clause(i)) be lowered to a price equal to
the quotient obtained by dividing
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock deemed to have been issued
pursuant to subdivision (C) of this clause (i) and to clause (ii) below
(including, but not limited to, the shares of Common Stock issuable upon
conversion of the Preferred Stock)) immediately prior to such issuance
multiplied by the Preferred Conversion Price in effect immediately prior to such
issuance, plus
(y) the consideration received by the Corporation
upon such issuance
(B) the total number of shares of Common Stock
outstanding (including any shares of Common Stock deemed to have been issued
pursuant to subdivision (C) of this clause (i) and to clause (ii) below
(including but not limited to, the shares of Common Stock issuable upon
conversion of the Preferred Stock)) immediately after issuance of such Common
Stock.
For the purposes of any adjustment of the Preferred Conversion Price pursuant to
this clause (i), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Corporation, irrespective of any
accounting treatment;
<PAGE> 8
provided, however, that such fair market value as determined by the Board of
Directors shall not exceed the aggregate Current Market Price of the shares of
Common Stock being issued.
(C) In the case of the issuance of (I) options to
purchase or rights to subscribe for Common Stock, (II) securities by their terms
convertible into or exchangeable for Common Stock or (III) options to purchase
or rights to subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (A) and (B) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration received by the Corporation for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (A) and (B) above;
(3) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchange for such convertible or exchangeable securities,
other than a change resulting from the antidilution provisions thereof, the
Preferred Conversion Price shall forthwith be readjusted to such Preferred
Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior to such
change been made upon the basis of such change; and
(4) on the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Preferred Conversion Price shall forthwith be readjusted to such Preferred
Conversion Price as would have been obtained had such options, rights,
securities or options or rights related to such securities not been issued.
(ii) "Excluded Stock" shall mean:
(A) Common Stock issued upon conversion of any shares
of Preferred Stock;
<PAGE> 9
(B) Common Stock issued to officers, employees or
directors of, or consultants to, the Corporation, pursuant to any agreement,
plan or arrangement approved by the Board of Directors of the Corporation,
options to purchase or rights to subscribe for such Common Stock, or securities
(other than the Preferred Stock) by their terms convertible into or exchangeable
for such Common Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities; and
(C) securities issued pursuant to the acquisition
of another corporation by the Corporation by merger, stock acquisition,
reorganization, purchase of substantially all of the assets or otherwise whereby
the Corporation owns at least 51% of the voting power of such other corporation
after such transaction.
(iii) If the number of shares of Common Stock
outstanding at any time after the Original Issuance Date is increased by a stock
dividend payable in shares of Common Stock, then, following the record date
fixed for the determination of holders of Common Stock entitled to receive such
stock dividends, subdivision or split-up, such Preferred Conversion Price shall
be appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of Preferred Stock shall be increased in proportion
to such increase in outstanding shares.
(iv) If, at any time after the Original Issuance
Date, the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock, the, following the record
date for such combination, the record date for such combination, the Preferred
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of each share of Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(v) In case, at any time after the Original Issuance
Date, of any capital reorganization, or any reclassification of the capital
stock of the Corporation (other than a change in par value or from par value or
as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into another
person (other than a consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any change in the Common
Stock) or of the sale or other disposition of all or substantially all the
properties and assets of the Corporation as an entirety to any other person,
each share of Preferred Stock shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be (unless, in the case of a
consolidation, merger, sale or other disposition, payment shall have been made
to the holders of all shares of Preferred Stock of the full amount to which they
shall have been entitled pursuant to Section A.2) convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
of the corporation resulting from such consolidation or surviving such merger or
to which such properties and assets shall have been sold or otherwise disposed
to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition)
<PAGE> 10
upon conversion of such share of Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section A.5 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(vi) All calculations under this paragraph (e) shall
be made to the nearest one-tenth of a cent ($.001) or to the nearest one-tenth
of a share, as the case may be.
(vii) For the purpose of any computation pursuant to
Section A.5(d) and (e) above, the current market price (the "Current Market
Price") at any date of one share of Common Stock shall be deemed to be the
average of the daily closing prices for the 30 consecutive business days ending
on the fifth business day before the day in question (as adjusted for any stock
dividend, split-up, combination or reclassification that took effect during such
30-business-day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading (or if the Common Stock is not at the
time listed or admitted for trading on any such exchange, then such price as
shall be equal to the last reported sale price, or if there is no such sale
price, the average of the last reported bid and asked prices, as reported by the
National Association of Securities Dealers Automated Quotations System (NASDAQ")
on such day, or if, on any day in question, the security shall not be quoted on
the NASDAQ, then such price shall be equal to the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc. or any
similar reputable quotation and reporting service, if such quotation is not
reported by the National Quotation Bureau, Inc.); provided, however, that if the
Common Stock is not traded in such manner that the quotations referred to in
this clause (vii) are available for the period required hereunder, the Current
Market Price shall be determined by a majority of the entire Board of Directors
of the Corporation.
(viii) In any case in which the provisions of this
Section A.5(e) shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may defer until
the occurrence of such event (i) issuing to the holder of any share of Preferred
Stock converted after such record date and before the occurrence of such event
the additional shares of capital stock issuable upon such event over and above
the shares of capital stock issuable upon such conversion before giving effect
to such adjustment and (ii) paying to such holder any amount in cash in lieu of
a fractional share of capital stock pursuant to Section A.5(d) above; provided,
however, that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event requiring such
adjustment.
(vi) Whenever the Preferred Conversion Price shall be
adjusted as provided in Section A.5(e) above, the Corporation shall
<PAGE> 11
forthwith file, at the office of the transfer agent for the Preferred Stock or
at such other place as may be designated by the Corporation, a statement, signed
by its President or Chief Financial Officer and by its Treasurer, showing in
detail the facts requiring such adjustment and the Preferred Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each holder of shares of Preferred Stock
at such holder's address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of Section A.5 (g) below.
(vii) In the event the Corporation shall propose to take any
action of the types described in clauses (i), (iii), (iv), (v) or (vi) of
Section A.5(e) above, the Corporation shall give notice to each holder of shares
of Preferred Stock, in the manner set forth in Section A.5(f) above, which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also set
forth such facts thereto as shall be reasonably necessary to indicate the effect
of such action (to the extent such effect may be known at the date of such
notice) on the Preferred Conversion Price and the number, kind or class of
shares or other securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion of shares of
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
(viii) The Corporation shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Preferred
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other then that of the
holder of the shares of Preferred Stock in respect of which such shares are
being issued.
(ix) The Corporation shall reserve, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of Preferred Stock
sufficient shares to provide for the conversion of all outstanding shares of
Preferred Stock.
(x) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Corporation, be validly issued, fully paid and nonassessable and free
from all taxes, liens or charges with respect thereto created or imposed by the
Corporation.
<PAGE> 12
vi. Definition. As used in this Article Third, the term
"Original Issuance Date" shall mean the date of original issuance of the first
share of Preferred Stock.
b. COMMON STOCK
i. Voting. Each holder of shares of Common Stock shall be
entitled to one vote for each share of Common Stock held on all matters as to
which holders of Common Stock shall be entitled to vote. The number of shares of
Common Stock may be increased or decreased by the affirmative vote of the
holders of all classes of stock entitled to vote thereon voting together as a
single class and not with the Common Stock voting separately as a single class.
ii. Other Rights. Each share of Common Stock issued and
outstanding s hall be identical in all respects one with the other, and no
dividends shall be paid on any shares of Common Stock unless the same dividend
is paid on all shares of Common Stock outstanding at the time of such payment
and unless all shares of Preferred Stock have been converted into shares of
Common Stock. Except for and subject to those rights expressly granted to the
holders of the Preferred Stock, or except as may be provided by the laws of the
State of Delaware, the holders of Common Stock s hall have exclusively all other
rights of stockholders including, but not by way of limitation, (i) the right to
receive dividends, when and as declared by the Board of Directors of the
Corporation out of assets lawfully available therefor, and (ii) in the event of
any distribution of assets upon a Liquidation or otherwise, the right to receive
ratably and equally all the assets and funds of the Corporation remaining after
the payment to the holders of sh ares of Preferred Stock of the specific amounts
which they are entitled to receive upon such Liquidation as herein provided.
ARTICLE IV
The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. The Corporation's registered agent at such address is The Corporation
Trust Company.
ARTICLE V
The business and affairs of the Corporation shall be managed
by the Board of Directors and the Directors need not be elected by written
ballot unless the By-Laws of the Corporation shall so provide. Meetings of the
Stockholders may be held within or without the State of Delaware, as the By-Laws
may provide. The books of the Corporation may be kept (subject to any provision
contained in the Delaware statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
ARTICLE VI
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
matter as the said court directs. If a majority in number representing 3/4 in
value of the creditors or class of creditors, and/or of the
<PAGE> 13
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE VII
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the Delaware Statute,
or (iv) for any transaction for which the director derived an improper personal
benefit. If the Delaware Statute is amended after the date of incorporation of
the Corporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware Statute, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SIGNATURE HEALTH CARE CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
SIGNATURE HEALTH CARE CORPORATION resolutions were duly adopted setting forth
the proposed Restated Certificate of Incorporation, declaring said restatement
to be advisable and calling a meeting of the stockholders of said corporation
for consideration thereof.
SECOND: That the stockholders of said corporation, acting by
unanimous written consent in accordance with Section 228 of the General
Corporation Law of the State of Delaware approved the restatement.
THIRD: That said restatement was duly adopted in accordance
with the provisions of Section 242 and 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, SIGNATURE HEALTH CARE CORPORATION has
caused this certificate to be signed by __________________________, its
President and attested by _____________________________, its Secretary, this 3rd
day of September, 1988.
SIGNATURE HEALTH CARE CORPORATION
/S/
--------------------------------
Its: President
ATTEST:
/S/
- --------------------------------
Secretary
<PAGE> 14
CERTIFICATE OF AMENDMENT
TO RESTATED CERTIFICATE OF INCORPORATION
OF
SIGNATURE HEALTH CARE CORPORATION
Filed with the Secretary of State
of the State of Delaware
on October 4, 1988
SIGNATURE HEALTH CARE CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Restate Certificate of Incorporation of the Corporation
originally filed with the Secretary of the State of Delaware on October 4, 1988
(the "Restated Certificate") be and hereby is amended by deleting Article III of
the Restated Certificate in its entirety and inserting the following in lieu
thereof as a new Article III:
ARTICLE III
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,900,000 shares, consisting of
700,000 shares of Convertible Preferred Stock, $.01 par value (the "Preferred
Stock"), and 1,200,000 shares of Common Stock, $.01 par value (the "Common
Stock").
The designations, powers, preferences, and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof in respect of the Preferred Stock and the Common Stock are
as follows:
A. PREFERRED STOCK
1. Dividends. The holder of each share of Preferred Stock shall be
entitled to receive dividends on an as converted basis in an amount per share
equal to the amount per share received by the holders of the Common Stock. All
payments due under this Section A.1 to any holder of shares of Preferred Stock
shall be made to the nearest cent. No rights shall accrue to holders of
Preferred Stock by reason of the fact that dividends on such shares are not
declared in any prior period.
2. Rights on Liquidation, Dissolution, Winding-Up. (a) In the event of
any liquidation, dissolution of winding-up of the affairs of the Corporation
(collectively, a "Liquidation"), the holders of shares of Preferred Stock then
outstanding shall be entitled to be paid out of the asserts of the Corporation
legally available for distribution to its stockholders, whether from capital,
surplus or earnings, before any payment shall be made to the holders of any
stock ranking on liquidation junior to the Preferred Stock (with respect to
rights on liquidation, dissolution or winding-up, the Preferred Stock shall rank
prior to the Common Stock) an amount per share equal to $2.86, plus an amount
equal to declared but unpaid dividends, if any, to the date of payment. If, upon
any Liquidation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of the Preferred
Stock the full amounts to which they respectively shall be entitled, the holders
of shares of the Preferred Stock shall share ratably in any distribution of
assets
<PAGE> 15
according to the respective amounts which would be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. In the event of any Liquidation, after
payment shall have been made to the holders of shares of Preferred Stock in the
full amount to which they are entitled as aforesaid, the holders of shares of
Common Stock shall be entitled to all remaining assets of the Corporation
available for distribution to its stockholders.
(b) In the event of and simultaneously with the closing of an Event of
Sale (as hereinafter defined), the Corporation shall (unless otherwise prevented
by law) redeem all the shares of Preferred Stock then outstanding for a cash
amount per share of Preferred Stock redeemed equal to $2.86 plus an amount equal
to declared and unpaid dividends, if any, to the date of payment (said
redemption being referred to herein as a "Special Redemption"). The date upon
which the Special Redemption shall occur is sometimes referred to herein as the
"Special Redemption Date." The Corporation shall cause notice of such Special
Redemption to be sent by first class certified mail, return receipt requested,
postage prepaid, to the holders of record of shares of Preferred Stock at their
respective addresses as the same shall appear on the books of the Corporation.
Such notice shall be mailed prior to or at the same time as any notice of a
stockholders meeting to be held for the purpose of voting on such Event of Sale
or as any request for consent in lieu of such meeting or, if no such notice or
consent is required, the notice of such Special Redemption shall be mailed o
later than 10 days prior to such Special Redemption Date. At any time on or
after the Special Redemption Date, each holder of record of shares of Preferred
Stock to be redeemed on such Special Redemption Date shall be entitled to
receive the applicable Special Redemption Price upon actual delivery to the
Corporation or its agents of the certificates representing the shares to be
redeemed. Anything contained herein to the contrary notwithstanding, the
provision of this Section 2 with respect to the redemption of all of the shares
of Preferred Stock may be waived, at the option of the holders of a majority of
shares of the Preferred Stock by delivery of written notice to the Corporation
prior to the closing of any Event of Sale waiving such redemption, in which
event the Corporation shall not redeem any shares of such series of Preferred
Stock with respect to which redemption has been waived. If upon any redemption
the assets of the Corporation available for redemption shall be insufficient to
pay the holders of the shares of Preferred Stock the full amounts to which they
shall be entitled, the holders of shares of Preferred Stock to be redeemed shall
share ratably in any such redemption based upon their respective ownership of
outstanding shares of Preferred Stock. On and after any Special Redemption Date,
all rights in respect of the shares of Preferred Stock to be redeemed, except
the right to receive the applicable Special Redemption Price as herein provided,
shall cease and terminate (unless default shall be made by the Corporation in
the payment of the applicable Special Redemption Price as herein provided, in
which event such rights shall be exercisable until such default is cured), and
such shares shall no longer be deemed to be outstanding, whether or not the
certificates
<PAGE> 16
representing such shares have been received by the Corporation. For purposes on
this Section 2, an "Event of Sale" shall mean (A) the merger or consolidation of
the Corporation into or with another corporation, partnership, joint venture,
trust or other entity or the merger or consolidation of any other corporation
into or with the Corporation (in which consolidation or merger the shareholders
of the Corporation receive distributions of cash or securities as a result of
such consolidation or merger in exchange for their shares of capital stock of
the Corporation), or (B) the sale or other disposition of all or substantially
all the assets of the Corporation or the purchase or other acquisition of all or
substantially all the assets of any other corporation, partnership, joint
venture, trust or other entity, unless, upon consummation of such merger or
consolidation or sale or purchase of assets, the holders of voting securities of
the Corporation immediately prior to such transaction continue to own directly
or indirectly not less than a majority of the voting power of the surviving
corporation.
3. Redemption. (a) The Corporation shall (unless otherwise prevented by
law) redeem on May 31, 1997 at a redemption price per share equal to $4.30, all
of the shares of Preferred Stock then outstanding. The date on which the
Corporation shall redeem shares of Preferred Stock is hereinafter referred to as
a "Redemption Date," the total sum payable per share of Preferred Stock on the
Redemption Date is hereinafter referred to as the "Redemption Price," and the
payment to be made on the Redemption Date is hereinafter referred to as the
"Redemption Payment."
(b) On and after the Redemption Date (unless default shall be
made by the Corporation in the payment of the Redemption Price as hereinafter
provided, in which event such rights shall be exercisable until such default is
cured), all rights in respect of the shares of Preferred Stock to be redeemed,
except the right to receive the Redemption Price as hereinafter provided, shall
cease and terminate; and such shares shall no longer be deemed to be
outstanding, whether or not the certificates representing such shares have been
received by the Corporation.
(c) Notice of redemption pursuant to this Section A.3 shall be
sent by first-class, certified mail, return receipt requested, postage prepaid,
to the holders of shares of Preferred Stock at their respective addresses
appearing on the books of the Corporation. Such notice shall be mailed not less
than 30 nor more than 60 days in advance of the Redemption Date, and the holders
of record of shares of Preferred Stock shall be entitled to receive the
Redemption Price upon actual delivery to the Corporation or its agent of the
certificate representing the shares to be redeemed. If upon any redemption the
assets of the Corporation available for redemption shall be insufficient to pay
the holders of the shares of Preferred Stock the full amount to which they shall
be entitled, the holders of shares of Preferred Stock shall share ratably in any
such redemption according to the respective amounts which would be payable
thereof if all amounts payable on or with respect to such shares were paid in
full.
(d) The Corporation shall not, and shall not permit any
subsidiary of the Corporation to, purchase or acquire any shares of Preferred
Stock otherwise than pursuant to the terms of this
<PAGE> 17
Section A.3 or pursuant to an offer made on the same terms to all holders of
shares of Preferred Stock at the time outstanding.
(e) Anything contained in this Section A.3 to the contrary
notwithstanding, the holders of shares of Preferred Stock shall have the right,
exercisable at any time up to the close of business on the Redemption Date
(unless default shall be made by the Corporation in the payment of the
Redemption Price as herein provided, in which event such right shall be
exercisable until such default is cured), to convert all or any part of such
shares requested by such holder to be redeemed as herein provided into shares of
Common Stock pursuant to Section A.5. If, and to the extent, any shares of
Preferred Stock so entitled to redemption are converted into shares of Common
Stock by the holders thereof prior to the close of business on the Redemption
Date, the total number of shares of Preferred Stock otherwise to be redeemed on
such Redemption Date shall be reduced by the number of shares of Preferred Stock
so converted.
4. Voting. (a) In addition to the rights specified in Sections A.4(b)
below and any other rights provided in the Corporation's By-laws or by law, each
share of Preferred Stock shall entitle the holder thereof to such number of
votes per share as shall equal the number of shares of Common Stock (including
any fraction to one decimal place) into which each share of Preferred Stock is
then convertible, and shall further entitle the holder thereof to vote, together
with the holders of Common Stock as one class, on all matters as to which
holders of Common Stock shall be entitled to vote, in the same manner and with
the same effect as such holders of Common Stock.
(b) (i) The Corporation shall not, without the affirmative
approval of the holders of shares representing at least 60% of the voting power
of the Preferred Stock then outstanding, acting separately as one class, given
by written consent in lieu of a meeting or by vote at a meeting called for such
purpose for which notice shall have been given to the holders of the Preferred
Stock, (A) sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets other than in the ordinary course
of its business, (B) purchase, lease or otherwise acquire all or substantially
all of the assets of another entity, (C) pay any dividend or make any
distribution with respect to any shares of its capital stock or, except as
required by Section B.2 hereof or any agreement with an employee providing for
the repurchase by the Corporation of such employee's capital stock of the
Corporation, make any payment on account of the purchase, redemption or other
retirement of any shares of its capital stock, or distribute to holders of
shares of Common Stock shares of the Corporation's capital stock (other than
Common Stock) or other securities of other entities, evidences of indebtedness
issued by the Corporation or other entities, or other assets or options or
rights (excluding options to purchase and rights to subscribe for shares of
Common Stock or the securities of the Corporation convertible into or
exchangeable for shares of Common Stock), (D) merge or consolidate with or into,
or permit any subsidiary to merge or consolidate with or into, any other
corporation, corporations or other entity or entities, (E) create any shares of
<PAGE> 18
capital stock which are senior to or on a parity with the Preferred Stock, (F)
in any manner alter or change the designations, powers, preferences, rights,
qualifications, limitations or restrictions of the Preferred Stock, (G) take any
action to cause any amendment, alteration or repeal of any of the provisions of
this Certificate of Incorporation or the By-laws of the Corporation, (H) except
for the issuance of shares of capital stock or other securities constituting
shares of Excluded Stock (as defined in Section A.5(e)(ii) below), authorize,
issue or agree to issue or agree to issue any shares of the Corporation's
capital stock or any security, right, option or warrant convertible into, or
exercisable or exchangeable for, shares of the Corporation's capital stock or
any debt security or capitalized lease with an equity feature of the Corporation
or (I) enter into a Related Transaction (as defined in the Convertible Preferred
Stock Purchase Agreement (the "Purchase Agreement") dated on or about the
Original Issuance Date, among the Corporation and the other signatories thereto)
involving more than $25,000, individually or in the aggregate or on terms no
less favorable than those available at the same time from non-affiliated
persons.
(ii) The Corporation shall not, without the
affirmative approval of the Board of Directors of the Corporation, including the
Preferred Representative (A) acquire, purchase, lease or control in any manner
any health care facility or (B) approve any salary or salary increase of any
person employed by the Corporation whose salary is in excess of $75,000 per
annum, including any consultants employed by the Company.
5. Conversion. (a) The holder of any shares of Preferred Stock shall
have the right, at any time or from time to time, to convert any or all of such
holder's share or Preferred Stock into such number of fully paid nonassessable
shares of Common Stock as is equal to the quotient obtained by dividing (A)
$2.86 multiplied by the number of shares of Preferred Stock being converted, by
(B) the Preferred Conversion Price (as last adjusted and then in effect) for the
shares of Preferred Stock being converted, by surrender of the certificates
representing the shares of Preferred Stock to be converted in the manner
provided in Section A.5(b) below. The Preferred Conversion Price per share at
which shares of Common Stock shall be issuable upon conversion of shares of
Preferred Stock shall be $2.86; provided, however, that such Preferred
Conversion Price shall be subject to adjustment as set forth in Section A.5(e)
below.
(b) The holder of any shares of Preferred Stock may exercise
the conversion right pursuant to Section A.5(a) above by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted, duly endorsed or assigned in blank to the Corporation (if required
by it), accompanied by written notice stating that such holder elects to convert
such shares and stating the name or names (with address) in which the
certificate or certificates for the shares of Common Stock are to be issued.
Such conversion shall be deemed to have been effected on the date when the
aforesaid
<PAGE> 19
delivery is made, and such date is referred to herein as the "Conversion Date."
As promptly as practicable thereafter, the Corporation shall issue and deliver
to or upon the written order of such holder, at the place designated by such
holder, a certificate or certificates for the number of full shares of Common
Stock to which such holder is entitled and a check or cash in respect of any
fractional interest in a share of Common Stock, as provided in Section A.5(d)
below, payable with respect to the shares of Preferred Stock so converted up to
and including the Conversion Date. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become a
stockholder of record on the applicable Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such holder
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Preferred Conversion Price
shall be that in effect on the Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate representing shares of
Preferred Stock surrendered fore conversion, the Corporation shall issue and
deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new certificate
covering the number of shares of Preferred Stock representing the unconverted
portion of the certificate so surrendered which new certificate shall entitle
the holder thereof to dividends on the shares of Preferred Stock represented
thereby to the same extent as if the certificate theretofore covering such
unconverted shares had not been surrendered for conversion.
(c) Upon the occurrence of an Event of Conversion (as
hereinafter defined), all shares of Preferred Stock then outstanding shall, by
virtue of, and simultaneously with the occurrence of the Event of Conversion and
without any action on the part of the holder thereof, be deemed automatically
converted into such whole number of fully paid and nonassessable shares of
Common Stock as is equal to the quotient obtained by dividing (A) $2.86
multiplied by the number of shares of Preferred Stock being converted by (B) the
Preferred Conversion (as last adjusted and then effect) for the shares of
Preferred Stock being converted. As used herein, the term "Event of Conversion"
shall mean the consummation of an underwritten public offering on a firm
commitment basis of shares of Common Stock pursuant to the Securities Act of
1933 at a net selling price per share of Common Stock (as constituted on the
date hereof) of not less than $8.58 and which results in aggregate gross cash
proceeds (prior to deduction of underwriters' commissions and expense, if any)
to the Corporation equal to not less than $5,000,000.
(d) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. If more than one share of Preferred
Stock shall be surrendered for conversion at any one time by the same holder,
the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock which would
otherwise be issuable upon conversion of any shares of
<PAGE> 20
Preferred Stock the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the then Current Market Price (as
hereinafter defined) of a share of Common Stock multiplied by such fractional
interest. Fractional interests shall not be entitled to dividends, and the
holders of fractional interests shall not be entitled to any rights as
stockholders of the Corporation in respect of such fractional interest.
(e) The Preferred Conversion Price shall be subject to
adjustment from time to time as follows:
(i) If the Corporation shall at any time or from time
to time after the Original Issuance Date, issue any shares of Common Stock or
other securities convertible into or exchangeable or exercisable for shares of
Common Stock, in each case other than Excluded Stock (as hereinafter defined),
without consideration or for a consideration per share less than the Preferred
Conversion Price in effect immediately prior to the issuance of such Common
Stock, Preferred Stock or other security, the Preferred Conversion Price in
effect immediately prior to each such issuance shall forthwith (except as
provided in this clause (i)) be lowered to a price equal to the quotient
obtained by dividing
(A) an amount equal to the sum of
(x) the total number of shares of Common
Stock outstanding (including any shares of Common Stock deemed to have been
issued pursuant to subdivision (C) of this clause (i) and to clause (ii) below
(including, but not limited to, the shares of Common Stock issuable upon
conversion of the Preferred Stock)) immediately prior to such issuance
multiplied by the Preferred Conversion Price in effect immediately prior to such
issuance, plus
(y) the consideration received by the
Corporation upon such issuance,
(B) The total number of shares of Common Stock
outstanding (including any shares of Common Stock deemed to have been issued
pursuant to subdivision (C) of this clause (i) and to clause (ii) below
(including, but not limited to, the shares of Common Stock issuable upon
conversion of the Preferred Stock)) immediately after issuance of such Common
Stock. For purposes of any adjustment of the Preferred Conversion Price pursuant
to this clause (i), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting therefrom any discounts, commissions or other expense allowed,
paid or incurred by the Corporation for any underwriting or otherwise in
connection with the issuance of sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Corporation, irrespective of any
accounting treatment; provided, however, that such fair market value as
determined by the Board of Directors shall not exceed the aggregate Current
Market Price of the shares of Common Stock being issued.
<PAGE> 21
(C) In the case of the issuance of (I) options to
purchase or rights to subscribe for Common Stock, (II) securities by their terms
convertible into or exchangeable for Common Stock or (III) options to purchase
or rights to subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (A) and (B)
above), if any, received by the Corporation upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(2) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
Corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subdivisions (A) and (B) above);
(3) on any change or in the number of shares
or exercise price of Common Stock deliverable upon exercise of any such options
or rights or conversions of or exchange for such convertible or exchangeable
securities, other than a change resulting from the antidilution provisions
thereof, the Preferred Conversion Price shall forthwith be readjusted to such
Preferred Conversion Price as would have obtained had the adjustment made upon
the issuance of such options, rights or securities not converted prior to such
change been made upon the basis of such change; and
(4) on the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Preferred Conversion Price shall forthwith be readjusted to such
Preferred Conversion Price as would have been obtained had such options, rights,
securities or options or rights related to such securities not been issued.
(ii) "Excluded Stock" shall mean:
(A) Common Stock issued upon conversion of
any shares of Preferred Stock;
(B) Common Stock issued to officers,
employees or directors of, or consultants to, the Corporation, pursuant to any
agreement, plan or arrangement approved by the Board of Directors of the
Corporation, options to purchase or rights to
<PAGE> 22
subscribe for such Common Stock, or securities (other than the Preferred Stock)
by their terms convertible into or exchangeable for such Common Stock, or
options to purchase or rights to subscribe for such convertible or exchangeable
securities; and
(C) securities issues pursuant to the
acquisition of another corporation by the Corporation by merger, stock
acquisition, reorganization, purchase or substantially all of the assets or
otherwise whereby the Corporation owns at least 51% of the voting power of such
other corporation after such transaction.
(iii) If the number of shares of Common
Stock outstanding at any time after the Original Issuance Date is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, such Preferred Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Preferred Stock shall be increased in proportion to
such increase in outstanding shares.
(iv) If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Preferred Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(v) In case, at any time after the Original
Issuance Date, of any capital reorganization, or any reclassification of the
capital stock of the Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another person (other
than a consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the Common Stock) or of
the sale or other disposition of all or substantially all the properties and
assets of the Corporation as an entirety to any other person, each share of
Preferred Stock shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be (unless, in the case of a
consolidation, merger, sale or other disposition, payment shall have been made
to the holders of all shares of Preferred Stock of the full amount to which they
shall have been entitled pursuant to Section A.2.) convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
of the corporation resulting from such consolidation or surviving such merger or
to which such properties and assets shall have been sold or otherwise disposed
to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition) upon conversion of such share
of Preferred Stock would have been
<PAGE> 23
entitled upon such reorganization, reclassification, consolidation, merger, sale
or other disposition. The provisions of this Section A.5. shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers, sales
or other disposition.
(vi) All calculations under this paragraph
(e) shall be made to the nearest one-tenth of a cent ($.001) or to the nearest
one-tenth of a share, as the case may be.
(vii) For the purpose of any computation
pursuant to Section A.5(d) and (e) above, the current market price (the "Current
Market Price") at any date of one share of Common Stock shall be deemed to be
the average of the daily closing prices for the 30 consecutive business days
ending on the fifth business day before the day in question (as adjusted for any
stock dividend, split-up, combination or reclassification that took effect
during such 30-business-day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the last reported sale price, or if there is no such sale
price, the average of the last reported bid and asked prices, as reported by the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") on such day, or if on any day in question, the security shall not be
quoted on the NASDAQ, then such price shall be equal to the last reported bid
and asked prices on such day as reported by the National Quotation Bureau, Inc.
or any similar reputable quotation and reporting service, if such quotation is
not reported by the National Quotation Bureau, Inc.); provided, however, that if
the Common Stock is not traded in such manner that the quotations referred to in
this clause (vii) are available for the period required hereunder, the Current
Market Price shall be determined by a majority of the entire Board of Directors
of the Corporation.
(viii) If any case in which the provisions
of this Section A.5(e) shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may defer until
the occurrence of such event (i) issuing to the holder of any share of Preferred
Stock converted after such record date before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (ii)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section A.5(d) above; provided, however, that the
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such adjustment.
(f) Whenever the Preferred Conversion Price shall be adjusted
as provided in Section A.5(e) above, the Corporation shall
<PAGE> 24
forthwith file, at the office of the transfer agent for the Preferred Stock or
at such other place as may be designated by the Corporation, a statement, signed
by its President or Chief Financial Officer and by its Treasurer, showing in
detail the facts requiring such adjustment and the Preferred Conversion Price
that shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first-class, certified mail, return
receipt requested, postage prepaid, to each holder of shares of Preferred Stock
at such holder's address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be included as part of a
notice required to be mailed under the provisions of Section A.5(g) below.
(g) In the event the Corporation shall propose to take any
action of the types described in classes (i), (iii), (iv), (v) or (vi) of
Section A.5(e) above, the Corporation shall give notice to each holder of such
shares of Preferred Stock, in the manner set forth in Section A.5(f) above,
which notice shall specify the record date, if any, with respect to any such
action and the date on which such action is to take place. Such notice shall
also set forth such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Preferred Conversion Price and the number, kind
of class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
shares of Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 10 days prior to
the date so fixed, and in case of all other action, such notice shall be given
at least 15 days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
any such action.
(h) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Preferred
Stock; provided, however, that the Corporation shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
holder of the shares of Preferred Stock in respect of which such shares are
being issued.
(i) The Corporation shall reserve, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of Preferred Stock
sufficient shares to provide for the conversion of all outstanding shares of
Preferred Stock.
(j) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Corporation, be validly issued, fully paid and nonassessable and free
from all taxes, liens or charges with respect thereto created or imposed by the
Corporation.
<PAGE> 25
6. Definition. As used in this Article III, the term "Original Issuance
Date" shall mean the date of original issuance of the first share of Preferred
Stock.
B. COMMON STOCK.
1. Voting. Each holder of shares of Common Stock shall be entitled to
one vote for each share of Common Stock held on all matters as to which holders
of Common Stock shall be entitled to vote. The number of shares of Common Stock
may be increased or decreased by the affirmative vote of the holders of all
classes of stock entitled to vote thereon voting together as a single class and
not with the Common Stock voting separately as a single class.
2. Other Rights. Each share of Common Stock issued and outstanding
shall be identical in all respects one with the other, and no dividends shall be
paid on any shares of Common Stock unless the same dividend is paid on all
shares of (i) Common Stock and (ii) Preferred Stock outstanding at the time of
such payment, said shares of Preferred Stock being entitled to receive dividends
on an as converted basis under Section A.1 of this Article III. Except for and
subject to those rights expressly granted to the holders of the Preferred Stock,
or except as may be provided by the laws of the State of Delaware, the holders
of Common Stock shall have exclusively all other rights of stockholders
including, but not by way of limitation, (i) the right to receive dividends,
when and as declared by the Board of Directors of the Corporation out of assets
lawfully available therefor, and (ii) in the event of any distribution of assets
upon a Liquidation or otherwise, the right to receive ratably and equally all
the assets and funds of the Corporation remaining after the payment to the
holders of shares of Preferred Stock of the specific amounts which the holders
of shares of Preferred Stock of the specific amounts which they are entitled to
receive upon such Liquidation as herein provided.
SECOND: That the aforesaid amendment was duly adopted in accordance
with the provisions of Sections 141(f), 242 and 228 of the General Corporation
Law of the State of Delaware.
THIRD: That the capital of the Corporation will not be
reduced under or by reason of the aforesaid amendment.
IN WITNESS WHEREOF, SIGNATURE HEALTH CARE CORPORATION has caused this
certificate to be signed by its President and attested by its Secretary as of
this 23rd day of April, 1992.
SIGNATURE HEALTH CARE CORPORATION
By /s/
---------------------------------
Its President
ATTEST:
/s/
- ---------------------------------
<PAGE> 1
Exhibit 3.13
ARTICLES OF INCORPORATION
OF
ASBURY CIRCLE, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Asbury Circle, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code, as amended. The corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2010
46th Avenue, Suite B-1, Greeley, Colorado 80634.
The name of its registered agent at such address is David Kremser.
ARTICLE IX
<PAGE> 2
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
(iii) acts specified in Section 7-5-114 of the Colorado Corporation Code; or
(iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as it he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be
2
<PAGE> 3
finally adjudged in such action, suit or proceeding to be liable for negligence
or misconduct; or in the event of a settlement of any such action, suit or
proceeding, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the corporation is advised by
counsel that the person to be indemnified did not commit a breach of duty. The
foregoing right of indemnification shall not be exclusive of other rights to
which he may be entitled under applicable state statute.
ARTICLE XI
INITIAL DIRECTORS
The number of directors of the corporation shall not be less than three
unless there are fewer than three shareholders of the corporation in which event
the number of directors may equal the number of shareholders. The initial
director of the corporation shall be David Kremser, 2010 46th Avenue, Suite B-1,
Greeley, Colorado 80634.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
David Kremser 2010 46th Avenue, Suite B-1
Greeley, Colorado 80634
DATED at Greeley, Colorado this 31st day of August, 1989.
/s/ David Kremser
------------------------
STATE OF COLORADO )
)ss
COUNTY OF WELD )
I, Stephanie L. Orlofsky, Notary Public hereby certify that on the
31st day of August, 1989, personally appeared before me David Kremser, who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 31st day
of August, 1989.
My commission expires: 10/12/1992
/s/ Stephanie L. Orlofsky
-------------------------
[SEAL] Notary Public
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Asbury Circle, Inc.
SECOND: The following Amendment to the Articles of Incorporation was
adopted on March 15, 1993 by unanimous vote of the shareholder.
ARTICLE I OF THE ARTICLES OF INCORPORATION ARE HEREBY
AMENDED TO READ AS FOLLOWS:
NAME OF CORPORATION
The name of the Corporation is Brookshire House, Inc.
ASBURY CIRCLE, INC.
/s/ David Kremser
- ------------------------
President
/s/
- ------------------------
Secretary
3
<PAGE> 1
Exhibit 3.14
ARTICLES OF INCORPORATION
OF
CHRISTOPHER NURSING CENTER, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Christopher Nursing Center, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code, as amended. The corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2010
46th Avenue, Suite B-1, Greeley, Colorado 80634.
The name of its registered agent at such address is David Kremser.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation Code;
or (iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
<PAGE> 3
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYERS AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employer or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any option, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. The foregoing right of indemnification shall
not be exclusive of other rights to which he may be entitled under applicable
state statute.
ARTICLE XI
INITIAL DIRECTORS
The number of directors of the corporation shall not be less than three
unless there are fewer than three shareholders of the corporation in which event
the number of directors may equal the number of shareholders. The initial
director of the corporation shall be David Kremser, 2010 46th Avenue, Suite B-1,
Greeley, Colorado 80634.
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
---- -------
David Kremser 2010 46th Avenue, Suite B-1
Greeley, Colorado 80634
DATED at Greeley, Colorado this 31st day of August, 1989.
/s/ David Kremser
--------------------
STATE OF COLORADO )
)ss.
COUNTY OF WELD )
I, Stephanie L. Orlofsky, Notary Public hereby certify that on the
31st day of August, 1989, personally appeared before me David Kremser, who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 31st day
of August, 1989.
My commission expires: 10/12/1992.
/s/ Stephanie L. Orlofsky
-------------------------
Notary Public
[seal]
<PAGE> 1
Exhibit 3.15
ARTICLES OF INCORPORATION
OF
VALLEY HI, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Valley Hi, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code, as amended. The corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2010
46th Avenue, Suite B-1, Greeley, Colorado 80634.
<PAGE> 2
The name of its registered agent at such address is David Kremser.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation Code;
or (iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
<PAGE> 3
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. The foregoing right of indemnification shall
not be exclusive of other rights to which he may be entitled under applicable
state statute.
ARTICLE XI
INITIAL DIRECTORS
The number of directors of the corporation shall not be less than three
unless there are fewer than three shareholders of the corporation in which event
the number of directors may equal the number of shareholders. The initial
director of the corporation shall be David Kremser, 2010 46th Avenue, Suite B-1,
Greeley, Colorado 80634.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
---- -------
David Kremser 2010 46th Avenue, Suite B-1
Greeley, Colorado 80634
DATED at Greeley, Colorado this 31st day of August, 1989.
/s/ David Kremser
--------------------
STATE OF COLORADO)
)ss
COUNTY OF WELD )
I, Stephanie L. Orlofsky, Notary Public hereby certify that on the
31st Day of August, 1989, personally appeared before me David Kremser, who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 31st day
of August, 1989.
My commission expires: 10/12/92.
Stephanie L. Orlofsky
---------------------
Notary Public
[SEAL]
<PAGE> 4
<PAGE> 5
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Valley Hi, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on October 19, 1990 by unanimous vote of the shareholder:
ARTICLE I of the Articles of Incorporation are hereby amended as
follows:
NAME OF CORPORATION
The name of the corporation is Amberwood Court, Inc.
VALLEY HI, INC.
/s/
President
/s/
Secretary
<PAGE> 1
Exhibit 3.16
ARTICLES OF INCORPORATION
OF
THE ARBORS HEALTH CARE CENTER, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day associated ourselves
together for the purpose of forming a corporation under and pursuant to the laws
of the State of Arizona, and for that purpose hereby adopt the following
Articles of Incorporation:
ARTICLE I
The name of the corporation is THE ARBORS HEALTH CARE CENTER,
INC.
ARTICLE II
The purpose for which this corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time.
ARTICLE III
The corporation initially intends to conduct the business of
operating a nursing home.
ARTICLE IV
The corporation shall have the authority to issue ONE HUNDRED
THOUSAND (100,000) shares of common stock at One ($1.00) Dollar par value.
The capital stock of this corporation shall be paid in at such
time or times, as the Board of Directors may designate, in cash, real or
personal property, services, leases, options to purchase, or any other valuable
rights or thing for the uses and purposes of this corporation and all shares of
the capital stock when issued in exchange therefor, shall thereupon and thereby
become fully paid, the same as though paid for in cash at par, and shall be
nonassessable forever. The judgment of the Directors, honestly exercised as to
the value of any real or personal property, services, leases, options to
purchase, or any other valuable thing or right acquired in exchange for capital
stock, shall be conclusive.
ARTICLE V
The shareholders of the corporation shall have pre-emptive
rights as to any new or existing classes of stock issued by the corporation.
<PAGE> 2
ARTICLE VI
The Board of Directors of the corporation may, from time to
time, cause the corporation to repurchase its own shares to the extent of the
unreserved and unrestricted earned and capital surplus of the corporation.
ARTICLE VII
Subject to limitation imposed by law, the Board of Directors
of the corporation may, from time to time, distribute on a pro rata basis to its
shareholders out of capital surplus of the corporation a portion of its assets,
in cash or property.
ARTICLE VIII
The affairs of the corporation shall be governed by a Board of
Directors elected by the Shareholders and represented by Officers elected by the
Board of Directors. Further, the corporation need have two (2) Officers and one
(1) Director. Said Director or Directors shall be elected annually by the
stockholders at each year's annual meeting. Any Director or Directors shall hold
office until their successors are elected and have qualified. Until the first
election of a Director or Directors, and until their successors are elected and
have qualified, the following named persons shall have as Directors of this
corporation, to wit:
John Filkoski David A. Kremser
2105 Clubhouse Drive 2105 Clubhouse Drive
Greeley, Colorado 80634 Greeley, Colorado 80634
ARTICLE IX
No Directors of the corporation shall be personally liable to
the corporation or its shareholders for monetary damages for breach of fiduciary
duty as a Director, except for liability for any of the following:
a) Any breach of the directors' duty of loyalty to the
corporation or its shareholders.
b) Acts or omissions which are not in good faith or
which involve intentional misconduct or a knowing
violation of law.
c) Authorizing the unlawful payment of a dividend or
other distribution of the corporation's capital stock
or the unlawful purchase of its capital stock.
d) Any transaction from which the Director derived an
improper personal benefit.
2
<PAGE> 3
e) A violation of Arizona Revised Statutes Section
10-041.
Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of the corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.
ARTICLE X
The corporation shall indemnify any person who incurs any
expense by reason of the fact he or she is or was an officer, director,
employee, or agent of the corporation. This indemnification shall be mandatory
in all circumstances in which indemnification is permitted by law.
ARTICLE XI
The private property of the Shareholders, Officers and
Directors of the corporation shall be forever exempt from all corporate debts
and liabilities of any kind whatsoever of the corporation.
ARTICLE XII
The name and address of the initial statutory agent of the
corporation is William C. Wulfers, Jr. whose address is:
WILLIAM C. WULFERS, JR., P.C.
William C. Wulfers, Jr.
6902 E. First Street
Scottsdale, Arizona 85251
IN WITNESS WHEREOF, we the undersigned have hereunto signed
our names this 29th day of October, 1990.
/s/ /s/
John Filkoski, Incorporator David A. Kremser, Incorporator
2105 Clubhouse Drive 2105 Clubhouse Drive
Greeley, Colorado 80634 Greeley, Colorado 80634
3
<PAGE> 1
Exhibit 3.17
ARTICLES OF INCORPORATION
OF
LOS ARCOS, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Los Arcos, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code, as amended. The corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2010
46th Avenue, Suite B-1, Greeley, Colorado 80634.
The name of its registered agent at such address is David Kremser.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation Code;
or (iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
<PAGE> 3
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYERS AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employer or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any option, suit or proceeding in which he may be involved or
which he may be made a party by reason of his being or having been a director,
officer, employee or agent of the corporation, or at its request, of any other
corporation of which it is a shareholder or creditor and from which he is not
entitled to be indemnified (whether or not he continues to be a director or
officer at the time of imposing or incurring such expenses), except in respect
of matters as to which he shall be finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. The foregoing right of indemnification shall
not be exclusive of other rights to which he may be entitled under applicable
state statute.
ARTICLE XI
INITIAL DIRECTORS
The number of directors of the corporation shall not be less than three
unless there are fewer than three shareholders of the corporation in which event
the number of directors may equal the number of shareholders. The initial
director of the corporation shall be David Kremser, 2010 46th Avenue, Suite B-1,
Greeley, Colorado 80634.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
---- -------
David Kremser 2010 46th Avenue, Suite B-1
Greeley, Colorado 80634
<PAGE> 4
DATED at Greeley, Colorado this 31st day of August, 1989.
/s/ David Kremser
-----------------
STATE OF COLORADO )
)ss.
COUNTY OF WELD )
I, Stephanie L. Orlofsky, Notary Public hereby certify that on the
31st day of August, 1989, personally appeared before me David Kremser, who
being by me first duly sworn, declared that he is the person who signed the
foregoing document as incorporator, and that the statements therein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 31st day
of August, 1989.
My commission expires: 10/12/1992.
/s/ Stephanie L. Orlofsky
-------------------------
Notary Public
[seal]
<PAGE> 1
Exhibit 3.18
ARTICLES OF INCORPORATION
OF
SIGNATURE HEALTH CARE OF CALIFORNIA CORPORATION
The undersigned, a natural person of the age of
eighteen years or more, acting as incorporator of this corporation under the
Colorado Corporation Act, adopts the following Articles of Incorporation for
this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Signature Health Care of
California Corporation.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
Section 3.1 Real Property and Business Enterprise. To purchase, lease
or in any manner to hold, own, improve and develop for any and all purposes and
to sell, convey, lease, mortgage or in any manner dispose of or deal with lands
and real property and any estate or interest therein, to contract, acquire by
purchase, lease or otherwise own, operate, manage, supervise and conduct and to
sell, lease, mortgage or otherwise dispose of hotels, apartments, apartment
houses, inns, lodging houses, garages and buildings, structures, and properties
of all kinds, to engage in, conduct and carry on in any and all branches thereof
the business or businesses of hotel keepers, innkeepers and garage keepers, and
to own, operate, manage, supervise and contract to grant concessions, rights or
licenses to others to operate, manage or otherwise dispose of, or deal with
restaurants, cafes, bars, all kinds of business stores and offices, broadcasting
stations, places of amusement and entertainment of all kinds, to carry on any
lawful business and to do any and everything necessary, suitable, convenient or
proper for the accomplishment of any of the purposes enumerated or incidental to
the powers named or for the enhancement of the value of the property of the
corporation or which should at any time appear conducive thereto or expedient.
Section 3.2 Securities. To trade and deal in, and to acquire, own and
dispose of, and to sell and purchase all forms of securities, including but not
by way of limitation, stocks (preferred and common), mutual fund shares, notes,
bonds, debentures, scrip, commodities, warrants, participation certificates,
mortgages, deeds of trust, commercial paper, choses in action, evidences of
indebtedness and other investments and obligations of every kind and
description.
Section 3.3 Corporate Investments. To invest its funds and to reinvest
and keep the same invested in corporate stocks, stock rights, bonds, debentures,
or any instrument representing any interest in the capital of corporations,
domestic or foreign, associations, firms, syndicates, trustees, partnerships,
individuals, governments, states, municipalities, or other political divisions,
or issued or created by others, and to
<PAGE> 2
acquire the same by purchase or in any other manner, and to own, hold, sell,
pledge, hypothecate, exchange or dispose of or turn the same to account in any
other manner, and to deal in and with the same and to issue in exchange therefor
or in payment thereof its own stocks, bonds or other obligations or to pay for
the same in any other manner, and to exercise in respect thereof any and all
rights, powers and privileges of individual ownership or interest therein,
including the rights to vote thereon for any and all purposes, and to consent to
and act in any other manner with respect thereto, and to do any and all acts and
things for the preservation, protection, improvement and enhancement in the
value thereof or designated to accomplish any such purpose.
Section 3.4 Commodities, Oil and Gas. To invest its funds and to
reinvest and keep the same invested in and to trade in commodities; and to
invest its funds and to reinvest and keep the same invested in oil, gas and
mineral interests and leases pertaining to the same.
Section 3.5 Property in General. To build, purchase, lease, or
otherwise acquire, own develop, manage, operate, improve, mortgage, create liens
upon, deal in, sell, lease, or otherwise dispose of any and all kinds of
property of every type and description connected with, incidental to, necessary,
suitable, useful, convenient or appertaining to any or all of the purposes and
powers of the corporation or any of its businesses and activities.
Section 3.6 Borrowing and Finance. To borrow or raise money for any of
the objects or purposes of the corporation without limit; to issue or negotiate
bonds, debentures, debenture stock, notes, and other obligations therefor,
secured or unsecured, and to secure payment thereof by pledge, mortgage, deed of
trust or otherwise of the whole or any part of the property of the corporation
so far as may be permitted by the laws of Colorado.
Section 3.7 Purchase of Businesses. To acquire, in whole or in part the
goodwill, rights, assets and business of, and to undertake or assume the whole
or any part of the obligations or liabilities of any person, firm, corporation
or association; and to pay for the same in cash, stock of the corporation, bonds
or otherwise; to hold or in any manner dispose of the whole or any part of the
property so purchased; to conduct in any lawful manner the whole or any part of
the business so acquired.
Section 3.8 Location of Corporation and Offices. To conduct its
business in whole or in part, and to exercise any and all of its rights, powers
and privileges, and to have one or more offices, and to register such offices,
both within and without the state of Colorado.
Section 3.9 Purchase of Corporation's Own Stock. To purchase, insofar
as the same may be done without impairing the capital of the corporation, and to
hold, pledge and reissue shares of its own capital stock; but such stock, so
acquired and held, shall not be entitled to vote or receive dividends.
Section 3.10 Where Business May be Conducted. To have one or more
offices, conduct its business and promote its objects and purposes within and
without the state of Colorado, in other
<PAGE> 3
states, the District of Columbia, the territories, colonies and dependencies of
the United States, and in foreign countries, without restriction as to place or
amount, but subject to the laws of such state, district, territory, colony,
dependency or country.
Section 3.11 Accomplishment of Purposes. To do all and everything
necessary, suitable and proper for the accomplishment of any of the purposes,
objects, or powers hereinbefore set forth to the same extent and as fully as a
natural person might or could do, in any part of the world and whether alone or
in association or partnership with other corporations, firms or individuals; and
to have all the rights and powers and privileges now or hereafter conferred by
the laws of the state of Colorado upon a corporation organized under the
Colorado Corporation Code, as amended.
Section 3.12 No Limitation on Objects and Powers. The foregoing clauses
shall be construed both as objects and powers, and it is hereby expressly
provided that the enumeration herein of any specific objects and powers shall
not be held to limit or restrict in any way the general powers of the
corporation. Nor shall such objects and powers, except when otherwise expressly
provided, be in anywise limited or restricted by reference to, or inference from
the terms of any other clause of these Articles of Incorporation, but the
objects and powers specified in each of the foregoing clauses of this article
shall be regarded as independent objects and powers.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 1,000,000 shares of common stock having no par value.
ARTICLE V
VOTING
No Cumulative voting shall be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 1812
56th Avenue, Greeley, Colorado 80631.
<PAGE> 4
The name of its registered agent at such address is John D.
Filkoski.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
(iii) acts specified in Section 7-5-114 of the Colorado Corporation Code; or
(iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as it he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
<PAGE> 5
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado including without limitation as permitted by the provisions of
Section 7-3-101(1)(u) of the Colorado Revised Statutes and any successor
provision as amended.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
two and the names and addresses of the persons who are to serve as a directors
until the first annual meeting of shareholders or until their successors are
elected and qualified are:
NAME ADDRESS
---- -------
John D. Filkoski 1812 56th Avenue
Greeley, CO 80631
The number of members of the Board of Directors shall be established by
the By-Laws of the corporation, but shall not be fewer than three members unless
there are fewer than three shareholders of the corporation in which case, the
number of directors may equal the number of shareholders.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
---- -------
John D. Filkoski 1812 56th Avenue
Greeley, CO 80631
DATEd at Greeley, Colorado this 23rd day of October, 1987.
/s/ John D. Filkoski
--------------------
STATE OF COLORADO )
)ss.
COUNTY OF WELD )
<PAGE> 6
I, Jeanine Bormson, Notary Public hereby certify that on the 23rd day
of October, 1987, personally appeared before me John D. Filkoski, who being by
me first duly sworn, declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 23 day of
October, 1987.
My commission expires: Sept. 9 [illegible]
/s/ Jeanine Bormson
-------------------
Notary Public
[SEAL]
<PAGE> 7
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is Signature Health Care of
California Corporation.
SECOND: The following amendment to the Articles of Incorporation was
adopted on October 24, 1991, as prescribed by the Colorado Corporation Code by
unanimous consent of the shareholder. All of the shares voted for the amendment.
THIRD: Article I of the Articles of Incorporation is amended as
follows:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Pueblo Norte, Inc.
Signature Health Care of California Corporation
by /s/ [illegible]
-------------------------
President
/s/ [illegible]
-------------------------
Secretary
STATE OF COLORADO )
)ss
COUNTY OF WELD )
The foregoing was acknowledged before on this 24th day
of October, 1991, by David L. Kremser, President of Signature
Health Care of California Corporation.
Witness my hand and official seal.
My commission expires: 6-4-95
/s/ Marybeth Durham
-------------------
Notary Public
[SEAL]
<PAGE> 1
Exhibit 3.19
ARTICLES OF INCORPORATION
OF
RIO VERDE NURSING CENTER, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Rio Verde Nursing Center, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
Section 3.1 Real Property and Business Enterprise. To purchase, lease
or in any manner to hold, own, improve and develop for any and all purposes and
to sell, convey, lease, mortgage or in any manner dispose of or deal with lands
and real property and any estate or interest therein, to contract, acquire by
purchase, lease or otherwise own, operate, manage, supervise and conduct and to
sell, lease, mortgage or otherwise dispose of hotels, apartments, apartment
houses, inns, lodging houses, garages and buildings, structures, and properties
of all kinds, to engage in, conduct and carry on in any and all branches thereof
the business or businesses of hotel keepers, innkeepers and garage keepers, and
to own, operate, manage, supervise and contract to grant concessions, rights or
licenses to others to operate, manage or otherwise dispose of, or deal with
restaurants, cafes, bars, all kinds of business stores and offices, broadcasting
stations, places of amusement and entertainment of all kinds, to carry on any
lawful business and to do any and everything necessary, suitable, convenient or
proper for the accomplishment of any of the purposes enumerated or incidental to
the powers named or for the enhancement of the value of the property of the
corporation or which should at any time appear conducive thereto or expedient.
Section 3.2 Securities. To trade and deal in, and to acquire, own and
dispose of, and to sell and purchase all forms of securities, including but not
by way of limitation, stocks (preferred and common), mutual fund shares, notes,
bonds, debentures, scrip, commodities, warrants, participation certificates,
mortgages, deeds of trust, commercial paper, choses in action, evidences of
indebtedness and other investments and obligations of every kind and
description.
Section 3.3 Corporate Investments. To invest its funds and to reinvest
and keep the same invested in corporate stocks, stock rights, bonds, debentures,
or any instrument
<PAGE> 2
representing any interest in the capital of corporations, domestic or foreign,
associations, firms, syndicates, trustees, partnerships, individuals,
governments, states, municipalities, or other political divisions, or issued or
created by others, and to acquire the same by purchase or in any other manner,
and to own, hold, sell, pledge, hypothecate, exchange or dispose of or turn the
same to account in any other manner, and to deal in and with the same and to
issue in exchange therefor or in payment thereof its own stocks, bonds or other
obligations or to pay for the same in any other manner, and to exercise in
respect thereof any and all rights, powers and privileges of individual
ownership or interest therein, including the rights to vote thereon for any and
all purposes, and to consent to and act in any other manner with respect
thereto, and to do any and all acts and things for the preservation, protection,
improvement and enhancement in the value thereof or designated to accomplish any
such purpose.
Section 3.4 Commodities, Oil and Gas. To invest its funds and to
reinvest and keep the same invested in and to trade in commodities; and to
invest its funds and to reinvest and keep the same invested in oil, gas and
mineral interests and leases pertaining to the same.
Section 3.5 Property in General. To build, purchase, lease, or
otherwise acquire, own develop, manage, operate, improve, mortgage, create liens
upon, deal in, sell, lease, or otherwise dispose of any and all kinds of
property of every type and description connected with, incidental to, necessary,
suitable, useful, convenient or appertaining to any or all of the purposes and
powers of the corporation or any of its businesses and activities.
Section 3.6 Borrowing and Finance. To borrow or raise money for any of
the objects or purposes of the corporation without limit; to issue or negotiate
bonds, debentures, debenture stock, notes, and other obligations therefor,
secured or unsecured, and to secure payment thereof by pledge, mortgage, deed of
trust or otherwise of the whole or any part of the property of the corporation
so far as may be permitted by the laws of Colorado.
Section 3.7 Purchase of Businesses. To acquire, in whole or in part the
goodwill, rights, assets and business of, and to undertake or assume the whole
or any part of the obligations or liabilities of any person, firm, corporation
or association; and to pay for the same in cash, stock of the corporation, bonds
or otherwise; to hold or in any manner dispose of the whole or any part of the
property so purchased; to conduct in any lawful manner the whole or any part of
the business so acquired.
Section 3.8 Location of Corporation and Offices. To conduct its
business in whole or in part, and to exercise any and all of its rights, powers
and privileges, and to have one or more offices, and to register such offices,
both within and without the state of Colorado.
Section 3.9 Purchase of Corporation's Own Stock. To purchase, insofar
as the same may be done without impairing the capital of the corporation, and to
hold, pledge and reissue shares of its own capital stock; but such stock, so
acquired and held, shall not be entitled to vote or receive dividends.
Section 3.10 Where Business May be Conducted. To have one or more
offices, conduct its business and promote its objects and purposes within and
without the state of Colorado, in other states, the District of Columbia, the
territories, colonies and dependencies of the United
2
<PAGE> 3
States, and in foreign countries, without restriction as to place or amount, but
subject to the laws of such state, district, territory, colony, dependency or
country.
Section 3.11 Accomplishment of Purposes. To do all and everything
necessary, suitable and proper for the accomplishment of any of the purposes,
objects, or powers hereinbefore set forth to the same extent and as fully as a
natural person might or could do, in any part of the world and whether alone or
in association or partnership with other corporations, firms or individuals; and
to have all the rights and powers and privileges now or hereafter conferred by
the laws of the state of Colorado upon a corporation organized under the
Colorado Corporation Code, as amended.
Section 3.12 No Limitation on Objects and Powers. The foregoing clauses
shall be construed both as objects and powers, and it is hereby expressly
provided that the enumeration herein of any specific objects and powers shall
not be held to limit or restrict in any way the general powers of the
corporation. Nor shall such objects and powers, except when otherwise expressly
provided, be in anywise limited or restricted by reference to, or inference from
the terms of any other clause of these Articles of Incorporation, but the
objects and powers specified in each of the foregoing clauses of this article
shall be regarded as independent objects and powers.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 1,000,000 shares of common stock having no par value.
ARTICLE V
VOTING
No Cumulative voting shall be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
3
<PAGE> 4
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is John D. Filkoski.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
(iii) acts specified in Section 7-5-114 of the Colorado Corporation Code; or
(iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as it he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
4
<PAGE> 5
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado including without limitation as permitted by the provisions of
Section 7-3-101(1)(u) of the Colorado Revised Statutes and any successor
provision as amended.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
two and the names and addresses of the persons who are to serve as a directors
until the first annual meeting of shareholders or until their successors are
elected and qualified are:
NAME ADDRESS
---- -------
John D. Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
David Kremser 2105 Clubhouse Drive
Greeley, CO 80634
The number of members of the Board of Directors shall be established by
the By-Laws of the corporation, but shall not be fewer than three members unless
there are fewer than three shareholders of the corporation in which case, the
number of directors may equal the number of shareholders.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
5
<PAGE> 6
NAME ADDRESS
---- -------
John D. Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
DATEd at Greeley, Colorado this 8th day of April, 1992.
/s/ John D. Filkoski
--------------------
John D. Filkoski
STATE OF COLORADO )
)ss.
COUNTY OF Weld )
I, M. Annette Durham, Notary Public hereby certify that on the 8th day
of April, 1992, personally appeared before me John D. Filkoski, who being by me
first duly sworn, declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 8th day
of April, 1992.
My commission expires: 6-4-95
/s/ M. Annette Durham
---------------------
Notary Public
[SEAL]
6
<PAGE> 1
Exhibit 3.20
ARTICLES OF INCORPORATION
OF
SIGNATURE MANAGEMENT GROUP, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Signature Management Group, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code, as amended. The corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-Laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is David Kremser.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
(iii) acts specified in Section 7-5-114 of the Colorado Corporation Code; or
(iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
2
<PAGE> 3
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as it he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. The foregoing right of indemnification shall
not be exclusive of other rights to which he may be entitled under applicable
state statute.
ARTICLE XI
INITIAL DIRECTORS
The number of directors of the corporation shall not be less than three
unless there are fewer than three shareholders of the corporation in which event
the number of directors may equal the number of shareholders. The initial
director of the corporation shall be David Kremser, 2105 Clubhouse Drive,
Greeley, Colorado 80634.
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
David Kremser 2105 Clubhouse Drive
Greeley, Colorado 80634
3
<PAGE> 4
DATED at Greeley, Colorado this 17th day of May, 1990.
/s/ David Kremser
-----------------------
STATE OF COLORADO )
)ss
COUNTY OF WELD )
I, M. Annette Durham, Notary Public hereby certify that on the 17 day
of May, 1990, personally appeared before me David Kremser, who being by me first
duly sworn, declared that he is the person who signed the foregoing document as
incorporator, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 17 day of
May, 1990.
My commission expires: 6-4-91
/s/ M. Annette Durham
------------------------
Notary Public
[SEAL]
4
<PAGE> 1
Exhibit 3.21
ARTICLES OF INCORPORATION
OF
CORNERSTONE CARE, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Corporation Act,
adopts the following Articles of Incorporation for this corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Cornerstone Care, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Business
Corporation Act, as amended. The corporation shall have the power to do all and
everything necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
shares of the corporation or securities convertible into shares or carrying
stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The by-laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the bylaws or adopt new by-laws
shall be vested in the Board of Directors, but the shareholders may also alter,
amend or repeal the by-laws or adopt new by-laws. The by-laws may contain any
provisions for the regulation and management of the affairs of the corporation
not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is John Filkoski.
The address of the Corporation's principal office is 2105 Clubhouse
Drive, Greeley, Colorado 80634.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniary or otherwise interested in or is a director, member or
officer of such other corporation or of such firm, association or partnership or
is a party to or is pecuniary or otherwise interested in such contract or other
transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniary or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
(iii) acts specified in Section 7-108-403 of the Colorado Business Corporation
Act; or (iv) any transaction from which the director derived an improper
personal benefit.
If the Colorado Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the
2
<PAGE> 3
corporation shall be eliminated or limited to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as it he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as a director until
the first annual meeting of shareholders or until his successor is elected and
qualified is:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, Colorado 80634
3
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is John Filkoski:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, Colorado 80634
DATED at Greeley, Colorado this 8th day of May, 1995.
/s/ John Filkoski
-------------------
John Filkoski
The undersigned consents to the appointment as the initial registered
agent of Cornerstone Care, Inc.
/s/ John Filkoski
-------------------
John Filkoski
4
<PAGE> 1
Exhibit 3.22
ARTICLES OF INCORPORATION
OF
ARKANSAS, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Business
Corporation Act, adopts the following Articles of Incorporation for this
corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Arkansas, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Business
Corporation Act, as amended. The corporation shall have the power to do all and
everything necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
shares of the corporation or securities convertible into shares or carrying
stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The by-laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the bylaws or adopt new by-laws
shall be vested in the Board of Directors, but the shareholders may also alter,
amend or repeal the by-laws or adopt new by-laws. The by-laws may contain any
provisions for the regulation and management of the affairs of the corporation
not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is John Filkoski.
The address of the Corporation's principal office is 2105 Clubhouse
Drive, Greeley, Colorado 80634.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniary or otherwise interested in or is a director, member or
officer of such other corporation or of such firm, association or partnership or
is a party to or is pecuniary or otherwise interested in such contract or other
transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniary or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-108-403 of the Colorado Business
Corporation Act; or (iv) any transaction from which the director derived an
improper Personal benefit.
If the Colorado Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the
<PAGE> 3
corporation shall be eliminated or limited to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as a director until
the first annual meeting of shareholders or until his successor is elected and
qualified is:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is John Filkoski:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
DATED at Greeley, Colorado this 8th day of May , 1995.
/s/ John Filkoski
-------------------
John Filkoski
The undersigned consents to the appointment as the initial registered
agent of Arkansas, Inc.
/s/ John Filkoski
-------------------
John Filkoski
<PAGE> 1
Exhibit 3.23
ARTICLES OF INCORPORATION
OF
DOUGLAS MANOR, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Business
Corporation Act, adopts the following Articles of Incorporation for this
corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Douglas Manor, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Business
Corporation Act, as amended. The corporation shall have the power to do all and
everything necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
shares of the corporation or securities convertible into shares or carrying
stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The by-laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the bylaws or adopt new by-laws
shall be vested in the Board of Directors, but the shareholders may also alter,
amend or repeal the by-laws or adopt new by-laws. The by-laws may contain any
provisions for the regulation and management of the affairs of the corporation
not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is John Filkoski.
The address of the Corporation's principal office is 2105 Clubhouse
Drive, Greeley, Colorado 80634.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniary or otherwise interested in or is a director, member or
officer of such other corporation or of such firm, association or partnership or
is a party to or is pecuniary or otherwise interested in such contract or other
transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniary or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-108-403 of the Colorado Business
Corporation Act; or (iv) any transaction from which the director derived an
improper Personal benefit.
If the Colorado Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the
<PAGE> 3
corporation shall be eliminated or limited to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as a director until
the first annual meeting of shareholders or until his successor is elected and
qualified is:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is John Filkoski:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
DATED at Greeley, Colorado this 8th day of May, 1995.
/s/ John Filkoski
-------------------
John Filkoski
The undersigned consents to the appointment as the initial registered
agent of Douglas Manor, Inc.
/s/ John Filkoski
-------------------
John Filkoski
<PAGE> 1
Exhibit 3.24
ARTICLES OF INCORPORATION
OF
SAFFORD CARE, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Business
Corporation Act, adopts the following Articles of Incorporation for this
corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Safford Care, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Business
Corporation Act, as amended. The corporation shall have the power to do all and
everything necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
shares of the corporation or securities convertible into shares or carrying
stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The by-laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the bylaws or adopt new by-laws
shall be vested in the Board of Directors, but the shareholders may also alter,
amend or repeal the by-laws or adopt new by-laws. The by-laws may contain any
provisions for the regulation and management of the affairs of the corporation
not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is John Filkoski.
The address of the Corporation's principal office is 2105 Clubhouse
Drive, Greeley, Colorado 80634.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniary or otherwise interested in or is a director, member or
officer of such other corporation or of such firm, association or partnership or
is a party to or is pecuniary or otherwise interested in such contract or other
transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniary or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-108-403 of the Colorado Business
Corporation Act; or (iv) any transaction from which the director derived an
improper Personal benefit.
If the Colorado Business Corporation Act is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the
<PAGE> 3
corporation shall be eliminated or limited to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as a director until
the first annual meeting of shareholders or until his successor is elected and
qualified is:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is John Filkoski:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
DATED at Greeley, Colorado this 8th day of May, 1995.
/s/ John Filkoski
-------------------
John Filkoski
The undersigned consents to the appointment as the initial registered
agent of Safford Care, Inc.
/s/ John Filkoski
-------------------
John Filkoski
<PAGE> 1
Exhibit 3.25
ARTICLES OF INCORPORATION
OF
REHABWEST, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as incorporator of this corporation under the Colorado Business
Corporation Act, adopts the following Articles of Incorporation for this
corporation:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is Rehabwest, Inc.
ARTICLE II
DURATION OF CORPORATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purposes and powers of the corporation shall be as follows:
The purpose of the corporation shall be to transact all lawful business
for which corporations may be incorporated pursuant to the Colorado Business
Corporation Act, as amended. The corporation shall have the power to do all and
everything necessary, suitable and proper for the accomplishment of its purpose.
ARTICLE IV
CAPITAL
The aggregate number of shares the corporation shall have authority to
issue is 100,000 shares of common stock having a par value of $1.00 per share.
ARTICLE V
VOTING
Cumulative voting shall not be allowed.
ARTICLE VI
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive rights to acquire additional
or treasury shares of the corporation or securities convertible into shares or
carrying stock purchase warrants or privileges.
<PAGE> 2
ARTICLE VII
ADOPTION AND AMENDMENT OF BY-LAWS
The By-laws of the corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors, but the shareholders may also
alter, amend or repeal the By-Laws or adopt new By-Laws. The By-Laws may contain
any provisions for the regulation and management of the affairs of the
corporation not inconsistent with statute or the Articles of Incorporation.
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 2105
Clubhouse Drive, Greeley, Colorado 80634.
The name of its registered agent at such address is David Kremser.
ARTICLE IX
DEALINGS OF OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
corporation and any other corporation or any partnership or association shall be
affected or invalidated by the fact that any director or officer of the
corporation is pecuniarily or otherwise interested in or is a director, member
or officer of such other corporation or of such firm, association or partnership
or is a party to or is pecuniarily or otherwise interested in such contract or
other transaction or in any way connected with any person or persons, firms,
associations, partnership or corporation pecuniarily or otherwise interested
therein, provided that the existence and nature of any such interest, possession
or connection of such director or officer shall be disclosed or shall have been
known to the directors present at any meeting of the Board of Directors at which
action on any such contract or transaction shall have been taken and provided
further that the fact of such relationship is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify the
contract or transaction by vote or written consent and the contract or
transaction is fair and reasonable to the corporation.
A director of this corporation shall not be personally liable to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to this corporation or to its
shareholders for monetary damages for (i) any breach of the director's duty of
loyalty to the corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation Code;
or (iv) any transaction from which the director derived an improper personal
benefit.
If the Colorado Corporation Code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Colorado Corporation Code, as so amended.
<PAGE> 3
Any repeal or modification of the foregoing provisions of this Article
Ninth by the shareholders or the corporation shall not affect adversely any
right or protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification.
Any director may be counted in determining the existence of a quorum
and may vote at any meeting of the Board of Directors of the corporation for the
purpose of authorizing any such contract or transaction with like force and
effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES AND AGENTS
Pursuant to Section 7-3-101 of the Colorado Revised Statutes, as
amended, each director, officer, employee or agent of the corporation (and his
heirs, executors and administrators) shall be indemnified by the corporation
against expenses reasonably incurred by or imposed upon him in connection with
or arising out of any action, suit or proceeding in which he may be involved or
to which he may be made a party by reason of his being or having been a
director, officer, employee or agent of the corporation, or at its request, of
any other corporation of which it is a shareholder or creditor and from which he
is not entitled to be indemnified (whether or not he continues to be a director
or officer at the time of imposing or incurring such expenses), except in
respect of matters as to which he shall be finally adjudged in such action, suit
or proceeding to be liable for negligence or misconduct; or in the event of a
settlement of any such action, suit or proceeding, indemnification shall be
provided only in connection with such matters covered by the settlement as to
which the corporation is advised by counsel that the person to be indemnified
did not commit a breach of duty. In addition to the foregoing right of
indemnification the personal liability of each director of the corporation shall
be eliminated and limited to the full extent permitted by the laws of the State
of Colorado including without limitation as permitted by the provisions of
Section 7-3-101(1)(u) of the Colorado Revised Statutes and any successor
provision as amended.
ARTICLE XI
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
one and the name and address of the person who is to serve as a director until
the first annual meeting of shareholders or until his successor is elected and
qualified is:
NAME ADDRESS
David Kremser 2105 Clubhouse Drive
Greeley, CO 80634
<PAGE> 4
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is John Filkoski:
NAME ADDRESS
John Filkoski 2105 Clubhouse Drive
Greeley, CO 80634
DATED at Greeley, Colorado this 19th day of November, 1993.
/s/ John Filkoski
-------------------
John Filkoski
STATE OF COLORADO )
)ss
COUNTY OF WELD )
I, M. Annette Durham, Notary Public hereby certify that on the 19 day
of Nov., 1993, personally appeared before me John Filkoski, who being by me
first duly sworn, declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 19 day of
Nov., 1993.
My commission expires: 6-4-95.
Notary Public
----------------------
/s/ M. Annette Durham
<PAGE> 5
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
REHABWEST, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Rehabwest, Inc.
SECOND: The following amendment to the Articles of Incorporation was adopted on
December [illegible], 1993, as prescribed by the Colorado Business Corporation
Act, by unanimous vote of the sole shareholder:
Article IV of the Articles of Incorporation is amended is read in its
entirety as follows:
ARTICLE IV
CAPITAL
The aggregate number of shares the
corporation shall have authority to issue is
1,000,000 shares of common stock having no
par value.
THIRD: There will be no exchange, reclassification or cancellation of issued
shares as a result of the amendment except that the capital stock authorized
shall be increased as set forth above and it shall be converted from common
stock of having a par value of $1.00 per share to common stock having no par
value.
The amendment set forth above shall be effective December [illegible],
1993.
REHABWEST, INC.
By: /s/ Linda Redwine
-------------------------
Linda Redwine, President
<PAGE> 1
Exhibit 3.26
ARTICLES OF INCORPORATION
OF
QUEST PHARMACIES, INC.
1. Name. The name of the corporation is Quest Pharmacies, Inc.
2. Purpose. The purpose for which this corporation is
organized is the transaction of any or all lawful business for which
corporations may be incorporated under the laws of the State of Arizona, as they
may be amended from time to time.
3. Initial Business. The corporation initially intends to
conduct the business of real estate ownership and of providing pharmaceutical
and pharmacy services.
4. Authorized Capital. The corporation shall have authority to
issue 10,000 shares of common stock, par value $0.01 per share.
5. Statutory Agent. The name and address of the initial
statutory agent of the corporation is Lawdock, Inc., One East Camelback Road,
Suite 400, Phoenix, Arizona 85012.
6. Initial Directors and Officers. The initial board of
directors shall consist of four directors. The names and addresses of the
persons who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and qualify are:
Jerry M. Walker
9342 N. Fanfol Road
Paradise Valley, Arizona 85253
Phillip R. Rollins
12835 E. Gail
Scottsdale, Arizona 85259
Paul J. Contris
5800 W. Kesler Street
Chandler, Arizona 86226
L. Robert Oberfield
9140 E. Hillery Drive
Scottsdale, Arizona 85260
The number of persons to serve on the board of directors
thereafter shall be fixed by the Bylaws. The persons who are to serve as
officers at the pleasure of the board of directors are:
L. Robert Oberfield President
Jerry M. Walker Chairman
Paul J. Contris Vice President and Treasurer
Phillip R. Rollins Vice President and Secretary
<PAGE> 2
7. Incorporators. The incorporators of the corporation, and
their addresses are:
Phillip R. Rollins
12835 E. Gail
Scottsdale, Arizona 85259
L. Robert Oberfield
9140 E. Hillary Drive
Scottsdale, Arizona 85260
All powers, duties and responsibilities of the incorporators shall cease at the
time of delivery of these Articles of Incorporation to the Arizona Corporation
Commission for filing.
8. Distributions from Capital Surplus. The board of directors
of the corporation may, from time to time, distribute on a pro rata basis to its
shareholders out of the capital surplus of the corporation a portion of its
assets, in cash or property.
9. Director Liability. A director of the Corporation shall not
be personally liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its shareholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for authorizing the unlawful
payment of a dividend or other distribution on the Corporation's capital stock
or the unlawful purchase of its capital stock, (iv) for any transaction from
which the director derived an improper personal benefit, or (v) for a violation
of Section 10-041 of the Arizona General Corporation Law. If the Arizona General
Corporation Law is amended after approval by the shareholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Arizona
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification. No amendment to the Arizona Revised Statutes that further
limits the acts, omissions or transactions for which elimination or limitation
of liability is permitted shall affect the liability of a director for any act,
omission or transaction which occurs prior to the effective date of such
amendment.
10. Repurchase of Shares. The board of directors of the
Corporation may, from time to time, cause the corporation to purchase its own
shares to the extent of the unreserved and unrestricted earned and capital
surplus of the corporation.
-2-
<PAGE> 3
EXECUTED as of the 15th day of May, 1995.
/s/ Phillip R. Rollins
---------------------------------
Phillip R. Rollins, Incorporator
/s/ L. Robert Oberfield
---------------------------------
L. Robert Oberfield, Incorporator
-3-
<PAGE> 4
ACCEPTANCE OF APPOINTMENT
BY STATUTORY AGENT
Pursuant to the provisions of Section 10-055, Arizona Revised
Statutes, the undersigned hereby acknowledges and accepts the appointment as
statutory agent of Quest Pharmacies, Inc., effective as of the 30th day of May,
1995.
LAWDOCK, INC.
By /s/ Dianne L. Lash
----------------------------
Its: Assistant Secretary
One East Camelback Road
Suite 400
Phoenix, Arizona 85012
-4-
<PAGE> 5
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this "Agreement") is entered into by QUEST
PHARMACIES, INC., an Arizona corporation (the "Corporation"), SUNQUEST
HEALTHCARE CORPORATION, a Delaware corporation ("SunQuest"), and L. ROBERT
OBERFIELD ("Oberfield"), with an effective date as of May 15, 1995. (SunQuest
and Oberfield are sometimes referred to herein severally as a "Shareholder" and
collectively as "Shareholders").
RECITALS
A. SunQuest and Oberfield are the owners of the following number of
shares of the Corporation, which in total constitute all of the issued and
outstanding shares of the Corporation:
<TABLE>
<CAPTION>
Name Number Of Shares
---- ----------------
<S> <C> <C>
SunQuest 7500
Oberfield 2500
</TABLE>
B. The parties wish to provide for certain rights by and between
themselves with respect to the transfer and issuance of shares in the
Corporation, all in the manner set forth herein.
AGREEMENTS
The Corporation and the Shareholders agree as follows:
1. Demand Sale/Purchase of Oberfield Shares.
a. Nature of Right and Timing. On the first Trading Day (as
defined below) of May 1998 and on the first Trading Day of each May thereafter
(each a "Trigger Date"), Oberfield will have the right, in his sole discretion,
to require that SunQuest purchase all or part of Oberfield's shares in the
Corporation, and SunQuest will have the right, in its sole discretion, to
require that Oberfield sell all or part of Oberfield's shares in the Corporation
to SunQuest. Any transaction resulting from Oberfield's exercise of his put
rights or SunQuest's exercise of its call rights as set forth herein is referred
to herein as a "Demand Transaction." The mutual rights of SunQuest and/or
Oberfield to compel Demand Transactions will remain in force for so long as the
Corporation remains in existence, and will be exercisable by either or both of
them upon 90 days written notice prior to a Trigger Date from the party seeking
to exercise its right to the other party. For purposes of this Agreement,
"Trading Day" shall mean (i) if SunQuest is a publicly held company, any day
<PAGE> 6
that the stock exchange listing SunQuest's stock is open to the public for
transacting business, or (ii) if SunQuest is not a publicly held company, any
day that all or substantially all of the nationally recognized United States'
stock exchanges are open to the public for transacting business. Although a
Demand Transaction may have a Closing Date (as defined below) falling after the
applicable Trigger Date, the price shall be established and fixed as of the
Trigger Date, in the manner set forth below.
b. Price. In a Demand Transaction, the price of the shares
will be determined using one of the two following valuation techniques,
depending on the circumstances on the applicable Trigger Date:
(i) If SunQuest is a publicly held company on or
before the applicable Trigger Date, the valuation shall be (A) 100% of the
price/earnings ratio of SunQuest's publicly traded stock (calculated as of the
applicable Trigger Date) multiplied by (B) an annualized estimate of the
after-tax net income of the Corporation (calculated by multiplying the financial
information for the three month operating period from February through April
immediately preceding the applicable Trigger Date by 4 to convert the earnings
to an annualized estimate) multiplied by (C) Oberfield's percentage share of the
total outstanding capital stock of the Corporation that is being transferred.
(ii) If SunQuest is not a publicly held company on or
before the applicable Trigger Date, the valuation methodology shall be the same
as that described in paragraph 1(b)(i), except that the price/earnings ratio
will be 75% of the average price/earnings ratio for the 10 largest publicly
traded nursing home companies, as determined by annual gross revenues from the
most recently available year-end financial statements for such companies, in the
same business as SunQuest ("Long Term Care Companies") as of the applicable
Trigger Date.
c. Payment Terms. If a Demand Transaction results from
Oberfield's exercise of his put rights, the purchase price shall be paid as
follows: (i) in all cash on the Closing Date if both SunQuest and Oberfield
consent to a cash payment, or (ii) 25% cash payment on the Closing Date and the
remaining 75% of the purchase price in fully amortized, equal monthly
installments over a period of 24 to 36 months, with the exact length of the
period selected by Oberfield, with interest at 10% per annum. The monthly
installment payments will commence on the 15th day of the month immediately
following the Closing Date. If a Demand Transaction results from SunQuest's
exercise of its call rights, Oberfield shall have the right to require SunQuest
to pay the calculated purchase price in all cash on the Closing Date or on the
following terms: 100% of the purchase price in fully amortized, equal monthly
installments over a period not to exceed 36 months, with interest at 10% per
annum. For purposes of this Agreement, the "Closing Date" shall mean that
-2-
<PAGE> 7
date upon which the transfer is actually consummated, which shall be no later
than 15 days following the date upon which the financial statements of the
Corporation for the months of February through April immediately preceding the
applicable Trigger Date are published.
d. Purchase with SunQuest Shares. Notwithstanding paragraph
1(c) above, upon any Demand Transaction, Oberfield, in his sole discretion, may
require that SunQuest purchase Oberfield's shares in the Corporation with shares
of SunQuest's own capital stock. If Oberfield elects this option, the number of
shares of SunQuest capital stock necessary to complete the purchase shall be
determined by comparative valuations of the Corporation and SunQuest. The market
valuation per share of SunQuest shall be (i) its listed selling price on the
applicable exchange on the applicable Trigger Date, if SunQuest is publicly
traded as of the applicable Trigger Date, or (ii) if SunQuest is not publicly
traded as of the applicable Trigger Date, the value arrived at by multiplying
75% of the average price/earnings ratio for Long Term Care Companies by
SunQuest's consolidated after-tax net income as annualized based upon the 6
month period ending on the April 30th immediately preceding the applicable
Trigger Date, and then by dividing the resulting market valuation of SunQuest by
the total outstanding common shares of SunQuest as of the Trigger Date. The
market valuation of the Corporation shall be determined based on the methods set
forth in paragraphs 1(b)(i) and (ii) above. The number of shares of common stock
of SunQuest to be paid to Oberfield to effect the transaction shall be
determined by dividing the total market valuation of the Corporation by the per
share value of SunQuest stock, as determined above, and then multiplying the
result by Oberfield's fractional share of stock of the Corporation.
2. Issuance and Sale of Stock; Preemptive Rights.
Except for stock splits and similar types of issuances that do
not require payment of additional consideration by the Shareholders and do not
dilute each Shareholder's Applicable Percentage (as defined below), the
Corporation shall not issue or sell any additional stock without the consent of
Oberfield, which consent shall not be unreasonably withheld. If such consent is
obtained, the issuance and sale of stock by the Corporation shall be governed by
the remainder of this Section 2. In the event of any issuance and sale by the
Corporation of new common stock, the Shareholders shall have the right and
option to purchase a sufficient number of shares of such new common stock to
restore their percentage of outstanding shares to 25% for Oberfield and 75% for
SunQuest (respectively for each, the "Applicable Percentage"). The Applicable
Percentage shall be adjusted downward to give effect to any exercise of
employees' stock options (if any) and for sales and purchases of stock by the
Shareholders. The number of shares the Shareholders shall be entitled to
purchase pursuant to the
-3-
<PAGE> 8
preemptive rights granted herein shall be the number of shares necessary to
preserve the Applicable Percentage. The Company shall provide written notice of
all sales of stock to the Shareholders within 10 days of such sale, setting
forth the number of shares of stock sold and the proposed sales price per share.
If the preemptive rights apply, the Shareholder shall have 30 days from receipt
of notice within which to exercise the preemptive rights. The purchase price for
any shares purchased pursuant to the preemptive rights shall be the same as the
proposed sales price to a third party and shall be paid in cash 30 days after
the notice of exercise of the preemptive rights. The preemptive rights granted
herein shall expire upon the earliest occurrence of: (a) an initial public
offering of the common stock of the Corporation; or (b) the exercise by either
party of its rights pursuant to paragraph 1 above with respect to all of the
Oberfield shares.
3. Right of First Refusal. No Shareholder shall have the right to
transfer, pledge, sell of otherwise dispose of any of the shares of the
Corporation or any certificate representing such shares, by inheritance,
operation of law or otherwise, until the shares proposed to be transferred are
first offered for sale to the other Shareholder to this Agreement for the same
price and upon the same terms as a bona fide third party offer to purchase such
shares, or if the proposed transfer is not pursuant to a third party offer, for
a price calculated in accordance with paragraphs 1(b)(i) and (ii). Any transfer
in violation of this provision shall be void. Such offer to the other party
shall be in writing, signed by the shareholder and sent by certified mail to the
other party and to the secretary of the Corporation. An offer to purchase from a
third party shall be considered as a bona fide offer only when a formal
agreement has been signed, an escrow has been opened with an independent escrow
company and not less than 10% of the purchase price has been placed in escrow
and is to be held for the entire amount of time allotted for the non-selling
Shareholder to exercise its rights hereunder. The offer shall remain open for
acceptance for 60 days from the date of mailing such offer. Subject to Section
6.6 of the Corporation's By-Laws, which shall apply and shall control if the
Corporation has other shareholders aside from SunQuest and Oberfield, the
non-selling Shareholder may accept the offer by advising the selling Shareholder
and the secretary of the Corporation by certified mail of such acceptances. The
non-selling Shareholder shall thereafter close substantially in accordance with
the terms of the offer.
4. Right of Purchase on Certain Events. Each Shareholder agrees that
upon the occurrence of any event set forth in the following sentence, the
affected Shareholder shall immediately submit to the Corporation and the other
Shareholder a written offer to sell all the Shares then owned by the affected
Shareholder, under the payment terms and conditions stated below in this
paragraph 4. The following events shall require an offer: (a) the filing of a
petition in bankruptcy by or against a Shareholder and
-4-
<PAGE> 9
the failure to quash or remove the petition within 90 days after the filing; (b)
the death, dissolution or liquidation of a Shareholder; and (c) the entry of a
final decree of divorce of a Shareholder unless on or prior thereto the
Shareholder has acquired all of his divorced spouse's interest in the Shares
owned by the Shareholder and/or the divorced spouse. The purchase price for any
shares purchased by the other Shareholder pursuant to such an event shall be
calculated in the manner set forth in paragraphs 1(b)(i) and (ii) as of the date
upon which the event occurs. If Oberfield is the selling Shareholder under this
paragraph, Oberfield shall not be entitled to require payment in shares of
SunQuest stock, as referenced in paragraph 1(d) above.
5. Additional Signatories. Without limiting the restrictions contained
herein, the Shareholders hereby agree that, in their capacities as Shareholders
and as officers and directors of the Corporation, they will cause any person who
becomes a shareholder of the Corporation, as a condition precedent to becoming a
shareholder, to become a signatory to this Agreement simultaneously with the
acquisition of any shares of the Corporation. In such event, all references to
any Shareholder herein shall also apply to the new shareholder, as the context
requires.
6. Indemnification. If a Shareholder sells all of his or its shares to
the Corporation or the other Shareholder pursuant to this Agreement, the
remaining Shareholder shall indemnify and hold harmless the selling Shareholder
against and in respect to any action, liability, damage or expense, including
reasonable attorneys' fees and court costs, relating to any matters arising from
the activities of the Corporation, except if such actions, liability, damages or
expenses were caused by the wrongful actions of the selling Shareholder.
7. Legend On Share Certificates.
The Shareholders agree, immediately upon execution of this
Agreement, to cause the secretary of the Corporation to stamp on the
certificates in a prominent manner the following legend:
The transfer, sale, exchange, assignment, hypothecation,
encumbrance or alienation of the shares represented by this
certificate is restricted by a Shareholder Agreement among the
shareholders of this corporation dated May 15, 1995. A copy of
the Shareholder Agreement will be mailed without charge to the
shareholder within 5 days after receipt of a written request
therefor. All the terms and provisions of the Shareholder
Agreement are hereby incorporated by reference and made a part
of this certificate.
-5-
<PAGE> 10
8. Agreement Available For Inspection.
An original copy of this Agreement duly executed by the
Corporation and by the Shareholders shall be delivered to the secretary of the
Corporation and maintained at the principal executive office of the Corporation
available for inspection by any person requesting to see it.
9. Termination Of Agreement.
This Agreement shall terminate upon the written agreement of
the Corporation and each of the Shareholders to that effect.
10. Amendment Or Alteration.
This Agreement may only be altered or amended by a written
agreement signed by all of the parties.
11. Notices.
Any and all notices or other communications required or
permitted by this Agreement or by law to be served on, given to or delivered to
any party hereto by any other party to this Agreement shall be in writing and
shall be deemed duly served, given or delivered when personally delivered to the
party or to an officer of the party, or in lieu of such personal delivery, when
deposited in the United States mail, registered or certified mail, return
receipt requested, addressed to either the Corporation or a Shareholder at the
Corporation's principal executive office.
12. Binding Effect.
This Agreement shall inure to the benefit of and shall be
binding on the parties hereto and on each of their heirs, executors,
administrators, successors and assignees. This paragraph, however, shall not
permit shares in the Corporation to be transferred in a manner otherwise
prohibited under this Agreement.
13. Severability.
Should any provision or portion of this Agreement be held
unenforceable or invalid for any reason, the remaining provisions and portions
of this Agreement shall be unaffected by such holding.
14. Governing Law.
This Agreement shall be construed and governed by the laws of
the State Of Arizona.
-6-
<PAGE> 11
15. Sole and Separate Property. Oberfield represents and warrants that
his shares are and will continue to be his sole and separate property at all
times while this Agreement is in effect.
16. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
hereto with respect to the matters discussed herein and correctly sets forth the
rights, duties and obligations of each to the others in relation thereto. Any
prior agreements, promises, negotiations or representations concerning the
matters discussed herein, which are not expressly set forth herein, are of no
force or effect.
DATED as of the date first above written.
SUNQUEST HEALTHCARE CORPORATION
By /s/ Jerry M. Walker
--------------------------------------
Its President
-------------------------------------
SHAREHOLDER
/s/ L. Robert Oberfield
----------------------------------------
L. ROBERT OBERFIELD
SHAREHOLDER
QUEST PHARMACIES, INC.
By /s/ Jerry M. Walker
--------------------------------------
Its Chairman
----------------------------------------
CORPORATION
-7-
<PAGE> 1
Exhibit 3.27
ARTICLES OF INCORPORATION
OF
SUNBELT THERAPY MANAGEMENT SERVICES, INC.
The undersigned, acting as incorporators of a corporation under the
Code of Alabama, adopt the following Articles of Incorporation for such
corporation:
FIRST: The name of the corporation is Sunbelt Therapy Management
Services, Inc.
SECOND: The period of its duration is prepetual.
THIRD: The purpose or purposes for which the corporation is organized
are: The transaction of any or all lawful business for which corporations may be
incorporated under this Act.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 10,000. The corporation shall begin business by the
issuance of 3,000 shares of common stock valued at $1.00 par per share.
FIFTH: Provisions for the regulation of the internal affairs of the
corporation are: None.
SIXTH: The address of the initial registered office of the corporation
is 1121 Somerville Road, Office No. 7, Decatur, Alabama 35601, and the name of
its initial registered agent at such address is Paul G. Henderson.
SEVENTH: The number of directors constituting the initial board of
directors of the corporation is three and the names and addresses of the persons
who are to serve as directors until the first annual meeting of the shareholders
or until their successors are elected and shall qualify are:
Name Address
Paul G. Henderson 1121 Somerville Road
Decatur, Alabama 35601
Paige B. Plash 1242 Anchor Drive
Mobile, Alabama 36609
Phillip R. Rollins Rote 3, Box 473R
Hartselle, Alabama 35640
<PAGE> 2
EIGHTH: The name and address of each incorporator is:
NAME ADDRESS
Paul G. Henderson 1121 Somerville Road
Decatur, Alabama 35601
Paige B. Plash 1242 Anchor Drive
Mobile, Alabama 36609
Phillip R. Rollins Route 3, Box 473R
Hartselle, Alabama 35640
NINTH: Should any shareholder of the corporation desire to sell,
transfer, alienate or otherwise dispose of any share of stock or any interest in
any share of stock of the corporation, said shareholder shall, before selling,
transferring, alienating or otherwise disposing of the same, offer said shares
for sale to the corporation. The offer shall be in writing addressed to the
Secretary of the corporation and shall set forth the offering price and the
terms of sale, and the corporation shall have the exclusive right to purchase
such share or shares for the price and upon the terms set forth in said offer
within sixty (60) days after receipt by it of such offer. After the expiration
of such sixty (60) days, the offering shareholder, if the corporation shall not
have exercised its option to purchase said share or shares offered, shall have
the right to sell, transfer, alienate or otherwise dispose of such share or
shares to whomsoever he may please; provided, however, that said offering
shareholder shall not sell or otherwise dispose of (except by such gift or
through inheritance of such person or persons) said share or shares or any
interest in said share or shares at a lesser price or upon more favorable terms
to the acquiring party than those upon which he shall have previously offered
the same to the corporation; provided further, that the failure of the
corporation to purchase any such share or shares so offered to it, and the
subsequent sale or other disposition thereof by such shareholder to any other
party shall not as to any other sale or other disposition of said share or
shares, or of any share or shares issued in lieu thereof, discharge any such
share or shares from any of the restrictions herein contained; and provided
further that all restrictions herein imposed upon the sale or other disposition
of the shares of the stock of the corporation shall apply to all shares of stock
of the corporation whensoever, howsoever, or by whomsoever acquired in the hands
of all holders or owners, whether original shareholders or subsequent purchasers
or transferees and whether acquired by gift, descent, bequest, or devise or
through a voluntary or involuntary act of a shareholder, or by operation of law
and whether a part of the first authorized issue or any subsequent or increased
issue.
The corporation, from time to time, may lawfully enter into any
agreement to which all of the holders of record of issued and outstanding shares
of its capital stock shall be parties further restricting the transfer of any or
all of its capital stock, upon such terms and conditions as may be approved by
the Board of Directors of the corporation, provided that such restrictions be
stated upon each certificate representing such shares.
In the event of the death or the desire of a stockholder to sell his
stock, value of the stock of such stockholder shall be determined in accordance
with the terms of this paragraph.
2
<PAGE> 3
If a stockholder dies, the corporation shall have a first option to
purchase the shares of stock of such deceased stockholder at the book or market
value thereof at the time of purchase, whichever is higher. If the corporation
does not exercise this privilege of purchase of such shares of stock of a
deceased stockholder, then the remaining stockholders shall have the same
privilege of purchase in proportion to their respective stock ownership in the
corporation. If the corporation exercises its option to purchase the shares of a
deceased stockholder, it shall have ten years from the date of death of such
deceased stockholder to pay the purchase price. In voting on whether the
corporation shall exercise its first option to purchase the shares of a deceased
stockholder, the legal representative of such deceased stockholder may vote as a
director or shareholder against the corporation's exercise of such option.
Unless otherwise provided by the laws of the State of Alabama, the
corporation shall be entitled to treat the person in whose name any shares of
its stock is registered as the owner thereof for all purposes, and shall not be
required to recognize any equitable or other claim to or interest in or to said
share on the part of any other person, whether or not the corporation shall have
notice thereof.
The corporation shall have a lien on the shares of its capital stock
owned by any shareholder for any debt or liability incurred to it by such
stockholder before a notice of transfer or levy on such shares.
All persons who shall acquire stock in the corporation shall acquire it
subject to the provisions of this Article of Incorporation.
TENTH: All of the shares which are issued within two years of the date
of filing of these Articles of Incorporation or are issued before any subsequent
offering of stock and are issued only for money or other property than stock or
securities shall be deemed by this charter and the due execution thereof to be
stock issued pursuant to a plan to issue Section 1244 stock, it being the
intention of the Directors of this corporation to issue such stock in such
manner as to qualify for the benefits of Section 1244 of the Internal Revenue
Code of the United States. The directors elected by the subscribers to these
articles shall, by the acceptance of their election as directors, ratify and
adopt this plan.
DATED March 22 , 19 85.
------------------ ----
/s/ Paul G. Henderson
-------------------------
Paul G. Henderson
/s/ Paige B. Plash
-------------------------
Paige B. Plash
/s/ Phillip R. Rollins
-------------------------
Phillip R. Rollins
3
<PAGE> 4
CONSENT TO ACTIONS IN LIEU OF A
SPECIAL MEETING OF THE
BOARD OF DIRECTORS OF
UNISON HEALTHCARE CORPORATION
a Delaware corporation
October 11, 1996
The undersigned, being the all of the members of the Board of Directors
of Unison HealthCare Corporation, a Delaware corporation (the "Company"), by
unanimous written consent pursuant to Section 141(f) of the General Corporation
Law of Delaware, in lieu of a special meeting, hereby consent to the following
resolution and the actions described therein:
RESOLVED, that Jerome L. Joseph, Vice President and
Treasurer of the Company, is hereby authorized on behalf of
the Company to execute a Guaranty in the form attached hereto
as Exhibit "A", guaranteeing the obligations and indebtedness
of Sunbelt Therapy Management Services, Inc. to Colonial Bank,
including without limitation Sunbelt's obligations under a
Commercial Promissory Note and Security Agreement in the amount
of $300,000, dated as of October 11, 1996.
This consent shall have the same force and effect as the unanimous vote
of the Board of Directors at a meeting of the Board of Directors duly called,
convened and held in accordance with the law, the Certificate of Incorporation
and the Bylaws of the Company.
Date of Signing:
- -------------------------------- ------------------------------
Tyrrell L. Garth Jerry M. Walker
- -------------------------------- ------------------------------
Bruce H. Whitehead Phillip R. Rollins
- -------------------------------- ------------------------------
Mark White Paul J. Contris
- -------------------------------- ------------------------------
Craig Clark John T. Lynch
- --------------------------------
John T. Casey
<PAGE> 1
Exhibit 3.28
ARTICLES OF INCORPORATION
OF
DECATUR SPORTS FIT & WELLNESS CENTER, INC.
STATE OF ALABAMA )
)
COUNTY OF MORGAN )
The undersigned, Paul G. Henderson, desiring to become one body
corporate under and by virtue of the laws of the State of Alabama and acting as
incorporator of such corporation, does hereby sign and adopt the following
Articles of Incorporation for such corporation:
(1) NAME OF CORPORATION:
The name of this Corporation is:
Decatur Sports Fit & Wellness Center, Inc.
(2) PERIOD OF DURATION:
The period of duration of this Corporation is perpetual.
(3) PURPOSE OF THE CORPORATION:
The purposes for which this corporation is organized are:
(a) To engage in any and all lawful practices relative to the operation
of a physical fitness and/or wellness center, including but not limited
to exercise physiology and training, aerobics, sales of physical
fitness equipment, marketing and management of physical fitness and
wellness centers, and teaching activities associated with the wellness
centers and/or physical fitness centers.
(b) To have and exercise any and all powers necessary to effect any and
all purposes for which the corporation is formed.
(c) To transact any and all lawful business for which a corporation may
be incorporated under the provisions of Chapter 2A of the "Alabama
Business Corporation Act," Section 10-2A-1, et. seq., Code of Alabama,
1975, as amended.
(d) CAPITAL STOCK:
The aggregate number of shares which this corporation shall have
authority to issue is 1,000 shares of common stock at a par value of $1.00 each.
Every share of said stock shall be
<PAGE> 2
equal to every other share of said stock and none of such stock shall have
preference over any other of said stock.
(5) REGISTERED OFFICE:
The address of the initial registered office of this corporation is
1530 6th Avenue, S.E, Decatur, Alabama, 35601, and the name of its initial
registered agent at such address is Paul G. Henderson.
(6) DIRECTORS:
The number of directors constituting the initial Board of Directors of
this Corporation is one (1) and the name and address of the person who is to
serve as director until the first annual meeting of the shareholders or until
successors are elected and shall qualify is:
Paul G. Henderson ---- 1530 6th Avenue, S.E.
Decatur, AL 35601
(7) INCORPORATORS:
The name and address of each incorporator is:
Paul G. Henderson ---- 1530 6th Avenue, S.E.
Decatur, AL 35601
(8) POWERS:
The corporation shall possess all the powers necessary to conduct the
business or businesses and carry out the objects and purposes herein expressed
and all those expressly conferred upon corporations by the laws of the State of
Alabama, as well as those necessarily implied, together with the following
additional powers:
A. To lend money and to take security therefor, or to borrow
money and to give security therefor, on such terms as the
Board of Directors may deem proper and advisable.
B. To purchase, acquire and own share of its capital stock or the
capital stock of any other corporation.
C. To purchase, sell, lease, exchange, assign, transfer convey,
pledge, or otherwise alienate, acquire, or dispose of any real
or personal property owned or otherwise acquired by the
corporation on such terms as the Board of Directors may deem
proper and advisable.
<PAGE> 3
D. To engage in business as natural persons may, not inconsistent
with the provisions of laws pertaining to corporations in the
State of Alabama.
IN WITNESS WHEREOF, I, Paul G. Henderson, being the incorporator
hereinabove named, have hereunto set my hand and seal of this the 26th day of
March, 1993.
/s/ Paul G. Henderson
---------------------
Paul G. Henderson
STATE OF ALABAMA )
)
COUNTY OF MORGAN )
Before me, the undersigned authority, a Notary Public, in and for said
County and State, personally appeared Paul G. Henderson, who being first duly
sworn, did depose and say that he has read the foregoing Articles of
Incorporation and that the same is true and correct to the best of his
knowledge, information and belief.
Sworn to and subscribed before me on this the 26 day of March, 1993.
/s/ R. Eric Summerford
------------------------------
Notary Public
My Commission expires: 6-28-93
<PAGE> 1
Exhibit 3.29
(TO BE EXECUTED IN DUPLICATE)
ARTICLES OF INCORPORATION
OF
MEDICAL PLAZA PHYSICAL THERAPY ASSOCIATES, INC.
We, the undersigned natural persons of the age of twenty-one years or
more, acting as incorporators of a corporation under the Mississippi Business
Corporation Law, adopted the following
Articles of Incorporation for such corporation:
FIRST: the name of the corporation is MEDICAL PLAZA PHYSICAL THERAPY
ASSOCIATES, INC. (P.A.)
SECOND: The period of its duration is 99 years (May not exceed 99
years)
THIRD: The specific purpose or purposes for which the
corporation is organized stated in general terms are:
To own and operate a clinic for the providing of physical therapy and
related services to patients and for the sale of necessary and related equipment
used by said patients, and to carry on any and all other activities and to do
all acts allowed under law to successfully carry out the above stated purpose or
purposes.
(It is not necessary to set forth in the Articles of Incorporation any of the
powers set fourth in Section 79-3-7 of the Mississippi Code of 1972.) (Use the
following if the shares are to consist of one class only.)
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 100 of the par value of Fifty Dollars ($50.00) each (or
without par value) (par value or sales price shall not be less than $1.00 per
share) (If no par shares are set out, then the sales price per share, if
desired.) (Use the following if the shares are divided into classes.)
FOURTH: The aggregate number of shares which the corporation is
authorized to issue is , divided into classes. The
designation of each class, the number of shares of each class and the par value,
if any, of the shares of each class, or a statement that the shares of any class
are without par value, are as follows: Par Value per Share
or Statement Number of Series That Shares are Shares
Class (if any) Without Par Value The preferences, limitations and relative
rights in respect of the shares of each class and the variations in the relative
rights and preferences as between series of any preferred to special class in
series are as follows: (Insert a statement of any authority to be vested in the
board of directors to establish series and fix and determine the variations in
the relative rights and preferences as between series.)
FIFTH: The corporation will not commence business until
consideration of the value of at least $1,000 has been received
for the issuance of shares.
<PAGE> 2
SIXTH: Provisions granting to shareholders the preemptive right to
acquire additional or treasury shares of the corporation are:
Any stock which may become available for sale, either thru resale of
original issue or thru additional authorized stock, shall be offered to
the existing stockholders before it is offered to the general public or
a non-stockholder.
SEVENTH: The street and post office address of its initial registered
office is 127 Lameuse Street, Suite 108
Biloxi MS
(Street and Number) (City)
(State)
and the name of its initial registered agent at such address is MICHAEL SMITH
EIGHTH: The number of directors constituting the initial board of
directors of the corporation, which must be not less than three (3), is three
and the names and addresses of the persons who are to serve as directors until
the first annual meeting of shareholders or until their successors are elected
and shall qualify are:
NAME STREET AND POST OFFICE ADDRESS
PAIGE B. PLASH 1242 Anchor Drive, Mobile, AL
36609
MICHAEL SMITH 5604 Candia Ct., Mobile, AL 36609
LYDIA L. SMITH 5604 Candia Ct., Mobile, AL 36609
NINTH: The name and post office address of each incorporator is:
NAME STREET AND POST OFFICE ADDRESS
DON W. KING 821 W. Howard Ave., Biloxi, MS 39530
CONNIE HERRING 821 W. Howard Ave., Biloxi, MS
39530
(Here set forth any provision, not inconsistent with law, which is
desired to be set forth in the Articles: Including, any provision
restricting the transfers of shares or any provision required or
permitted to be set forth in the by-laws)
Dated April 30 , 1987
----------- --
/s/ DON W. KING
-------------------
/s/ CONNIE HERRING
-------------------
ACKNOWLEDGEMENT
STATE OF MISSISSIPPI )
)
County of HARRISON )
This day personally appeared before me, the undersigned authority
DON W. KING ,
-----------
, CONNIE HERRING,
----------- -------------- -----------------,
, , ,
incorporators of the corporation known as the Medical Plaza
Physical Therapy Associates, Inc. (P.A.) ,
<PAGE> 3
who acknowledged that they signed and executed the above and
foregoing articles of incorporation as their act and deed on this
the 30th day of April, 1987 .
/s/ Judy Scaach
-----------------
Notary Public
My Commission expires July 2, 1990
(NOTARIAL SEAL)
ARTICLES OF AMENDMENT
(Attach conformed copy.)
/X/ PROFIT / / NON-PROFIT
(Mark appropriate box.)
The undersigned corporation, pursuant to Section 79-4-10.06
(if a profit corporation) or Section 79-11-305 (if a nonprofit
corporation) of the Mississippi Code of 1972, hereby executes the
following document and sets forth:
i. The name of the corporation is Medical Plaza Physical
Therapy Associates, Inc. (P.A.)
ii. Set forth the text of each amendment adopted. (Attach
page.)
iii. If a profit amendment provides for an exchange,
reclassification, or cancellation of issued shares, set
forth the provisions for implementing the amendment if they
are not contained in the amendment itself. (Attach page.)
iv. The amendment(s) was (were) adopted June 18, 1992
--------------
Date(s)
FOR PROFIT CORPORATION
(1) adopted by / / the incorporators /X/ directors without
shareholder action and shareholder action was not
required. (Check appropriate box.)
FOR NONPROFIT CORPORATION
(2) adopted by / / board of directors / / incorporators without
member action and member action was not required (Check
appropriate box.)
FOR PROFIT CORPORATIONS
v. If the amendment was approved by shareholders:
(1) The designation, number of outstanding shares, number
of votes entitled to be cast by each voting group entitled to
vote separately on the amendment, and the number of votes of
each voting group indisputably represented at the meeting was:
No. No. of No. of
Designation outstanding votes votes
entitled to Indisputably
shares be cast represented
(2) Either the total number of votes cast for and against the
amendment by each voting group entitled to vote separately on
the amendment was:
<PAGE> 4
<TABLE>
<S> <C> <C>
Total No. of Total No. of
Voting votes votes
Group cast FOR cast AGAINST
</TABLE>
or the total number of undisputed votes cast for the amendment by each
voting group was:
<TABLE>
<S> <C>
Total No. of
Voting undisputed
Group votes cast FOR
the plan
</TABLE>
and the number cast for the amendment by each voting group was
sufficient for approval by that voting group.
FOR NONPROFIT CORPORATIONS
vi. If the amendment was approved by the members:
(1) The designation, number of memberships outstanding,
number of votes entitled to be cast by each class entitled to
vote separately on the amendment, and number of votes of each
class indisputably represented at the meeting was:
<TABLE>
<S> <C> <C> <C>
No. No. of No. of
Designation outstanding votes votes
entitled to Indisputably
shares be cast represented
</TABLE>
(2) Either
(i) the total number of votes cast for and against the
amendment by each class entitled to vote separately
on the amendment was:
<TABLE>
<S> <C> <C>
Total No. of Total No. of votes
votes cast cast
Voting class FOR the AGAINST the
amendment amendment
</TABLE>
or
(ii) the total number of undisputed votes cast for the
amendment by each class was:
<TABLE>
<S> <C>
Total No. of
Voting undisputed
Group votes cast FOR the
amendment
</TABLE>
<PAGE> 5
and the number cast for the amendment by each class was
sufficient for approval by the voting group.
By Michael Smith - Secretary/Treasurer /s/ Michael Smith
- ---------------------------------------- ----------------
Printed Name/Corporate Title Signature
The following amendment of the Articles of Incorporation adopted by the board of
directors of the corporation on June 18, 1992, in the manner prescribed by the
Mississippi Business Corporation Act:
The name of the corporation is changed from Medical Plaza
Physical Therapy Associates, Inc., (P.A.) to Therapy Health
Systems, Inc.
<PAGE> 1
Exhibit 3.30
ARTICLES OF INCORPORATION
OF
HENDERSON & ASSOCIATES REHABILITATION, INC.
STATE OF ALABAMA )
)
COUNTY OF MORGAN )
The undersigned, Paul G. Henderson, desiring to become one body
corporate under and by virtue of the laws of the State of Alabama and acting as
incorporator of such corporation, does hereby sign and adopt the following
Articles of Incorporation for such corporation:
(1) NAME OF CORPORATION:
The name of this Corporation is:
Henderson & Associates Rehabilitation, Inc.
(2) PERIOD OF DURATION:
The period of duration of this Corporation is perpetual.
(3) PURPOSE OF THE CORPORATION:
The purposes for which this corporation is organized are:
(a) To engage in any and all lawful practices relative to the operation
of a rehabilitation center, including but not limited to physical
therapy, occupational therapy, speech therapy services and training,
sales of rehabilitation equipment, marketing and teaching activities
associated with the rehabilitation centers and to contract with other
agencies and facilities for rehabilitation services.
(b) To have and exercise any and all powers necessary to effect any and
all purposes for which the corporation is formed.
(c) To transact any and all lawful business for which a corporation may
be incorporated under the provisions of Chapter 2A of the "Alabama
Business Corporation Act," Section 10-2A-1, et. seq., Code of Alabama,
1975, as amended.
(d) CAPITAL STOCK:
The aggregate number of shares which this corporation shall have
authority to issue is 1,000 shares of common stock at a par value of $1.00 each.
Every share of said stock shall be
<PAGE> 2
equal to every other share of said stock and none of such stock shall have
preference over any other of said stock.
(5) REGISTERED OFFICE:
The address of the initial registered office of this corporation is
1530 6th Avenue, S.E, Decatur, Alabama, 35601, and the name of its initial
registered agent at such address is Paul G. Henderson.
(6) DIRECTORS:
The number of directors constituting the initial Board of Directors of
this Corporation is one (1) and the name and address of the person who is to
serve as director until the first annual meeting of the shareholders or until
successors are elected and shall qualify is:
Paul G. Henderson ---- 1530 6th Avenue, S.E.
Decatur, AL 35601
(7) INCORPORATORS:
The name and address of each incorporator is:
Paul G. Henderson ---- 1530 6th Avenue, S.E.
Decatur, AL 35601
(8) POWERS:
The corporation shall possess all the powers necessary to conduct the
business or businesses and carry out the objects and purposes herein expressed
and all those expressly conferred upon corporations by the laws of the State of
Alabama, as well as those necessarily implied, together with the following
additional powers:
A. To lend money and to take security therefor, or to borrow
money and to give security therefor, on such terms as the
Board of Directors may deem proper and advisable.
B. To purchase, acquire and own share of its capital stock or the
capital stock of any other corporation.
C. To purchase, sell, lease, exchange, assign, transfer convey,
pledge, or otherwise alienate, acquire, or dispose of any real
or personal property owned or otherwise acquired by the
corporation on such terms as the Board of Directors may deem
proper and advisable.
<PAGE> 3
D. To engage in business as natural persons may, not inconsistent
with the provisions of laws pertaining to corporations in the
State of Alabama.
IN WITNESS WHEREOF, I, Paul G. Henderson, being the incorporator
hereinabove named, have hereunto set my hand and seal of this the 26th day of
March, 1993.
/s/ Paul G. Henderson
---------------------
Paul G. Henderson
STATE OF ALABAMA )
)
COUNTY OF MORGAN )
Before me, the undersigned authority, a Notary Public, in and for said
County and State, personally appeared Paul G. Henderson, who being first duly
sworn, did depose and say that he has read the foregoing Articles of
Incorporation and that the same is true and correct to the best of his
knowledge, information and belief.
Sworn to and subscribed before me on this the 26th day of March, 1993.
/s/ R. Eric Summerford
-----------------------------
Notary Public
My Commission expires: 6-28-93
-------
This document prepared by:
R. Eric Summerford
NOWLIN, SUMMERFORD & MCBRIDE
118 East Moulton Street
P. O. Box 1149
Decatur, Alabama 35602
(205) 353-8601
<PAGE> 1
Exhibit 3.31
ARTICLES OF INCORPORATION
OF
SUNBELT THERAPY MANAGEMENT SERVICES, INC.
1. Name. The name of the corporation is Sunbelt Therapy Management
Services, Inc. (the "Corporation").
2. Purpose. The purpose for which this Corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as they may be amended from
time to time.
3. Initial Business. The Corporation initially intends to conduct the
business of operating physical rehabilitation centers.
4. Authorized Capital. The Corporation shall have authority to issue
400,000 shares of common stock and 100,000 shares of preferred stock.
5. Preferred Stock.
5.1 Series. The board of directors is authorized, subject to
limitations prescribed by law and these Articles of Incorporation, to provide
for the issuance of the shares of preferred stock in series, and by filing a
certificate pursuant to the applicable law of the State of Arizona, to establish
from time to time the number of shares to be included in each such series, and
to fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions thereof.
5.2 Rights and Limitations. The authority of the board of
directors with respect to each series of preferred stock shall include, without
limitation, determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares of
that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges,
and if so, the terms and conditions of such conversion, including provisions for
adjustment of the conversion rate in such events as the board of directors shall
determine;
(e) Whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption, including
the date or dates upon or after
<PAGE> 2
which they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and if so, the terms and amount
of such sinking fund;
(g) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(h) Any other relative rights, preferences and
limitations of that series.
5.3 Dividends. Dividends on outstanding shares of preferred
stock shall be paid or declared and set apart for payment before any dividends
shall be paid or declared and set apart for payment on the common shares with
respect to the same dividend period.
5.4 Liquidation. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets available
for distribution to holders of shares of preferred stock of all series shall be
insufficient to pay such holders the full preferential amount to which they are
entitled, then such assets shall be distributed ratably among the shares of all
series of preferred stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.
6. Statutory Agent and Known Place of Business. The name and address of
the initial statutory agent of the Corporation is Lawdock, Inc., One East
Camelback Road, Suite 400, Phoenix, Arizona 85012. The initial Known Place of
Business shall be 7272 East Indian School Road, Suite 214, Scottsdale, Arizona
85251.
7. Initial Directors and Officers. The initial board of directors shall
consist of five directors. The names and addresses of the persons who are to
serve as directors until the first annual meeting of shareholders or until their
successors are elected and qualify are:
<TABLE>
<S> <C>
Jerry M. Walker 7272 East Indian School Road, Suite 214, Scottsdale, Arizona 85251
Phillip R. Rollins 7272 East Indian School Road, Suite 214, Scottsdale, Arizona 85251
Craig R. Clark 7272 East Indian School Road, Suite 214, Scottsdale, Arizona 85251
Paul G. Henderson 7272 East Indian School Road, Suite 214, Scottsdale, Arizona 85251
Paige B. Plash 7272 East Indian School Road, Suite 214, Scottsdale, Arizona 85251
</TABLE>
The number of persons to serve on the board of directors thereafter
shall be fixed by the Bylaws. The persons who are to serve as officers at the
pleasure of the board of directors are:
Jerry M. Walker, Chairman
Paul Henderson, President
Craig R. Clark, Treasurer
Phillip R. Rollins, Secretary
2
<PAGE> 3
8. Incorporators. The incorporator of the Corporation, and his
addresses, is:
Phillip R. Rollins
7272 East Indian School Road, Suite 214,
Scottsdale, Arizona 85251
All powers, duties and responsibilities of the incorporators shall cease at the
time of delivery of these Articles of Incorporation to the Arizona Corporation
Commission for filing.
9. Distributions to Shareholders. The board of directors may authorize
and the Corporation may make distributions to its shareholders except, if, after
giving effect to such distribution, (i) the Corporation would not be able to pay
its debts as they become due in the usual course of business, or (ii) the
Corporation's total assets would be less than the sum of its total liabilities
without regard for the amount that would be needed, if the Corporation were to
be dissolved at the time of the distribution, to satisfy any preferential rights
of those shares not receiving the distribution.
10. Director Liability. A director of the Corporation shall not be
personally liable to the Corporation or its shareholders for monetary damages
for any action taken or any failure to take any action as a director, except for
liability (i) for the amount of a financial benefit received by a director to
which the director is not entitled (ii) for an intentional infliction of harm on
the Corporation or the shareholders, (iii) for an intentional violation of
criminal law, or (iv) for a violation of Section 10-833 of the Arizona Business
Corporation Act. If the Arizona Business Corporation Act is amended after
approval by the shareholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Arizona Business Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification. No amendment to the Arizona Revised Statutes that further
limits the acts, omissions or transactions for which elimination or limitation
of liability is permitted shall affect the liability of a director for any act,
omission or transaction which occurs prior to the effective date of such
amendment.
EXECUTED this 27th day of March, 1996.
/s/ Phillip R. Rollins
--------------------------------
Phillip R. Rollins, Incorporator
3
<PAGE> 1
Exhibit 3.32
ARTICLES OF INCORPORATION
The undersigned desiring to form a corporation (hereinafter referred to as
"Corporation") pursuant to the provisions of Indiana Business Corporation Law.
ARTICLE I.
NAME
Name of Corporation - CEDAR CARE, INC.
ARTICLE II.
REGISTERED OFFICE AND AGENT
The street address of the corporation's initial registered office in Indiana and
the name of its initial registered agent at that office is:
David E. Cooper
406 Ansley Court
Indianapolis, Indiana 46234
ARTICLE III.
AUTHORIZED SHARES
Number of shares: 1,000 Shares of Common.
ARTICLE IV.
INCORPORATORS
The name(s) and address(es) of the incorporator(s) of the corporation:
David E. Cooper
406 Ansley Court
Indianapolis, IN 46234
IN WITNESS WHEREOF, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true, this 18th
day of July, 1991.
/s/ David E. Cooper
-------------------
David E. Cooper
Instrument was prepared by:
William T. Rees
8355 Rockville Road
Indianapolis, IN 46234
<PAGE> 2
[SEAL OF
THE STATE ARTICLES OF INCORPORATION Provided by: EVAN BAYH
OF State Form 4159 (R6 /3-88)
INDIANA] Secretary of State
Room 155, State House
Indianapolis, Indiana 46204
(317) 232-6576
Indiana Code 23-1-21-2
FILING FEE $90.00
INSTRUCTIONS: Use 8-1/2 x 11 inch white paper for inserts.
Filing requirements - Present original and
one copy to the address in the upper right
corner of this form.
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION OF
- --------------------------------------------------------------------------------
(Indicate the appropriate act)
The undersigned desiring to form a corporation (herein after referred to as
"Corporation") pursuant to the provisions of:
[X] Indiana Business Corporation Law
[ ] Indiana Professional Corporation Act 1983
As amended, executes the following Articles of Incorporation:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE I NAME
- --------------------------------------------------------------------------------
Name of Corporation
CEDAR CARE, INC.
- --------------------------------------------------------------------------------
(The name must contain the word "Corporation," "Incorporated," "Limited,"
"Company" or an abbreviation of one of those words.)
- --------------------------------------------------------------------------------
ARTICLE II REGISTERED OFFICE AND AGENT
- --------------------------------------------------------------------------------
(The street address of the corporation's initial registered office in Indiana
and the name of its initial registered agent at that office is:)
- --------------------------------------------------------------------------------
Name of Agent
DAVID E. COOPER
- --------------------------------------------------------------------------------
Street Address of Registered Office Zip Code
406 Ansley Court, Indianapolis, Indiana 46234
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE III AUTHORIZED SHARES
- --------------------------------------------------------------------------------
Number of shares: 1000 Shares - Common Stock
--------------------------------------------------------------
If there is more than one class of shares, shares with rights
and preferences, list such information on "Exhibit A."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE IV INCORPORATORS
(The name(s) and address(es) of the incorporator(s) of the corporation:)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER and STREET
NAME OR BUILDING CITY STATE ZIP CODE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAVID E. COOPER 406 Ansley Court Indianapolis Indiana 46234
- --------------------------------------------------------------------------------
</TABLE>
In Witness Whereof, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true,
this 18th day of July 1991.
---- ---- --
- --------------------------------------------------------------------------------
Signature Printed Name
/s/ David E. Cooper David E. Cooper
- --------------------------------------------------------------------------------
Signature Printed Name
- --------------------------------------------------------------------------------
Signature Printed Name
- --------------------------------------------------------------------------------
This instrument was prepared by (Name)
William T. Rees
- --------------------------------------------------------------------------------
Address (Street, Number, City and State) Zip Code
8355 Rockville Road, Indianapolis, Indiana 46234
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 3.33
ARTICLES OF INCORPORATION
The undersigned desiring to form a corporation (hereinafter referred to as
"Corporation") pursuant to the provisions of Indiana Business Corporation Law.
ARTICLE I.
NAME
Name of Corporation - SHERWOOD HEALTHCARE CORP.
ARTICLE II.
REGISTERED OFFICE AND AGENT
The street address of the corporation's initial registered office in Indiana and
the name of its initial registered agent at that office is:
William Robert Lee
1302 Sherwood Drive
Greenfield, Indiana 46140
ARTICLE III.
AUTHORIZED SHARES
Number of shares: 1,000 Shares of Common.
ARTICLE IV.
INCORPORATORS
The name(s) and address(es) of the incorporator(s) of the corporation:
William Robert Lee
1302 Sherwood Drive
Greenfield, IN 46140
IN WITNESS WHEREOF, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true, this 15th
day of February, 1991.
/s/ William Robert Lee
----------------------
William Robert Lee
Instrument was prepared by:
William Robert Lee
<PAGE> 2
1302 Sherwood Drive
Greenfield, IN 46140
STATEMENT OF CONSENT TO ACT
AS REGISTERED AGENT
CT Corporation System hereby accepts the appointment to serve as
registered agent in Indiana for SHERWOOD HEALTHCARE CORP.
March 11, 1994 C T CORPORATION SYSTEM
By: /s/Daniel R. Glatz
-----------------------
Daniel R. Glatz,
Asst. Vice President
<PAGE> 1
Exhibit 3.34
GENERAL PARTNERSHIP AGREEMENT
OF
BRITWILL INDIANA PARTNERSHIP
(an Arizona General Partnership)
This General Partnership Agreement is entered into as of the 1st day of
February, 1997, by and among BritWill Investments - I, Inc., a Delaware
corporation, Sherwood Healthcare Corp., an Indiana corporation, and Cedar Care,
Inc., an Indiana corporation.
In consideration of the mutual agreements and covenants hereinafter set
forth, the parties hereto agree as follows:
ARTICLE I
Definitions
The following terms used in this Agreement and not elsewhere defined
shall, unless the context otherwise requires, have the following meanings:
1.1 Agreement. This General Partnership Agreement, as it may be amended
from time to time.
1.2 Bankruptcy. For purposes of this Agreement, the "bankruptcy" of a
Partner or the Partnership (as the case may be) shall be deemed to have occurred
upon the happening of any of the following: (a) the filing of an application by
a Partner or the Partnership for, or a consent to, the appointment of a trustee
of its assets; (b) the filing of a Partner or the Partnership of a voluntary
petition in bankruptcy, arrangement, reorganization or other debtor relief laws
of the United States or any state or other jurisdiction or the filing of a
Partner or the Partnership of a pleading in any court of record admitting in
writing its inability to pay its debts as they come due; (c) the making by a
Partner or the Partnership of a general assignment for the benefit of creditors;
(d) the filing by a Partner or the Partnership of, or its consenting to, or
defaulting in answering, a bankruptcy petition filed against it in any
bankruptcy proceeding; (e) the filing of a petition against a Partner or the
Partnership seeking relief under the bankruptcy, arrangement, reorganization or
other debtor relief laws of the United States or any state or other
jurisdiction; (f) the entry against a Partner or the Partnership of a charging
order which is not dismissed within sixty (60) days or; (g) the entry of an
order, judgment or decree by a court of competent jurisdiction adjudicating a
Partner or the Partnership bankrupt or, without the consent of such Partner or
Partnership, appointing a trustee or receiver for it or for all or any part of
its assets, and such order, judgment or decree shall be unstayed and in effect
for any period of sixty (60) consecutive days.
<PAGE> 2
1.3 Capital Account. The capital account of a Partner, as described and
maintained in accordance with Section 3.4 hereof.
1.4 Capital Contribution. All sums, including the fair market value of
any asset, contributed to the capital of the Partnership pursuant to this
Agreement, without reduction for any distributions to the Partners.
1.5 Code. The Internal Revenue Code of 1986, as amended.
1.6 Credits. For each fiscal year of the Partnership, the amount of any
credit available to the Partnership and its Partners under the Code.
1.7 Expiration Date. December 31, 2044.
1.8 Interest. The interest, or part thereof, of a Partner in the
Partnership, including the rights of such Partner to any and all benefits to
which a Partner in his or her capacity as such may be entitled hereunder. The
Interest of a Partner in the Partnership shall be represented by a Partner's
Percentage Interest. Each Partner shall have identical voting rights, equal to
its Percentage Interest in the Partnership.
1.9 Managing Partner. The person designated and acting as Managing
Partner pursuant to Article V hereof.
1.10 Partners. The Partners, including the Managing Partner,
collectively.
1.11 Partnership. The General Partnership formed pursuant to this
Agreement.
1.12 Partnership Act. The Uniform Partnership Act of the State of
Arizona, contained in Title 29 of the Arizona Revised Statutes, as amended from
time to time.
1.13 Partnership Properties. Any and all property acquired or leased by
the Partnership.
1.14 Partnership Term. The period of time between the Effective Date
and the date the winding up of the Partnership business is completed.
1.15 Percentage Interest. A Partner's Interest in the Partnership
obtained by dividing each Partner's Capital Contribution by the total Capital
Contributions of all Partners, unless and until there is a change in accordance
with the terms of this Agreement. The initial Percentage Interests of the
Partners are set forth in Exhibit A hereto.
1.16 Profits, Losses and Credits. For each fiscal year or other period,
an amount equal to the Partnership's taxable income or taxable loss for such
year or period, determined in accordance with Section 703(a) of the Code (and
for this purpose, all items of income,
2
<PAGE> 3
gain, loss or deduction required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in taxable income or taxable loss) and
the Partnership's Credits.
ARTICLE II
FORMATION, PURPOSES, TERM, ETC.
2.1 Formation of Partnership. The Partners hereby form a general
partnership in accordance with the Arizona Uniform Partnership Act and other
applicable laws of the State of Arizona.
2.2 Partnership Name. The name of the Partnership shall be Britwill
Indiana Partnership, and the business of the Partnership shall be conducted
under that name or such other name or names as the Majority in Interest of the
Partners shall hereafter agree upon in writing.
2.3 Expenses. The Partnership shall bear the expenses incident to its
formation and operation. The Partnership shall pay, or reimburse the Partners
for, expenses incurred by them in connection with the formation and organization
of the Partnership and for matters undertaken by them in the interest of the
Partnership.
2.4 Purposes of the Partnership. The purpose of the Partnership is to
acquire, own, hold, develop, improve, construct, rehabilitate, mortgage,
encumber, manage, operate, lease, exchange, buy and sell property, including
without limitation, long term health care facilities and property related
thereto, located in the State of Indiana, and to do any and all things relating
or incidental thereto, including the investment of funds held in reserve
pursuant to this Agreement The Partnership shall not engage in any activity or
business inconsistent with the purposes of the Partnership as set forth in this
Section 2.4.
2.5 Term. The partnership has a definite term. The Partnership is
required to wind up its business on the Expiration Date. The Partnership may be
required to wind up its business on a date earlier than the Expiration Date if
an event requiring winding up of the Partnership occurs.
2.6 Principal Place of Business. The principal place of business of the
Partnership is 7272 E. Indian School Road, #214, Scottsdale, Arizona 85251.
2.7 Additional Partners. No person or entity shall be admitted as a
Partner without the consent of a Majority in Interest of the Partners.
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<PAGE> 4
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Capital Contributions. Upon the call by a majority vote of the
Partners, and subject to the Partners obtaining the necessary consents of
lessors and sublessors and necessary governmental licenses, permits and
authorizations for the Partnership, the Partners shall contribute to the
Partnership the assets and business described in Exhibits A-1, A-2 and A-3
hereto and the Partnership shall assume all liabilities related to such assets
and business. The Partners agree that the net fair market value (gross fair
market value of assets and business less liabilities assumed or to which such
assets and business are subject) of each Partner's initial Capital Contribution
as so described in Exhibits A-1, A-2 and A-3 is as set forth in Exhibit A.
3.2 Additional Capital Requirements.
If additional capital is reasonably necessary for the Partnership to
accomplish its purposes as set forth in Section 2.4, then the Managing Partner
is authorized to require each Partner to make additional Capital Contributions
to the Partnership, in such proportion to each Partner's Percentage Interest.
3.3 Failure to Make Capital Contributions. If a Partner (the
"Defaulting Partner") fails or refuses to make payment of any required initial
or additional Capital Contribution, the other Partners, in proportion to the
Percentage Interests of such other Partners who exercise the following election
(collectively, the "Curing Partner"), may, at their sole discretion:
(a) Loan to the Defaulting Partner, by way of advance to the
Partnership on behalf of the Defaulting Partner, the amount of the Defaulting
Partner's Capital Contribution, in which event the Defaulting Partner and its
Percentage Interest will be credited with such additional Capital Contribution
and said loan advance bears interest at the highest rate permitted by law (the
"Interest Rate"). Thereafter, all Partnership distributions or withdrawals
attributable to the Defaulting Partner's Percentage Interest will be paid
directly to the Curing Partner until such time as all such advances, together
with accrued interest thereon, have been fully repaid.
3.4 Establishment and Maintenance of Capital Accounts.
(a) A Partnership Capital Account is established for each
Partner. The amount in a Partner's Capital Account is initially to be the amount
of the Partner's Capital Contribution set forth in Exhibit A hereto.
(b) A Partner's Capital Account shall be credited or charged
(as the case may be) with such Partner's Capital Contributions, distributable
share of Partnership Profit,
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<PAGE> 5
Loss or Credit determined pursuant to Article IV of this Agreement, and such
Partner's allocable share of distributions.
(c) It is the intent of the Partners that Capital Accounts be
maintained at all times in strict accordance with the rules governing
maintenance of capital accounts set forth in Section 1.704-1(b)(2)(iv) of the
Treasury Regulations.
(d) No Partner shall demand or receive interest on or a return
of his or her Capital Contribution except as provided in this Agreement.
(e) No Partner has any right to payment for or redemption of
his Partnership Interest except with the written consent of a Majority in
Interest of the Partners or except as otherwise provided in this Agreement.
(f) If, after any final allocation of items of Profit, Loss
and Credit, and distributions of cash and other Partnership assets to the
Partners upon termination and liquidation of the Partnership, any Partner has a
debit (negative) balance in his Capital Account, such Partner is required to
contribute to the capital of the Partnership cash equal to such debit balance,
which cash will be distributed among the remaining Partners pro rata in
accordance with their positive Capital Account balances, or paid to the
creditors of the Partnership.
ARTICLE IV
ALLOCATIONS OF PROFITS AND LOSSES;
DISTRIBUTIONS
4.1 Profits, Losses and Credits.
Except as provided in Section 4.2:
(a) Profits, Losses and Credits shall be allocated among the
Partners in accordance with their respective Percentage Interests in the
Partnership.
(b) Items of income of the Partnership exempt from federal
income tax and expenditures not deductible in computing taxable income are
allocable among the Partners in the same manner as provided above in
subparagraph (a).
4.2 Change in Interest. If there is a change in the Percentage
Interests of the Partners in the Partnership during the fiscal year for which
allocations of items of Profits, Losses, or Credits are made, each such item
shall be assigned to the portion of the fiscal year (determined in days) to
which economically attributable, determined on an accrual basis, and apportioned
as if realized evenly over that portion of the fiscal year. The amounts so
5
<PAGE> 6
apportioned shall then be allocated among the Partners in proportion to their
respective Percentage Interests in such items in the Partnership during the
respective portions of the fiscal year.
4.3 Distributions. All Partnership cash not required for the
Partnership business (including working capital and capital reserves) may only
be distributed in amounts and at times as may be determined by the Managing
Partner, in its sole discretion. The Managing Partner may consider special
circumstances of the Partnership and of individual Partners and may allow
disproportionate or no distributions among Partners. It is intended that the
Managing Partner determines, in its sole discretion, when, how much and to whom
withdrawals or distributions are made.
ARTICLE V
Management
5.1 Designation and Removal of Managing Partner.
(a) The initial Managing Partner of the Partnership is
BritWill Investments - I, Inc.
(b) The Managing Partner may be removed and a successor
Managing Partner designated only upon the written consent or affirmative
majority vote of the Partners.
(c) The Partners removal of the Managing Partner does not
operate to relieve the removed Managing Partner from liability, if any, for any
claims arising from acts or omissions while it was a Managing Partner, or from
any of said Managing Partner's duties or obligations, whether or not incurred or
accrued before such removal.
5.2 General Rights of the Managing Partner as Manager. The Managing
Partner has full, exclusive and complete discretion to manage and control, and
makes all decisions affecting the Partnership business. The Managing Partner has
full authority to take any actions which the Managing Partner believes in good
faith to be in furtherance of the Partnership business and purposes and to
exercise all rights and powers generally conferred by law in connection
therewith. No person, firm or corporation dealing with the Partnership is
required to inquire into, or obtain any consent or other documentation as to the
authority of the Managing Partner to take any such action or to exercise any
such rights or powers. The Managing Partner may on behalf of the Partnership
execute such contracts, agreements, leases, documents and other instruments as
the Managing Partner may deem necessary for the Partnership's business.
5.3 Obligations Not Exclusive. The Managing Partner is required to
devote and dedicate a sufficient amount of its time and expertise to the
furtherance of the Partnership
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<PAGE> 7
purposes and the management of the Partnership's business, it being understood
that the Managing Partner may engage in other unrelated businesses and
investments for its own account.
5.4 Indemnification of the Managing Partner. The Partnership agrees to
indemnify the Managing Partner from all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the Managing Partner's management of the Partnership affairs,
except that the Partnership is not required to indemnify the Managing Partner if
the claim is based upon:
(a) A matter entirely unrelated to the Managing Partner's
management of the Partnership affairs;
(b) The gross negligence, willful misconduct, fraud, deceit or
wrongful taking by the Managing Partner; or
(c) The material breach of the Managing Partner of any
provision of this Agreement.
5.5 Liability. The Managing Partner must perform its duties under this
Agreement with ordinary prudence and in a manner reasonable under the
circumstances. The Managing Partner is not liable to the Partnership or the
other Partners (or any other person) for any loss or liability caused by any act
or by the failure to do any act unless such loss or liability arises from the
Managing Partner's intentional misconduct, gross negligence or fraud. The
Managing Partner is not liable for a mistake in judgment made in good faith or
action or lack of action based on the advice of legal counsel. Further, the
Managing Partner is not liable for its failure to take any action unless it is
specifically directed to take such action under the terms of this Agreement.
ARTICLE VI
BOOKS OF ACCOUNT; RECORDS AND REPORTS
6.1 Fiscal Year. The Partnership fiscal year is the calendar year.
6.2 Maintenance of Books and Records. The Partnership books shall be
kept by the Managing Partner on the accrual basis of accounting in accordance
with generally accepted accounting principles and are to be maintained at
Partnership expense by such accounting firms as the Managing Partner may
designate.
6.3 Financial Reporting. The Managing Partner is required to distribute
to each Partner at least annually a financial report reflecting all partnership
operations including a balance sheet and profit and loss statement. All
accounting expenses incurred pursuant to the
7
<PAGE> 8
foregoing provisions are to be borne by the Partnership and accounted for as a
Partnership expense.
6.4 Tax Returns. The Managing Partner is also responsible for the
preparation of the annual Partnership income tax return and must furnish a copy
of same, together with Schedules K-1, to the Partners after the end of each
Partnership year.
6.5 Tax Matters Partner. The Managing Partner shall be the party
designated to receive all notices from the Internal Revenue Service which
pertain to the tax affairs of the Partnership and shall be the "Tax Matters
Partner" as that term is used in the Code.
ARTICLE VII
DISPOSITION, WITHDRAWAL AND DISSOLUTION
7.1 Disposition of Partner's Interest. No Partner may assign, transfer,
exchange, dispose of, pledge, hypothecate or encumber (voluntarily or
involuntarily) all or any part of such Partner's Interest in the Partnership
without the written consent of all Partners. Any attempted unpermitted
assignment of all or any part of an Interest of any Partner is void, except to
the extent otherwise provided by law.
7.2 Withdrawal of Partner. Any notice of withdrawal by a Partner is not
effective unless in writing actually received by the Managing Partner, or in the
case of a withdrawal by the Managing Partner, in writing actually received by a
majority in interest of the remaining Partners.
7.3 Dissolution. The following are events requiring the dissolution of
the Partnership:
(a) The arrival of the Expiration Date;
(b) The Partnership sells all or substantially all of its
assets or becomes bankrupt;
(c) The express written agreement of a Majority in Interest of
the Partners;
(d) The occurrence of any other circumstances which by law or
pursuant to this Agreement would require that the Partnership be wound up.
7.4 Final Accounting. When an event occurs requiring the dissolution of
the Partnership, an accounting must be made of the accounts of the Partnership,
the account of each Partner thereof, and the Partnership's assets, liabilities
and operations from the date of the last previous accounting to the date of
completion of such dissolution.
8
<PAGE> 9
7.5 Liquidation. In the event of the dissolution of the Partnership for
any reason set forth in Sections 7.3(a)-(c), the Managing Partner (or such
person as may be designated by a majority vote of the Partners if the
dissolution is caused by the Managing Partner) shall commence to wind up the
affairs of the Partnership and to liquidate its business. The Partners shall
continue to share Profits, Losses and Credits during the period of liquidation
in the same proportions as before the dissolution. The Managing Partner shall
have full right and unlimited discretion to determine the time, manner and terms
of any sale or sales of Partnership Property pursuant to such liquidation,
giving due regard to the activities and condition of the relevant market and
general, financial and economic conditions.
If the Partnership is dissolved pursuant to Section 7.3(d), by reason
of the bankruptcy, dissolution, withdrawal or other action of any Partner, the
Partnership and its business shall be continued by the remaining Partners under
the terms of this Agreement and not be liquidated unless such remaining Partners
determine otherwise by approval of a majority vote.
7.6 Distribution Upon Liquidation. The proceeds of the liquidation and
any other funds of the Partnership shall be distributed in accordance with the
positive balances of each Partner's respective Capital Account following the
payment of all debts and liabilities of the Partnership (including loans from
Partners, but only after other creditors and obligees have been paid) and all
expenses of liquidation, and subject to the right and power of the Partners to
set up such cash reserves as they may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Partnership;
provided, however, that if any Partnership assets remain unsold at the time of
such distribution, the unsold assets shall first be valued to determine the gain
or loss which would have resulted if such assets had been sold and the capital
accounts of the Partners shall be adjusted to reflect how such gain or loss
would have been allocated to the Partners pursuant to Article IV hereof if such
assets had been sold at the assigned value. The unsold Partnership assets shall
then be distributed to the Partners in repayment of their Capital Accounts,
using the values so assigned for purposes of this Section 7.6. Any unsold assets
of the Partnership shall be valued by approval of a majority vote of the
Partners or, if no such approval occurs, within sixty (60) days following the
event giving rise to dissolution of the Partnership, by an appraisal firm chosen
by the Managing Partner(s).
7.7 Compliance With Timing Requirements of Regulations. In the event
the Partnership is "liquidated" within the meaning of Treas. Regs. Section
1.704-1(b)(2)(ii)(g):
(a) Distributions shall be made pursuant to this Article VII
(if such liquidation constitutes a dissolution of the Partnership) or Article IV
hereof (if it does not) to the Partners who have positive Capital Accounts in
compliance with Treas. Regs. Section 1.704-1(b)(2)(ii)(b)(2); and
(b) If any Partner's Capital Account has a deficit balance
(after giving effect to all Capital Contributions, Distributions and allocations
of Profits and Losses for all fiscal
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<PAGE> 10
years, including the year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such deficit balance to zero in compliance with Treas. Regs.
Section 1.704-1(b)(2)(ii)(b)(3).
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment of Agreement. This Agreement shall not be amended except
by the written agreement of all of the Partners.
8.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the internal
laws of the State of Arizona.
8.3 Enforceability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby, unless the context otherwise requires.
8.4 Binding Effect. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their legal representatives, heirs, administrators, executors,
successors and permitted assigns.
8.5 Captions. The captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
8.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument.
8.7 Notices. Except as otherwise specifically provided herein, all
notices or other communications required or permitted to be given pursuant to
this Agreement shall be in writing and shall be delivered by hand or if mailed
from within the United States by first class United States mail, postage
prepaid, and addressed, to the address set forth on Exhibit A, attached hereto.
A Partner may change its address by giving notice in writing to the other
Partners, stating its new address. Notice to the Partners, if deposited in the
mail as hereinabove provided, is deemed effective as to each named addressee two
(2) business days after it is so deposited. Notice to a Partner given in any
other manner, is effective only when received by such addressee.
8.8 Specific Performance. If any Partner shall at any time transfer or
attempt to transfer his interest in violation of the provisions of this
Agreement and any rights hereby granted, the other Partners shall, in addition
to all rights and remedies at law and in equity,
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<PAGE> 11
be entitled to a decree or order restraining and enjoining such transfer and the
offending Partner shall not plead in defense thereto that there would be an
adequate remedy at law; it being hereby expressly acknowledged and agreed that
damages at law will be an inadequate remedy for a breach or threatened breach or
the violation of the provisions concerning transfer set forth in this Agreement.
8.9 Entire Agreement. This Agreement constitutes the entire agreement
among the parties thereto. It supersedes any prior agreement of understanding
among them and may not be modified or amended in any manner other than as set
forth herein.
8.10 Attorney's Fees. In the event the Partnership or any Partner takes
legal action against a Partner (the "defaulting Partner") to enforce one or more
of the provisions of this Agreement, the defaulting Partner shall pay the
reasonable costs incurred by the Partnership or such other Partner in enforcing
such provisions, including without limitation reasonable attorneys' fees.
8.11 Waiver of Partition.
Notwithstanding any statute or principle of law to the contrary, each
Partner hereby agrees that, during the term of the Partnership, it shall have no
right (and hereby waives any right that it might otherwise have had) to cause
any Partnership assets to be partitioned and/or distributed in kind.
8.12 Election by Partnership as to Optional Adjustment to Basis.
Upon the request of any Partner given in writing to the Managing
Partner and upon the approval of a majority vote of the Partners, the
Partnership shall file an election under Section 754 of the Code, in accordance
with the procedure set forth in the applicable Treasury Regulations. Such
requesting Partner(s) agrees to bear all additional legal and accounting
expenses resulting from the making of such election.
IN WITNESS WHEREOF, the undersigned have set their hands on the day and
year first above written.
BRITWILL INVESTMENTS - I, INC. CEDAR CARE, INC.
By: /s/ Jerry M. Walker By: /s/ Jerry M. Walker
- ----------------------- -------------------
President President
SHERWOOD HEALTHCARE CORP.
By: /s/ Jerry M. Walker
- -----------------------
President
11
<PAGE> 12
BRITWILL INDIANA PARTNERSHIP
EXHIBIT A
DESCRIPTION OF PARTNERS, NET FAIR MARKET VALUE OF
CAPITAL CONTRIBUTIONS, AND PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
Capital Partnership
Name and Address of Partner Contribution Interest
- --------------------------- ------------ --------
<S> <C> <C>
BritWill Investments - I, Inc.
7272 E. Indian School Road, #214
Scottsdale, AZ 85251 $ 1%
(As set forth in Exhibit A-1)
Sherwood Healthcare Corp.
7272 E. Indian School Road, #214
Scottsdale, AZ 85251 $18,644,000 68%
(As set forth in Exhibit A-2)
Cedar Care, Inc.
7272 E. Indian School Road, #214
Scottsdale, AZ 85215 $9,633,000 31%
(As set forth in Exhibit A-3)
TOTAL $__________ 100%
</TABLE>
12
<PAGE> 13
BRITWILL INDIANA PARTNERSHIP
EXHIBIT A-1
BRITWILL INVESTMENTS-I, INC.
DESCRIPTION OF CAPITAL CONTRIBUTION
All of BritWill Investments-I, Inc.'s leasehold interests under the
lease agreement with Omega Healthcare Investors, Inc. as Lessor regarding the
following health care facilities: Capital Care Healthcare Center, Kendallville
Manor Healthcare Center, Sunset Manor, English Assisted Living, English Estates
Healthcare, Wellington Manor, Cloverleaf of Knightsville, Lockerbie Healthcare
Center, and Willow Manor Convalescent. The Partnership shall assume all of the
obligations of BritWill Investments-I,Inc. under such lease agreement with Omega
Healthcare Investors, Inc.
13
<PAGE> 14
BRITWILL INDIANA PARTNERSHIP
EXHIBIT A-2
SHERWOOD HEALTHCARE CORP.
DESCRIPTION OF CAPITAL CONTRIBUTION
All of Sherwood Healthcare Corp.'s assets and business relating to the
following healthcare facilities: Parkview Manor health care facility located at
2424 East 46th Street, Indianapolis, Indiana; Owensville Convalescent Center,
Hwy. 165 West, Owensville, Indiana; Capital Care Healthcare Center, 2115 North
Central Avenue, Indianapolis, Indiana; Kendallville Manor Healthcare Center,
1802 East Dowling Street, Kendallville, Indiana; Sunset Manor, 1109 South
Indiana Street, Greencastle, Indiana; Holiday Manor, 305 North 6th Street,
Princeton, Indiana; and Boonville Convalescent Center, 725 South Second Street,
Boonville, Indiana 47601 (collectively the "Facilities") including without
limitation all leasehold interests under leases or subleases of the Facilities,
accounts receivable, contract rights, furniture, fixtures, leasehold
improvements, machinery, instruments, equipment, parts and supplies, inventory,
prepaid items, permits, licenses and other governmental authorizations, records,
cash, cash equivalents and investments and all other tangible and intangible
property. The Partnership shall assume all liabilities, obligations, accounts
payable, leases, subleases and other contracts of Sherwood Healthcare Corp.
relating to the Facilities.
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<PAGE> 15
BRITWILL INDIANA PARTNERSHIP
EXHIBIT A-3
CEDAR CARE, INC.
DESCRIPTION OF CAPITAL CONTRIBUTION
All of Cedar Care, Inc.'s assets and business relating to the following
health care facilities: English Assisted Living, 1015 North Lebanon Street,
Lebanon, Indiana 46052; English Estates Health Care, 1585 Pennyworth Road,
Lebanon, Indiana; Wellington Manor, 1924 Wellesley Boulevard, Indianapolis,
Indiana; Cloverleaf of Knightsville, Knightsville, Indiana; Lockerbie Healthcare
Center, 1629 North College Avenue, Indianapolis, Indiana; and Willow Manor
Convalescent, 1321 Willow Street, Vincennes, Indiana (collectively the
"Facilities") including without limitation all leasehold interests under leases
or subleases of the Facilities, accounts receivable, contract rights, furniture,
fixtures, leasehold improvements, machinery, instruments, equipment, parts and
supplies, inventory, prepaid items, permits, licenses and other governmental
authorizations, records, cash, cash equivalents and investments and all other
tangible and intangible property. The Partnership shall assume all liabilities,
obligations, accounts payable, leases, subleases and other contracts of Cedar
Care, Inc. relating to the Facilities.
15
<PAGE> 1
Exhibit 3.36
BYLAWS
OF
HENDERSON & ASSOCIATES REHABILITATION, INC.
ARTICLE I. OFFICES
The principal office of the corporation shall be in Decatur, Alabama,
the location of said store. The corporation may have such other offices, either
within or without the State of Alabama, as the Board of Directors may designated
or as the business of the corporation may require from time to time.
The registered office of the corporation, required by the Alabama
Business Corporation Act to be maintained in the State of Alabama may be, but
need not be, identical with the principal office in the State of Alabama, and
the address of the registered office may be changed from time to time by the
Board of Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the __________ in the month of __________ in each year, beginning
with the year ______, at the hour of _______ o'clock p.m., or at such other time
on such other day within such month as shall be fixed by the Board of Directors,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday in the State of Alabama, such meeting shall be held on
the next succeeding business day. If the election of directors shall not be held
on the day designated herein for any annual meeting of the shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as conveniently
may be.
Section 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president or by a majority of the Board of Directors, and shall be called
by the President upon the written request of the holders of not less than
one-tenth of all the outstanding shares of the corporation entitled to vote at
the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alabama, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Alabama,
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of
<PAGE> 2
meeting shall be the principal office of the corporation in the State of
Alabama.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of special meeting, the purpose or purposes for
which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, or at the direction of the
President, or the Secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Notwithstanding the provisions of this section, the stock or bonded indebtedness
of the corporation shall not be increased at a meeting unless notice of such
meeting shall have been given as may be required by Section 234 of the
Constitution of Alabama as the same may be amended from time to time.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than fifty (50) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired.
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<PAGE> 3
Section 6. Voting Record. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. For a period of ten (10) days prior to any meeting of
shareholders, such list shall be kept on file at the principal office of the
corporation and shall be subject to inspection by any shareholder making written
request therefor at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such other corporation may prescribe, or, in
the absence of such provision, as the Board of Directors of such other
corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by
-3-
<PAGE> 4
him without a transfer of such shares into his name and no corporate trustee
shall be entitled to vote in the election of directors' shares held by it solely
in a fiduciary capacity if such shares are shares issued by the corporate
trustee itself.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by the
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Section 11. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof. Such consent shall have the same force and effect as a unanimous
vote of all the shareholders.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its board of directors.
Section 2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Alabama or shareholders of the corporation.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than by this by-law immediately
after, and at the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place, either within or
without the State of Alabama, for the holding of additional regular meetings
without other notice than such resolution.
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Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors.
Section 5. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alabama, as the place of meeting
for any regular or special meeting of the Board of Directors. Members of the
Board of Directors may participate in a meeting of such Board by means of a
conference telephone or similar communications equipment by means of which all
persons participating in a meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
Section 6. Notice. Notice of any special meeting shall be given at
least two days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
If a quorum is present when the meeting is convened, the directors
present may continue to do business, taking action by a vote of a majority of a
quorum, until adjournment, notwithstanding the withdrawal of enough directors to
leave less than a quorum present, or the refusal of any director present to
vote.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 9. Action Without A Meeting. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors.
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Section 10. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected to serve until the next annual meeting of
shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose.
Section 11. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 12. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 13. Removal. No Director may be removed without cause and a
Director may only be removed upon the affirmative vote of a majority of all the
shares entitled to vote at the election of the Directors.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the corporation shall be a President
and a Secretary, both of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the Board of Directors. Any two or more offices may be held by
the same person.
Section 2. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been elected and shall have qualified or until
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his death or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights. Such removal shall be only
by the affirmative vote of a majority of all the Directors.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. The Vice-Presidents. In the absence of the President or in
the event of his death, inability or refusal to act, (or in the event there be
more than one Vice-President, the Vice-Presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice-President may sign, with the Secretary or any other
proper officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the President or by
the Board of Directors.
Section 7. The Secretary. The Secretary shall: (a) keep the minutes of
the proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b)
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see that all notices are duly given in accordance with the provisions of these
By-Laws or as required by law; (c) be custodian of the corporate records and of
the seal of the corporation and see that the seal of the corporation is affixed
to all documents the execution of which on behalf of the corporation under its
seal is duly authorized; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, any Vice-President, or the Treasurer, certificate for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
Section 8. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such monies in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article V of these By-Laws; and (c) in general
perform all of the duties incident to the office of Treasurer and such other
duties from time to time may be assigned to him by the President or by the Board
of Directors. The Treasurer may sign, with the Secretary or any other proper
officer of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries or Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President, any Vice-President or the Treasurer,
certificates for shares of the corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties and shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
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ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board, the
President, any Vice-President, or the Treasurer, and by the Secretary, an
Assistant Vice-President, an Assistant Secretary or an Assistant Treasurer, and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrary, other than the corporation
itself or one of its employees. Each certificate for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number and
class of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for transfer
shall be cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the Board of Directors may prescribe.
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Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
Section 3. Lost, Stolen, Destroyed, or Mutilated Certificates. No
certificates for shares of stock in the corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft as the Board of
Directors may in it discretion require, and on delivery to the corporation, if
the Board of Directors shall so require, of a bond of indemnity, upon such terms
and secured by such surety as the Board of Directors may in its discretion
require.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors my from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of Incorporation and the words, "Corporate Seal."
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the corporation under the provisions of these By-Laws or under the
provisions of the Articles of Incorporation or the laws of the State of Alabama,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI. AMENDMENTS
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These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors or by the shareholders at any regular or
special meeting, provided, however, that the Board of Directors may not alter,
amend or repeal any by-law establishing what constitutes a quorum at
shareholders meetings.
ADOPTED the ______ day of ____________________, 19____.
________________________________
Secretary
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<PAGE> 1
Exhibit 3.37
AMENDED AND RESTATED BY-LAWS
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the state of incorporation of the corporation or shareholders of the
corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 3.38
AMENDED AND RESTATED BY-LAWS
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting (except that if the number of authorized shares is to be
increased, at least thirty (30) days notice shall be given), either personally
or by mail, or at the direction of the president, or the secretary, or the
officer or other persons calling the meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the state of incorporation of the corporation or shareholders of the
corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 3.39
AMENDED AND RESTATED BY-LAWS
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the state of incorporation of the corporation or shareholders of the
corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
<PAGE> 2
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
2
<PAGE> 1
Exhibit 3.40
BYLAWS
OF
MEDICAL PLAZA PHYSICAL THERAPY ASSOCIATES, INC. (P.A.)
ARTICLE I. OFFICES
The principal office of the corporation in the State of Mississippi
shall be located in the City of Biloxi, County of Harrison. The corporation may
have such other offices, either within or without the State of Mississippi, as
the Board of Directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the 1st Monday in the month of June in each year, beginning with the
year 1987 at the hour of 4:00 o'clock p.m., for the purpose of electing
Directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State of Mississippi such meeting shall be held on the next succeeding business
day. If the election of Directors shall not be held on the day designated herein
for any annual meeting of the shareholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than fifty (50%) per cent of
all the outstanding shares of the corporation entitled to vote at the meeting.
<PAGE> 2
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Mississippi unless otherwise
prescribed by statute, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed by
all shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Mississippi, unless otherwise prescribed by
statute, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal office of the corporation in the State of Mississippi.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of special meeting, the purpose or purposes for
which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) nor more than thirty (30) days before the date
of the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for
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a stated period but not to exceed, in any case, 30 days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least 30 days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than 30 days and, in case of a meeting of shareholders, not less
than 10 days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
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SECTION 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
___________ months from the date of its execution, unless otherwise provided in
the proxy.
SECTION 9. Voting of Shares. Subject to the provisions of Section 12 of
this Article II, each outstanding share entitled to vote shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
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Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
SECTION 12. Cumulative Voting. Unless otherwise provided by law, at
each election for Directors every shareholder entitled to vote at such election
shall have the right
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to vote, in person or by proxy, the number of shares owned by him for as many
persons as there are Directors to be elected and for whose election he had a
right to vote, or to cumulate his votes by gibing one candidate as many votes as
the number of such Directors multiplied by the number of his shares shall equal,
or by distributing such votes on the same principle among any number of
candidates.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be ______________. Each director shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than by this bylaw immediately
after, and at the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least ________ days previously thereto by written notice delivered personally or
mailed to each director at
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<PAGE> 7
his business address, or by telegram. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. Any
director may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. Action Without A Meeting. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed before such
action by all of the Directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled
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<PAGE> 8
by election by the Board of Directors for a term of office continuing only until
the next election of Directors by the shareholders.
SECTION 10. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance to each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
President, a Vice-President, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
SECTION 2. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the
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<PAGE> 9
first meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation,
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<PAGE> 10
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of President and such other
duties as my be prescribed by the Board of Directors from time to time.
SECTION 6. Vice-President. In the absence of the President or in event
of his death, inability or refusal to act, the Vice-President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice-President shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the postoffice address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the President, certificate
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for
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<PAGE> 11
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositaries as shall be selected in accordance with the
provisions of Article V of these ByLaws; and (c) in general perform all of the
duties incident to the office of the Treasurer and such other duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. If required by
the Board of Directors, the Treasurer shall give a bond for the faithful
discharge of his duties in such sum and with such surety or sureties as the
Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation,
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<PAGE> 12
shall be signed by such officer or officers, agent or agents of the corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the
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<PAGE> 13
Secretary of the corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares stand on the books
of the corporation shall be deemed by the corporation to be the owner thereof
for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors my from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its articles of incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these By-Laws or under the provisions of the articles of incorporation or under
the provisions of the Mississippi Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
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<PAGE> 14
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or replaced and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
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<PAGE> 1
Exhibit 3.41
AMENDED AND RESTATED BY-LAWS
GAMMA LABORATORIES, INC., A MISSOURI CORPORATION
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be four (4), or as established by the Board of
Directors from time to time and notified to the Secretary of State of the State
of Missouri if required by law. Each director shall hold office until the next
annual meeting of shareholders and until his successor shall have been elected
and qualified. Directors need not be residents of the State of Missouri or
shareholders of the corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
<PAGE> 2
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
2
<PAGE> 1
Exhibit 3.42
AMENDED AND RESTATED BY-LAWS
MEMPHIS CLINICAL LABORATORY, INC., A TENNESSEE CORPORATION
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than two (2) months before the date
of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the state of incorporation of the corporation or shareholders of the
corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 3.43
AMENDED AND RESTATED BY-LAWS
EMORY CARE CENTER, INC., A TEXAS CORPORATION
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Texas or shareholders of the corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 3.44
AMENDED AND RESTATED BY-LAWS
AMPRO MEDICAL SERVICES, A TEXAS CORPORATION
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Texas or shareholders of the corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 3.45
AMENDED AND RESTATED BY-LAWS
AMERICAN PROFESSIONAL HOLDING, INC., A UTAH CORPORATION
Adopted as of November 1, 1996
ARTICLE I SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held in the month of June in each year or at such other time as shall be
fixed by the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
Section 2. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Tenure and Qualifications. The number of directors
of the corporation shall be not less than one (1) nor more than four (4) as
established by the Board of Directors from time to time. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the state of incorporation of the corporation or shareholders of the
corporation.
Section 2. Regular and Special Meetings. The Board of Directors may
call regular and special meetings.
ARTICLE III OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, vice president, a secretary and a treasurer, all of whom shall be
elected or appointed by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors. Each officer shall hold
office until his successor shall have been elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
ARTICLE IV FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
<PAGE> 1
Exhibit 4.1
(FACE OF NOTE)
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC")
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS NOTE TO "QUALIFIED INSTITUTIONAL BUYERS" (WITHIN THE MEANING OF RULE
144A) WITHOUT REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT PRIOR
TO THE DATE WHICH THREE YEARS AFTER THE LATER OF THE ISSUE DATE AND THE LAST
DATE THAT THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE
(OR ANY PREDECESSOR THERETO), THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED FROM, ONLY (a) TO THE COMPANY, (b) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN
1
<PAGE> 2
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (c) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE
OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 502 UNDER THE SECURITIES ACT FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, (e) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE OF THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT OR (f) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR THE
TRUSTEE'S RIGHT TO RECEIVE PRIOR TO TRANSFER UNDER CLAUSE (f) THE LEGAL OPINIONS
AND PRIOR TO TRANSFER UNDER CLAUSE (d) THE CERTIFICATES, IN EACH CASE AS
REQUIRED BY THE INDENTURE (FORMS OF WHICH ARE EXHIBITS TO THE INDENTURE, AND
SUBJECT, IN ANY EVENT, TO THE COMPLETION AND DELIVERY TO THE TRUSTEE OF THE
CERTIFICATE OF TRANSFER APPEARING ON THE REVERSE OF THIS NOTE AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
2
<PAGE> 3
No. G-1 CUSIP NUMBER 909196-AA-5
UNISON HEALTHCARE CORPORATION
12-1/4% SENIOR NOTE DUE 2006
Unison HealthCare Corporation, a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to Cede & Co. or registered assigns the principal sum of
100,000,000 Dollars, on November 1, 2006.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1997
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Senior
Note contained herein, which will for all purposes have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Senior Note to
be signed manually or by facsimile by its duly authorized officers.
Dated:
UNISON HEALTHCARE CORPORATION
By: /s/ Craig R. Clark
____________________________
By: /s/ Jerry M. Walker
____________________________
Certificate of Authentication:
This is one of the 12-1/4% Senior
Notes due 2006 referred to in
the within-mentioned Indenture
FIRST BANK NATIONAL ASSOCIATION, as Trustee
By: /s/
________________________________________
Authorized Signatory
3
<PAGE> 4
(REVERSE SIDE)
UNISON HEALTHCARE CORPORATION
12-1/4% SENIOR NOTE DUE 2006
1. INTEREST.
Unison HealthCare Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on May 1 and November 1 of each year (each an "Interest Payment
Date"), commencing on May 1, 1997, at the rate of 12-1/4% per annum. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Senior Notes. Under certain circumstances, holders of
the Senior Notes are entitled to receive additional interest. See paragraph 8
herein.
The Company shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to .5% per annum; and the per annum interest rate of such additional
interest will increase by an additional .25% per annum for each subsequent
90-day period during which such overdue principal and installments of interest
remain unpaid, up to a maximum additional interest rate of 2.0% per annum.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the April 15 or
October 15 preceding the Interest Payment Date (whether or not such day is a
Business Day). The Holder must surrender this Note to a Paying Agent to collect
principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts; provided, however, that the
Company may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to the Holder's registered address.
Notwithstanding the foregoing, all payments with respect to the Senior Notes,
the Holders of which have given wire transfer instructions to the Paying Agent
on or before the relevant record date, shall be made by wire transfer of
immediately available funds to the accounts specified by such Holders.
3. PAYING AGENT AND REGISTRAR.
Initially, First Bank National Association (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders of the Senior Notes. Neither the
Company nor any of its
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Subsidiaries or Affiliates may act as Paying Agent but may act as registrar or
co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Senior Note under an Indenture dated
as of October 31, 1996 (the "Indenture") by and between the Company and the
Trustee. The terms of this Senior Note include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. This Senior Note is subject to all such terms, and the Holder of this
Senior Note is referred to the Indenture and said Trust Indenture Act for a
statement of them. All capitalized terms in this Senior Note, unless otherwise
defined, have the meanings assigned to them by the Indenture.
The Senior Notes are general unsecured senior obligations of
the Company limited to up to $100,000,000 aggregate principal amount. The
Indenture imposes certain restrictions on, among other things, (i) the
incurrence of additional indebtedness; (ii) certain restricted payments,
including the payment of dividends on the redemption of equity interests by the
Company; (iii) the issuance of equity interests in subsidiaries; (iv) the
creation of liens; (v) restrictions on the ability of subsidiaries to pay
dividends, make certain payments and transfer property to the Company; (vi)
transactions with affiliates; (vii) the transfer or sale of assets; and (viii)
the Company's ability to consolidate or merge with or into, or to transfer all
or substantially all of its assets to, another person.
5. OPTIONAL REDEMPTION.
The Company may redeem the Senior Notes, in whole or in part,
at any time on or after November 1, 2001 at the redemption prices set forth in
Section 3.07 of the Indenture, together, in each case, with accrued and unpaid
interest to the redemption date.
In addition, the Company may redeem Senior Notes out of the
net proceeds of one or more Public Equity Offerings at the redemption price, in
the amount and under the terms set forth in the Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the redemption date to each
Holder of Senior Notes to be redeemed at its registered address as it shall
appear on the register of the Senior Notes maintained by the Registrar. On and
after any Redemption Date, interest will cease to accrue on the Senior Notes or
portions thereof called for redemption unless the Company shall fail to redeem
any such Senior Note.
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7. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Senior Notes in accordance with the procedures set
forth in the Indenture. The Company is also required to make an offer to
purchase Senior Notes upon occurrence of a Change of Control in accordance with
procedures set forth in the Indenture.
8. REGISTRATION RIGHTS.
Pursuant to the Senior Note Registration Rights Agreement by
and among the Company, the Guarantors party thereto and CIBC Wood Gundy
Securities Corp., Cruttenden Roth Incorporated and Wheat, First Securities, Inc.
as initial purchasers of the Senior Notes, the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Senior Note
shall have the right to exchange this Senior Note for Senior Notes of a separate
series issued under the Indenture (or a trust indenture substantially identical
to the Indenture in accordance with the terms of the Senior Note Registration
Rights Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Senior Notes.
The Holders shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Senior Note
Registration Rights Agreement.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Senior Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Holder may register
the transfer or exchange of Senior Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Senior Note selected for redemption or register the transfer
of or exchange any Senior Note for a period of 15 days before a selection of
Senior Notes to be redeemed or any Senior Note after it is called for redemption
in whole or in part, except the unredeemed portion of any Senior Note being
redeemed in part.
10. PERSONS DEEMED OWNERS.
The registered Holder of this Senior Note may be treated as
the owner of it for all purposes.
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11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on
any Senior Note remains unclaimed for two years, the Trustee or Paying Agent
will pay the money back to the Company at its request. After that, Holders
entitled to money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Senior
Notes may be modified, amended or supplemented by the Company, the Guarantors
and the Trustee with the consent of the Holders of at least a majority in
principal amount of the Senior Notes then outstanding and any existing default
or compliance with any provision may be waived in a particular instance with the
consent of the Holders of a majority in principal amount of the Senior Notes
then outstanding. Without the consent of Holders, the Company, the Guarantors
and the Trustee may amend the Indenture or the Senior Notes or supplement the
Indenture for certain specified purposes including providing for uncertificated
Senior Notes in addition to certificated Senior Notes, and curing any ambiguity,
defect or inconsistency, or making any other change that does not materially and
adversely affect the rights of any Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of
its predecessor under the Senior Notes and the Indenture and immediately before
and thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event
of Default (other than an Event of Default pursuant to Section 6.01(7) or (8) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, or the Holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding by written notice to the
Company and the Trustee, may declare to be immediately due and payable the
entire principal amount of all the Senior Notes then outstanding plus accrued
but unpaid interest to the date of acceleration and such amounts shall become
immediately due and payable. In case an Event of Default specified in Section
6.01(7) or (8) of the Indenture with respect to the Company occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Senior Notes, shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the Holders of the Notes.
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal, premium, if any, or interest) if it determines
that withholding notice is in their interests.
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15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company, any Guarantor or their Affiliates, and may otherwise deal with
the Company, any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee, partner, affiliate, beneficiary or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company or any Guarantor under the Notes or the Indenture or for any claim based
on, in respect or by reason of, such obligations or their creation. The Holder
of this Senior Note by accepting this Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Senior Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Senior Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Senior Notes and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders of the Senior
Notes. No representation is made as to the accuracy of such numbers either as
printed on the Senior Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THE INDENTURE AND THE SENIOR NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
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PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SENIOR NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A SENIOR NOTE UPON
WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE
TO: UNISON HEALTHCARE CORPORATION, 7272 E. Indian School Road, Suite 214,
Scottsdale, AZ 85251, Attention: Chief Financial Officer.
21. AUTHENTICATION
This Senior Note shall not be valid until the Trustee manually
signs the Certificate of Authentication on the other side of this Senior Note.
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GUARANTEE
Each guarantor (each a "Guarantor" and collectively the
"Guarantors" including any successor Person under the Indenture) has
unconditionally guaranteed, jointly and severally, to the extent set forth in
the Indenture and subject to the provisions of the Indenture, (a) the due and
punctual payment of the principal of and interest on the Senior Notes, whether
at maturity, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal, and, to the extent permitted by law, interest,
and the due and punctual performance of all other obligations of the Company to
the Noteholders or the Trustee all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of payment
or renewal of any Senior Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
[intentionally left blank]
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The obligations of the Guarantor to the Holders and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms and limitations of this Guarantee.
<TABLE>
<S> <C>
SUNQUEST SPC, INC. CHRISTOPHER NURSING
an Arizona corporation CENTER, INC.
BRITWILL HEALTHCARE COMPANY a Colorado corporation
a Delaware corporation AMBERWOOD COURT, INC.
BRITWILL INVESTMENTS - I, INC. a Colorado corporation
a Delaware corporation THE ARBORS HEALTH CARE
BRITWILL INVESTMENTS - II, INC. CENTER, INC.
a Delaware corporation an Arizona corporation
BRITWILL FUNDING CORPORATION LOS ARCOS, INC.
a Delaware corporation a Colorado corporation
EMORY CARE CENTER, INC. PUEBLO NORTE, INC.
a Texas corporation a Colorado corporation
MEMPHIS CLINICAL RIO VERDE NURSING CENTER, INC.
LABORATORY, INC. a Colorado corporation
a Tennessee corporation SIGNATURE MANAGEMENT
AMERICAN PROFESSIONAL GROUP, INC.
HOLDINGS, INC. a Colorado corporation
an Utah corporation CORNERSTONE CARE, INC.
AMPRO MEDICAL SERVICES, INC. a Colorado corporation
a Texas corporation ARKANSAS, INC.
GAMMA LABORATORIES, INC. a Colorado corporation
a Missouri corporation DOUGLAS MANOR, INC.
SIGNATURE HEALTH CARE a Colorado corporation
CORPORATION SAFFORD CARE, INC.
a Delaware corporation a Colorado corporation
BROOKSHIRE HOUSE, INC. REHABWEST, INC.
a Colorado corporation a Colorado corporation
</TABLE>
/S/ Jerry M. Walker
____________________________________________
Jerry M. Walker
President for the above subsidiaries of
Unison HealthCare Corporation
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QUEST PHARMACIES, INC. DECATUR SPORTS FIT & WELLNESS
an Arizona corporation CENTER, INC.
an Alabama corporation
/s/ Phillip R. Rollins THERAPY HEALTH SYSTEMS, INC.
____________________________________ a Mississippi corporation
Phillip R. Rollins HENDERSON & ASSOCIATES
Vice President for the above REHABILITATION, INC.
subsidiary of an Alabama corporation
Unison HealthCare Corporation SUNBELT THERAPY MANAGEMENT
SERVICES, INC.
an Alabama corporation
SUNBELT THERAPY MANAGEMENT
SERVICES, INC.
an Arizona corporation /s/ Phillip R. Rollins
_______________________________________
Phillip R. Rollins
/s/ Phillip R. Rollins Secretary for the above subsidiaries of
____________________________________ Unison HealthCare Corporation
Phillip R. Rollins
Secretary for the above
subsidiary of
Unison HealthCare Corporation
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ASSIGNMENT
I or we assign and transfer this Senior Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Senior Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
/ / (a) this Senior Note is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
/ / (b) this Senior Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Senior Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Senior Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: _______________________
Your Signature: _______________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ____________________________________________________TO BE
COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Senior Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A
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under the Securities Act and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ____________________
______________________________________
NOTICE: To be executed by an executive officer
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Senior
Note purchased by the Company pursuant to Section 4.08 or Section 4.22 of the
Indenture, check the appropriate box:
/ / Section 4.08 / / Section 4.22
If you want to have only part of the Senior Note purchased by
the Company pursuant to Section 4.08 or Section 4.22 of the Indenture, state the
amount you elect to have purchased:
$____________________
(multiple of $1,000)
Date: _______________
Your Signature: ___________________________________________
(Sign exactly as your name appears on the face of this Note)
_______________________________
Signature Guaranteed
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Exhibit 4.2
SECURITIES PURCHASE AGREEMENT, dated as of October 28, 1996 (the
"Agreement"), by and between UNISON HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), and CIBC WOOD GUNDY SECURITIES CORP., CRUTTENDEN
ROTH INCORPORATED and WHEAT, FIRST SECURITIES, INC. (the "Initial Purchasers").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"Accountants" has the meaning provided therefor in Section
3.1(b) of this Agreement.
"Accredited Investor" has the meaning provided therefor in
Section 3.2 of this Agreement.
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, the Person in question.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that beneficial ownership of at least
10% of the voting securities of a Person shall be deemed to be control.
"Agreement" or "Purchase Agreement" means this Agreement, as
the same may be amended, supplemented or modified in accordance with the terms
hereof.
"Basic Documents" means, collectively, the Indenture, the
Senior Notes, the Senior Note Registration Rights Agreement and this Agreement.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York are authorized or obligated by law to close.
"Closing" has the meaning provided therefor in Section 2.2(b)
of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Act.
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"Common Stock" means, collectively, the Common Stock of the
Company, each share with a par value of $.001.
"Default" means any event, act or condition which, with notice
or lapse of time or both, would constitute an Event of Default.
"Dispositions" has the meaning provided therefor in the Final
Memorandum.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means any event defined as an Event of
Default in the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Exchange Notes" shall have the meaning provided therefor in
the Senior Note Registration Rights Agreement.
"Facility" has the meaning provided therefor in Section 3.1(z)
of this Agreement.
"Final Memorandum" has the meaning provided therefor in
Section 2.1 of this Agreement.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the obligations of the
Company with respect to the Senior Notes by each Guarantor pursuant to the terms
of the Indenture.
"Guarantors" means each of the Subsidiaries listed on Schedule
II hereto.
"Indemnified Party" has the meaning provided therefor in
Section 7.1(c) of this Agreement.
"Indemnifying Party" has the meaning provided therefor in
Section 7.1(c) of this Agreement.
"Indenture" means the indenture dated as of October 31, 1996
by and between the Company and the Trustee under which the Senior Notes will be
issued.
"Initial Purchasers" has the meaning provided therefor in the
introductory paragraph of this Agreement.
"Lien" means, with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligation (as defined in
the Indenture), conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Losses" has the meaning provided therefor in Section 7.1(a)
of this Agreement.
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<PAGE> 3
"Material Adverse Effect" means, with respect to the Company
and its Subsidiaries, a material adverse effect on the business, condition
(financial or otherwise), results of operations, properties or prospects of the
Company and its Subsidiaries, taken as a whole. "Material Adverse Effect" shall
also mean a material adverse effect on the ability of the Company or any
Guarantor to perform its obligations under this Agreement or any of the Basic
Documents.
"Memorandum" has the meaning provided therefor in Section 2.1
of this Agreement.
"Offering Materials" has the meaning provided therefor in
Section 7.1(a) of this Agreement.
"Permits" has the meaning provided therefor in Section 3.1(ii)
of this Agreement.
"Person" means any individual, corporation, partnership,
limited liability company or partnership, association, joint venture,
joint-stock company, trust, unincorporated organization, government (including
any agency or political subdivision thereof) or entity of any kind.
"PORTAL" means the Private Offerings, Resales and Trading
through Automated Linkages Market.
"Preliminary Memorandum" has the meaning provided therefor in
Section 2.1 of this Agreement.
"Private Exchange Notes" shall have the meaning provided
therefor in the Senior Note Registration Rights Agreement.
"Proceeding" has the meaning provided therefor in Section
7.1(c) of this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
Agreement.
"Senior Note Registration Rights Agreement" means the
registration rights agreement among the Company, the Guarantors and the Initial
Purchasers relating to the Senior Notes.
"Senior Notes" means the 12 1/4% Senior Notes due 2006 of the
Company and the Guarantees.
"Signature" has the meaning provided therefor in the Final
Memorandum.
"State" means each of the states of the United States, the
District of Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having
jurisdiction to enforce such State's securities laws.
"Subsidiaries" means, with respect to any Person, any
corporation, partnership, joint venture, association or other business entity,
whether now existing or hereafter organized or acquired, (1) in the case of a
corporation, of which more than 50% of the total voting power of the capital
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by such
first-named Person or any of its Subsidiaries; or (ii) in the case of a
partnership, joint venture, association or other business entity, with respect
to which such first-named Person or any of its
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Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise or if in accordance with
generally accepted accounting principles such entity is consolidated with the
first-named Person for financial statement purposes.
"Taxes" has the meaning provided therefor in Section 3.1(v) of
this Agreement.
"Time of Purchase" has the meaning provided therefor in
Section 2.2(b) of this Agreement.
"Transactions" has the meaning provided therefor in the Final
Memorandum.
"Trustee" means First Bank National Association, as trustee
under the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, and the rules and regulations of the Commission thereunder.
Section 1.2. Accounting Terms; Financial Statements. All
accounting terms used herein not expressly defined in this Agreement shall have
the respective meanings given to them in accordance with generally accepted
accounting principles in the United States as the same may be in effect from
time to time.
ARTICLE II
ISSUE OF SENIOR NOTES; PURCHASE AND SALE
OF SENIOR NOTES; RIGHTS OF HOLDERS OF SENIOR
NOTES; OFFERING BY INITIAL PURCHASERS
Section 2.1. Issue of Senior Notes and Guarantees. The Company
and the Guarantors have authorized the issuance of $100,000,000 aggregate
principal amount of the Senior Notes, unconditionally guaranteed by the
Guarantors, which are to be issued pursuant to the Indenture. Each Senior Note
will be substantially in the form of the Senior Note set forth as Exhibit A to
the Indenture.
The Senior Notes will be offered and sold to the Initial
Purchasers without being registered under the Act, in reliance on exemptions
therefrom.
In connection with the sale of the Senior Notes, the Company
has prepared a preliminary offering memorandum dated October 10, 1996 (the
"Preliminary Memorandum") and prepared a final offering memorandum dated October
28, 1996 (the "Final Memorandum" and, together with the Preliminary Memorandum,
the "Memorandum") setting forth or including a description of the terms of the
Senior Notes, the terms of the offering, a description of the Company and the
Guarantors and any material developments relating to the Company and the
Guarantors occurring after the date of the most recent financial statements
included therein.
Section 2.2. Purchase, Sale and Delivery of Senior Notes. (a)
On the basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Company
and the Guarantors agree that they will sell to the Initial Purchasers, and the
Initial Purchasers severally agree that they will purchase from the Company and
the Guarantors at the Time of Purchase, the aggregate principal amount of the
Senior Notes set forth opposite the name
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of each Initial Purchaser on Schedule I attached hereto at a price equal to
97.0% of the principal amount thereof.
(b) The purchase, sale and delivery of the Senior Notes will
take place at a closing (the "Closing") at the offices of Quarles & Brady, One
East Camelback Avenue, Phoenix, Arizona, at 8:30 A.M., Phoenix time, on October
31, 1996, or such other date and time, if any, as the Initial Purchasers and the
Company shall agree. The time at which such Closing is concluded is herein
called the "Time of Purchase."
(c) One or more certificates in definitive form for the Senior
Notes that the Initial Purchasers agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 48 hours prior to
the Closing, shall be delivered by or on behalf of the Company and the
Guarantors to the Initial Purchasers, against payment by or on behalf of the
Initial Purchasers of the purchase price therefor by wire transfer of
immediately available funds wired in accordance with the written instructions of
the Company. The Company will make such certificate or certificates for the
Senior Notes available for checking and packaging by the Initial Purchasers at
the offices of CIBC Wood Gundy Securities Corp., or such other place as the
Initial Purchasers may designate, at least 24 hours prior to the Closing.
Section 2.3. Registration Rights of Holders of Senior Notes.
The Initial Purchasers and their direct and indirect transferees of the Senior
Notes will have such rights with respect to the registration thereof under the
Act and qualification of the Indenture under the Trust Indenture Act as are set
forth in the Senior Note Registration Rights Agreement.
Section 2.4. Offering by the Initial Purchasers. The Initial
Purchasers propose to make an offering of the Senior Notes at the price and upon
the terms set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchasers is
advisable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF SENIOR NOTES
Section 3.1. Representations and Warranties of the Company and
the Guarantors. The Company and the Guarantors jointly and severally represent
and warrant to and agree with each of the Initial Purchasers as follows:
(a) The Final Memorandum, as of its date and at the Time of
Purchase, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 3.1(a) do not apply to
statements or omissions made in reliance upon and in conformity with information
relating to the Initial Purchasers or to the manner of sale of the Senior Notes
by the Initial Purchasers which is furnished to the Company in writing by the
Initial Purchasers expressly for use in the Final Memorandum or any amendment or
supplement thereto.
(b) The audited consolidated financial statements of the
Company; Britwill Healthcare Company; American Professional Holding, Inc.;
Memphis Clinical Laboratory, Inc.; Signature Health Care Corporation; Arkansas,
Inc., Cornerstone Care, Inc., Douglas Manor, Inc. and Safford Care, Inc.;
RehabWest, Inc.; The Oaks of Boise; Nightingale West, Inc.; Henderson
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and Associates Rehabilitation and Sunbelt Therapy Management Services, Inc.; and
Franciscan Health Care Center at Enumclaw and Walla Walla included in the Final
Memorandum fairly present the financial position, results of operations and cash
flows of the Company and the other Persons to which they relate at the dates and
for the periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. The
summary and selected financial data in the Final Memorandum present fairly in
all material respects the financial information shown therein and have been
prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein. Ernst & Young
LLP, Price Waterhouse, LLP, Ronald H. Ridgers, P.C., Arthur Andersen LLP,
Anderson & Whitney, P.C. and Millman & Johnson P.C. (the "Accountants") are
independent public accounting firms within the meaning of the Act and the rules
and regulations promulgated thereunder. The pro forma financial statements
(including the notes thereto) and the other pro forma financial information
included in the Final Memorandum have been prepared using reasonable assumptions
and in accordance with the applicable requirements of the Act and include all
adjustments necessary to present fairly the pro forma financial information
included within the Final Memorandum at the respective dates and for the
respective periods indicated.
(c) (i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
filed all reports with the Secretary of State of Delaware required to obtain a
certificate with respect to continued subsistence in good standing from that
office. Each Subsidiary of the Company is a corporation duly incorporated or
organized, validly existing and in good standing under the laws of the state or
other jurisdiction of its incorporation or organization. Each of the Company and
its Subsidiaries is duly qualified and in good standing as a foreign corporation
or partnership, as the case may be, and is authorized to do business, in each
jurisdiction in which the ownership or leasing of any property or the character
of its operations makes such qualification necessary and in which the failure so
to qualify is reasonably likely to have a Material Adverse Effect; and (ii)
Schedule U attached hereto contains a complete and correct list of all of the
Subsidiaries of the Company, as of the completion of the Transaction. The
Company and its Subsidiaries do not own more than 5% of the equity interest in
any other business entity.
(d) As of the Time of Purchase (after giving pro forma effect
to the Transactions), the Company will have the authorized, issued and
outstanding capitalization as set forth in the Final Memorandum. All of the
issued and outstanding shares of capital of the Company and its Subsidiaries are
validly issued, all of such capital stock is fully paid and nonassessable and
none of such shares or interests were issued in violation of any preemptive or
similar rights. Except as set forth in the Final Memorandum, all outstanding
shares of capital stock of each of the Subsidiaries of the Company are owned by
the Company, either directly or through wholly-owned subsidiaries, free and
clear of any perfected security interest and any other security interest, claim,
lien or encumbrance except for "permitted liens" (as defined in the Final
Memorandum) or as otherwise set forth in the Final Memorandum. Except as set
forth in the Final Memorandum, (i) there are no outstanding subscriptions,
options, warrants, rights, convertible securities or other binding agreements or
commitments of any character obligating any Subsidiary of the Company to issue
any securities, (ii) there is no agreement, understanding or arrangement among
any such Subsidiaries and their respective stockholders or any other Person
relating to the acquisition, ownership or disposition of any capital stock in
such Subsidiaries, the election of directors of any of such Subsidiaries or the
governance of such Subsidiaries' affairs, and (iii) there is no agreement,
understanding or arrangement among the Company, any Subsidiary and any other
person that may result in a change of control of the Company, and such
agreements,
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arrangements or understandings will not be breached or violated as a result of
the consummation of the Transactions or the execution, delivery or performance
of, this Agreement and the other Basic Documents.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors and (assuming the due authorization,
execution and delivery by the Initial Purchasers) is a valid and legally binding
agreement of the Company and the Guarantors, enforceable against the Company and
each Guarantor in accordance with its terms except (i) that the enforcement
hereof may be subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding therefor may be brought and
(ii) as any rights to indemnity or contribution hereunder may be limited by
federal or state securities laws and public policy considerations.
(f) The Indenture has been duly authorized by the Company and
the Guarantors, and, when executed and delivered by the Company and the
Guarantors (assuming the due authorization, execution and delivery by the
Trustee), will constitute a valid and legally binding agreement of the Company
and the Guarantors, enforceable against the Company and each Guarantor in
accordance with its terms except (i) that the enforcement thereof may be subject
to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and to general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal or state
securities laws and public policy considerations.
(g) The Senior Note Registration Rights Agreement has been
duly authorized by the Company and the Guarantors and, when executed and
delivered by the Company and the Guarantors (assuming the due authorization,
execution and delivery by the Initial Purchasers), will constitute a valid and
legally binding agreement of the Company and the Guarantors, enforceable against
the Company and each Guarantor in accordance with its terms except (i) that the
enforcement thereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and to general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought and (ii) as any rights to indemnity or contribution thereunder may be
limited by federal or state securities laws and public policy considerations.
(h) The Senior Notes, the Exchange Notes and the Private
Exchange Notes have each been duly authorized by the Company and the Guarantors
and, when executed by the Company and the Guarantors and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the case of
the Senior Notes, delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will be entitled to the benefits of
the Indenture and will constitute valid and legally binding obligations of the
Company and the Guarantors enforceable against the Company and each Guarantor in
accordance with their terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought. The ranking of the Senior
Notes is as set forth in the Final Memorandum.
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(i) Each of the Guarantees has been duly authorized by the
Guarantors and each Guarantor has all requisite corporate power and authority to
execute, issue and deliver its respective Guarantee and to incur and perform its
respective obligations provided for therein. The Guarantees, upon execution and
delivery of the Indenture and upon the due execution, authentication and
delivery of the Senior Notes to the Initial Purchasers will constitute valid and
legally binding obligations of the Guarantors enforceable against each of them
in accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought. The
ranking of the Guarantees is as set forth in the Final Memorandum.
(j) Immediately after the consummation of the Transactions and
the consummation of this Agreement (including the use of proceeds from the sale
of Senior Notes at the Time of Purchase), the fair value and present fair
saleable value of the assets of the Company (on a consolidated basis) and each
of the Guarantors will exceed the sum of its stated liabilities and identified
contingent liabilities; the Company (on a consolidated basis) and each of the
Guarantors will not be, after giving effect to the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby (including the use of proceeds from the sale of Senior Notes
at the Time of Purchase), (i) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (ii) unable to pay its
debts (contingent or otherwise) as they mature or (iii) otherwise insolvent.
(k) Each of the Company and the Guarantors has all requisite
corporate power and authority to (i) execute, deliver and perform its
obligations under each of the Basic Documents, (ii) execute, deliver and perform
its obligations under all other agreements and instruments to be executed and
delivered by it pursuant to or in connection with each of the Basic Documents
and the Transactions, (iii) issue the Senior Notes in the manner and for the
purpose contemplated by this Agreement and (iv) consummate each of the
Transactions.
(l) Subsequent to the date as of which information is given in
the Final Memorandum to the date hereof, except as contemplated in the
Memorandum, there has not been (i) any event or condition that has had or that
could reasonably be expected to have a Material Adverse Effect, (ii) any
transaction entered into by the Company or any of its Subsidiaries, other than
in the ordinary course of business, that is material to the Company and its
Subsidiaries, taken as a whole, or (iii) any dividend or distribution of any
kind declared, paid or made by the Company on its Common Stock.
(m) Except as set forth in the Final Memorandum, there is no
action, suit, investigation or proceeding, governmental or otherwise, pending
or, to the best knowledge of the Company, threatened to which the Company or any
of the Guarantors is or would be a party or of which the properties or assets of
the Company or any of the Guarantors are or may be subject, that (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance and sale of the Senior Notes by the Company, the Transactions or any of
the other transactions contemplated hereby, (ii) questions the legality or
validity of any such transactions or seeks to recover damages or obtain other
relief in connection with any such transactions or (iii) could reasonably be
expected to have a Material Adverse Effect.
(n) The execution, delivery and performance by the Company and
the Guarantors of the Basic Documents, the issuance and sale by the Company
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and the Guarantors of the Senior Notes, and the execution, delivery and
performance by the Company and the Guarantors of all other agreements and
instruments to be executed and delivered by the Company and the Guarantors
pursuant hereto or thereto or in connection herewith or therewith or in
connection with any of the Transactions, and compliance by the Company and the
Guarantors with the terms and provisions hereof and thereof, do not and will not
(i) violate any provision of any law, rule or regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, decree, determination or award presently
in effect or in effect at the Time of Purchase having applicability to the
Company or any of its Subsidiaries, (ii) conflict with or result in a breach of
or constitute a default (or give rise to any right to accelerate the maturity or
require the prepayment of any obligation) under the certificate of incorporation
or by-laws (or similar organizational document) of the Company, any of the
Guarantors or any of their Subsidiaries, or, as of the Time of Purchase, any
indenture or loan or credit agreement, lease, or any other agreement or
instrument, to which the Company or any of the Guarantors is a party or by which
the Company or any of the Guarantors or any of their respective properties or
assets may be bound or affected, or (iii) result in, or require the creation or
imposition of, any Lien upon or with respect to any of the properties or assets
now owned or hereafter acquired by the Company or any of its Subsidiaries.
(o) Each agreement or instrument (other than the Basic
Documents) executed and delivered by the Company or any of the Guarantors in
connection with the Basic Documents and the Transactions has been duly and
validly authorized, and, when executed and delivered by the Company or any of
the Guarantors, will constitute a valid and legally binding obligation of the
Company or such Guarantors, enforceable against the Company or such Guarantor in
accordance with its terms, except (i) that the enforcement thereof may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding therefor may be brought and
(ii) as any rights to indemnity and contribution hereunder and thereunder may be
limited by applicable law.
(p) None of the Company, the Guarantors or any of their
Subsidiaries is currently or, after giving effect to the execution, delivery and
performance of this Agreement, the other Basic Documents and the consummation of
the Transactions, will be (i) in violation of its respective certificate of
incorporation or by-laws (or similar organizational document), (ii) in default
(nor will an event occur which with notice or passage of time or both would
constitute such a default) under or in violation of any indenture or loan or
credit agreement or any other material lease, agreement or instrument to which
it is a party or by which it or any of its properties or assets may be bound or
affected, (iii) in violation of any order of any court, arbitrator or
governmental body, or (iv) in violation of or will have violated any statute,
rule or regulation of any governmental authority, except in each case, which
default or violation (individually or in the aggregate) could reasonably be
expected to (y) affect the legality, validity or enforceability of any of the
Basic Documents in any material respect or (z) have a Material Adverse Effect.
(q) Except as set forth in the Final Memorandum, and assuming
the accuracy of the Initial Purchasers' representations and warranties set forth
in Section 3.2 hereof, and the due performance by the Initial Purchasers of the
covenants and agreements set forth in Section 3.2 hereof, no authorization,
consent, approval, license, qualification or formal exemption from, nor any
filing, declaration or registration with, any court, governmental agency or
regulatory authority or any securities exchange is required in connection with
(a) the execution, delivery or performance by the
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Company or the Guarantors (to the extent they are a party thereto) of any of the
Basic Documents or any of the Transactions or (b) to permit the Company and the
Guarantors to effect payments of principal of, premium and interest on the
Senior Notes, except (i) as may be required under state securities or "Blue Sky"
laws or the laws of any foreign jurisdiction in connection with the offer and
sale of the Senior Notes or (ii) as would not (individually or in the aggregate)
be reasonably likely to have a Material Adverse Effect. All such authorizations,
consents, approvals, licenses, qualifications, exemptions, filings, declarations
and registrations set forth in the Final Memorandum (other than as disclosed
therein) which are required to have been obtained by the date hereof have been
obtained or made, as the case may be, and are in full force and effect and not
the subject of any pending or, to the knowledge of the Company and the
Guarantors, threatened attack by appeal or direct proceeding or otherwise.
(r) None of the Company and the Guarantors is, and immediately
after the Time of Purchase will not be, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(s) The execution and delivery of this Agreement and the other
Basic Documents and the sale of the Senior Notes to the Initial Purchasers will
not involve any non-exempt prohibited transaction within the meaning of Section
406 of ERISA, or Section 4975 of the Code on the part of the Company, any of the
Guarantors or any of their Subsidiaries. No Reportable Event (as defined in
Section 4043 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Employee Benefit Plan (as defined in Section 3(3) of ERISA), and the Company and
its Subsidiaries have complied in all material respects with the applicable
provisions of ERISA and the Code in connection with each Employee Benefit Plan.
The present value of all benefits vested under each Employee Benefit Plan
maintained by the Company or any person or entity treated with the Company as a
single employer under Section 414 of ERISA (a "Commonly Controlled Entity")
(based on the current liability, interest rate and other assumptions used in
preparation of the plan's Form 5500 Annual Report) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such plan allocable to such
accrued benefits. Neither the Company nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan (as defined in
ERISA), and neither the Company nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Company or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which such representation
is made or deemed made. No such Multiemployer Plan is in reorganization or
insolvent. There are no material liabilities of the Company or any Commonly
Controlled Entity for post-retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as described
in Section 3(1) of ERISA). To the best of the Company's knowledge, the Company
and its Subsidiaries are substantially and in all material respects in
compliance with all applicable laws with respect to all employee benefit plans
maintained or contributed to in respect of employees other than those employed
in the United States ("Foreign Plans"). There are no material unfunded
liabilities in respect of the Foreign Plans.
(t) The Company and each of its Subsidiaries have good and
valid title to, or valid and enforceable leasehold interests in, all properties
and assets identified in the Final Memorandum as owned or leased, respectively,
by each of them which are material to the business of the Company and its
Subsidiaries, taken as a whole, free and clear of all material Liens, except (i)
such Liens as are described in the Final Memorandum or (ii) Liens created in the
ordinary course of business which are Permitted Liens (as defined in
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the Indenture). All of the leases material to the business of the Company or any
of its Subsidiaries and under which the Company or any of its Subsidiaries, as
the case may be, holds properties described in the Final Memorandum, are valid
and binding as leased by them, with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such properties by
the Company or any of its Subsidiaries, as the case may be. All agreements under
which the Company or any of its Subsidiaries manages healthcare facilities are
valid and binding and in full force and effect and neither the Company nor any
of its Subsidiaries is in default (nor has any event occurred which with notice
or the passaged of time or both would constitute a default) under or in
violation of such agreement.
(u) No form of general solicitation or general advertising was
used by the Company, any of the Guarantors or any of their respective Affiliates
and representatives in connection with the offer and sale of the Senior Notes.
None of the Company, any of the Guarantors, their respective Affiliates or any
Person authorized to act for any of them has, either directly or indirectly,
sold or offered for sale any of the Senior Notes or any other similar security
of the Company or the Guarantors to, or solicited any offers to buy any thereof
from, or has otherwise approached or negotiated in respect thereof with, any
Person or Persons other than with or through the Initial Purchaser; and the
Company and the Guarantors agree that neither they, any of their Subsidiaries or
Affiliates nor any Person acting on their behalf has sold or offered for sale or
will sell or offer for sale any Senior Notes to, or has solicited or will
solicit any offers to buy any Senior Notes from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons so as thereby to bring
the issuance or sale of any of the Senior Notes within the provisions of Section
5 of the Act.
(v) All tax returns required to be filed by the Company or any
of its Subsidiaries in any jurisdiction (including foreign jurisdictions) have
been duly filed and all taxes, assessments, fees and other charges including,
without limitation, withholding taxes, penalties, and interest ("Taxes") due or
claimed to be due have been paid, other than those Taxes being contested in good
faith and for which adequate reserves or accruals have been established in
accordance with generally accepted accounting principles, except where the
failure to file such returns or to pay such Taxes is not reasonably likely to
have, singly or in the aggregate, a Material Adverse Effect. The Company knows
of no actual or proposed additional tax assessments for any fiscal period
against the Company or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
(w) The Company and its Subsidiaries are the owners or
licensees of all trade names, unregistered trademarks and service marks, brand
names, patents, registered and unregistered copyrights, registered trademarks
and service marks, and all applications for any of the foregoing, and all
permits, grants and licenses or other rights with respect thereto, the absence
of which could reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has been charged with any material
infringement of any intangible property of the character described above or been
notified or advised of any material claim of any other Person relating to any of
the intangible property, which infringements or claims (individually or in the
aggregate) would be reasonably likely to have a Material Adverse Effect.
(x) The Senior Notes, the Indenture, the Senior Note
Registration Rights Agreement and this Agreement conform to the descriptions
thereof in the Final Memorandum.
(y) Assuming the accuracy of the Initial Purchasers'
representations and warranties set forth in Section 3.2 hereof, and the due
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performance by the Initial Purchasers of the covenants and agreements set forth
in Section 3.2 hereof, the offer and sale of the Senior Notes to the Initial
Purchasers in the manner contemplated by this Agreement and the Memorandum does
not require registration under the Act and the Indenture does not require
qualification under the Trust Indenture Act of 1939, as amended.
(z) Except as described in the Final Memorandum, the Company,
and its Subsidiaries and each long-term care, assisted living or other facility
owned, leased, operated or managed by the Company or any of its Subsidiaries
before giving effect to the Dispositions and after giving effect to the
Transactions (each a "Facility") is in material compliance with the common law
and all federal, state, and local laws, and any rules, regulations, orders,
decrees, judgments or injunctions issued or promulgated thereunder relating to
pollution and protection of public and employee health and the environment
("Environmental Law") and with the terms and conditions of any permit, license
or approval required under any Environmental Law in connection with the
ownership, operation or use of its business, property and assets where the
failure to be in such compliance could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; except as disclosed
in the Final Memorandum, and to the knowledge of the Company, none of the
Company or any of its Subsidiaries or any Facility is subject to any liability,
absolute or contingent, under any Environmental Law which liability would,
individually or in the aggregate, be reasonably likely to result in a Material
Adverse Effect; except as disclosed in the Final Memorandum, there is no civil,
criminal or administrative action, suit, demand, hearing, notice of violation or
deficiency, investigation, proceeding or notice of potential responsibility or
liability or demand letter or request for information pending or, to the
knowledge of the Company, threatened against the Company, any of its
Subsidiaries or any Facility under any Environmental Law which, if determined
adversely to the Company or any such Subsidiary, would, individually or in the
aggregate, be reasonably likely to result in a Material Adverse Effect.
(aa) Except as set forth in the Final Memorandum, there is no
strike, labor dispute, slowdown or work stoppage with the employees of the
Company or any of its Subsidiaries which is pending or, to the best knowledge of
the Company or any of its Subsidiaries, threatened, which would be reasonably
likely to result in a Material Adverse Effect.
(bb) Each of the Company and its Subsidiaries carries
insurance (including self insurance) in such amounts and covering such risks as
is adequate for the conduct of its business and the value of its properties.
(cc) No securities of the Company, any of the Guarantors or
their Subsidiaries are of the same class (within the meaning of Rule 144A under
the Act) as the Senior Notes and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system.
(dd) None of the Company, the Guarantors or their Subsidiaries
has taken, nor will any of them take, directly or indirectly, any action
designed to, or that might be reasonably expected to, cause or result in
stabilization or manipulation of the price of the Senior Notes.
(ee) None of the Company, the Guarantors, their Subsidiaries,
any of their respective Affiliates or any person acting on its or their behalf
(other than the Initial Purchasers) has engaged in any directed selling efforts
(as that term is defined in Regulation S under the Act ("Regulation S") with
respect to the Senior Notes and the Company, the Guarantors, their Subsidiaries
and their respective Affiliates and any person acting on its or their behalf
(other than the Initial Purchasers) have acted in accordance with the offering
restrictions requirement of Regulation S.
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(ff) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate or represents the Company's good faith estimates
that are made on the basis of data derived from such sources.
(gg) Except as stated in the Final Memorandum, the Company
does not know of any claims for services, either in the nature of a finder's fee
or financial advisory fee, with respect to the offering of the Senior Notes and
the transactions contemplated by the Final Memorandum.
(hh) Except as described in the Final Memorandum there exists
no relationship, direct or indirect, between or among the Company or any of its
Subsidiaries, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company, any of its Subsidiaries or any of the
Facilities on the other hand, of a kind described in Item 404 of Regulation S-K,
17 CFR 229.404.
(ii) The Company, and each of its Subsidiaries and Facilities
have such pen-nits, licenses, certificates and authorizations and governmental
or regulatory authorities, including but not limited to, such permits, licenses,
certificates and authorizations ("Permits"), as are necessary to own, lease or
manage their respective properties (including, without limitation, the
Facilities) and to conduct their respective businesses in the manner now being
conducted and as described in the Final Memorandum, subject to such
qualifications as may be set forth in the Final Memorandum, except where the
failure to have any such Permit would not have a Material Adverse Effect; the
Company, and each of its Subsidiaries and Facilities have each fulfilled and
performed all of their respective material obligations with respect to such
Permits, and no event has occurred which allows, or after notice of lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit, subject in
each case to such qualification as may be set forth in the Final Memorandum;
and, except as described in the Final Memorandum, such Permits contain no
restrictions that are materially burdensome to the Company, or any of the
Subsidiaries or Facilities.
(jj) Neither the Company nor any of the Subsidiaries nor any
employee or agent of the company or the subsidiaries has made any payment of
funds of the Company or any of the Subsidiaries or received or retained any
funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Final
Memorandum.
(kk) The Company, each Subsidiary and each Facility that the
Final Memorandum indicates is participating in the medicare or medicaid
programs, upon consummation of the transactions contemplated by this Agreement
and after giving effect to the Transactions, has the requisite provider
agreement, provider number or other authorization to bill the Medicare program
and the respective Medicaid program in the state or states in which each
Facility is located. The number of units or licensed beds and the number of
Medicare certified beds at each of the Facilities are as indicted in the Final
Memorandum. Except as set forth in the Final Memorandum, there is no action
threatened or pending which could reasonably be expected to result in a
revocation of any such provider number or authorization or the Company's, or any
Subsidiary's or Facility's exclusion from the Medicare or any state Medicaid
programs and no individual with an ownership or control interest, as defined in
42 U.S.C. Section 1320a-3(a)(3), in the Company or any Subsidiary, or who is an
officer, director, or managing employee as defined in 42 U.S.C. Section
1320a-5(b), of the Company or any Subsidiary is a person described in 42 U.S.C.
Section 1320a-7(b)(8)(B). The Company's and each Subsidiary's business practices
do not violate any federal or state laws regarding physician ownership of (or
financial relationship
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with) and referral to entities providing health care related goods or services,
or laws requiring disclosure of financial interests held by physicians in
entities to which they may refer patients for the provisions of health care
related goods or services. None of the Company or any of its Subsidiaries is
subject to settlements or other adjustments by third party payors (including
Medicare and Medicaid) which could reasonably be expected to have a Material
Adverse Effect.
(ll) The statements regarding regulation of the Company and
its Subsidiaries under the captions "Business -- Government Regulation," "Risk
Factors -Extensive Government Regulations," "-- Healthcare Reform" and
"--Reimbursement by Third-Party Payors" (collectively, the "Regulatory
Sections ") in the Final Memorandum are correct in all material respects and
fairly describe the applicability of regulations to the operations of the
Company and its Subsidiaries as described in the Final Memorandum. The
statements regarding regulation of the Company and its Subsidiaries in the
Regulatory Sections in the Final Memorandum do not contain any untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(mm) Subsequent to the respective dates as of which
information is given in the Final Memorandum and except as set forth in the
Final Memorandum, no acquisition of any material Business (whether by way of
merger, asset acquisition or stock acquisition), by the Company or any of its
Subsidiaries is Probable, with the terms "Business" and "Probable" defined and
interpreted in the manner described in Regulation S-X under the Act; and
(nn) The Company and each of its Subsidiaries maintain systems
of internal accounting controls sufficient to provide reasonable assurances that
(I) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(oo) The Company, the Guarantors and each of their
Subsidiaries has complied and is continuing compliance with all provisions of
Florida Statutes, Section 517.075, relating to issuers doing business with Cuba.
Section 3.2. Resale of Senior Notes. The Initial Purchasers
represent and warrant that they are "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIB"). The Initial Purchasers agree with the
Company that (a) they have not and will not, directly or indirectly, solicit
offers for, or offer or sell, the Senior Notes by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (b) they have and will solicit offers for the
Senior Notes only from, and will offer the Senior Notes only to (i) Persons whom
the Initial Purchasers reasonably believe to be QIBs or, if any such Person is
buying for one or more institutional accounts for which such Person is acting as
fiduciary or agent, only when such Person has represented lo the Initial
Purchasers that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A or (ii) a limited number of other institutional
investors reasonably believed by the Initial Purchasers to be "Accredited
Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Act) that,
prior to their purchase of the Senior Notes,
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deliver to the Initial Purchasers a letter containing the representations and
agreements set forth in Annex A to the Final Memorandum.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the
Initial Purchasers. The obligation of the Initial Purchasers to purchase the
Senior Notes to be purchased by them hereunder is subject to the satisfaction of
the following conditions:
(a) The Initial Purchasers shall have received an opinion,
addressed to the Initial Purchasers in form and substance reasonably
satisfactory to counsel to the Initial Purchasers and dated the Time of
Purchase, from Quarles & Brady, counsel to the Company and the Guarantors,
covering the matters set forth in Exhibit 1 hereto.
(b) The Initial Purchasers shall have received an opinion,
addressed to the Initial Purchasers in form and substance reasonably
satisfactory to counsel to the Initial Purchasers and dated the Time of
Purchase, from Quarles & Brady, healthcare counsel to the Company covering the
matters set forth in Exhibit 2 hereto.
(c) The Initial Purchasers shall have received an opinion,
addressed to the Initial Purchasers in form and substance satisfactory to the
Initial Purchasers and dated the Time of Purchase, of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to the Initial Purchasers, substantially in the form
of Exhibit 3 hereto.
In rendering such opinions in accordance with Sections 4.1(a),
(b) and (c), each such counsel may rely as to factual matters upon
representations of, and certificates or other documents furnished by the
Company, the Guarantors and their respective officers and directors, the Initial
Purchasers and government officials, and upon such other documents as such
counsel deem appropriate as a basis for their opinion. Each such counsel may
specify the jurisdictions in which it is admitted to practice and that it is not
admitted to practice in any other jurisdiction or an expert in the law of any
other jurisdiction. To the extent such opinion concerns the laws of any other
such jurisdiction such counsel may rely upon the opinion of counsel
(satisfactory to the Initial Purchasers) admitted to practice in such
jurisdiction.
(d) The Initial Purchasers shall have received from each of
the Accountants a comfort letter or letters dated as of the date hereof and as
of the Closing in form and substance reasonably satisfactory to counsel to the
Initial Purchasers.
(e) The representations and warranties made by the Company and
the Guarantors herein shall be true and correct in all material respects (except
for changes expressly provided for in this Agreement) on and as of the Time of
Purchase with the same effect as though such representations and warranties had
been made on and as of the Time of Purchase, the Company and the Guarantors
shall have complied in all material respects with all agreements as set forth in
or contemplated hereunder and in the other Basic Documents required to be
performed by them at or prior to the Time of Purchase.
(f) Subsequent to the date of the Final Memorandum, (i) there
shall not have been any change, or any development involving a prospective
change, which has had or could be reasonably likely to have a Material
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<PAGE> 16
Adverse Effect, and (ii) the Company and its Subsidiaries shall have conducted
their respective businesses only in the ordinary course.
(g) At the Time of Purchase and after giving effect to the
consummation of this Agreement, the other Basic Documents and the Transactions,
there shall exist no Default or Event of Default.
(h) The purchase of and payment for the Senior Notes by the
Initial Purchasers hereunder shall not be prohibited or enjoined (temporarily or
permanently) by any applicable law or governmental regulation (including,
without limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System).
(i) At the Time of Purchase, the Initial Purchasers shall have
received a certificate, executed by the Chief Executive Officer of the Company
and the Chief Financial Officer of the Company, dated the Time of Purchase, from
the Company stating that the conditions specified in Sections 4.1(e), (f), (g)
and (l) have been satisfied or duly waived at the Time of Purchase.
(j) Each of the Basic Documents shall be reasonably
satisfactory in form and substance to the Initial Purchasers and shall have been
executed and delivered by all the respective parties thereto and shall be in
full force and effect.
(k) All proceedings taken in connection with the issuance of
the Senior Notes and the consummation of this Agreement, the other Basic
Documents and the Transactions and all documents and papers relating thereto
shall be reasonably satisfactory to the Initial Purchasers and counsel to the
Initial Purchasers. The Initial Purchasers and counsel to the Initial Purchasers
shall have received copies of such papers and documents as they may reasonably
request in connection therewith, all in form and substance reasonably
satisfactory to them.
(l) The sale of the Senior Notes hereunder shall not have been
enjoined (temporarily or permanently) at the Time of Purchase.
(m) There shall not have been any announcement by any
"nationally recognized statistical rating organization," as defined for purposes
of Rule 436(g) under the Act, that (A) it is downgrading its rating assigned to
any debt securities of the Company, or (B) it is reviewing its rating assigned
to any debt securities of the Company with a view to possible downgrading, or
with negative implications, or direction not determined.
(n) The Initial Purchasers shall have sold $100,000,000
aggregate principal amount of the Senior Notes in accordance with the provisions
of Section 3.2 hereof.
On or before the Closing, the Initial Purchasers and counsel
to the Initial Purchasers shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Company and its Subsidiaries as
they may reasonably request.
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Company and the Guarantors. The
Company and the Guarantors jointly and severally covenant and agree with the
Initial Purchasers that:
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(a) The Company will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement and as
to which the Initial Purchasers shall not have given its consent, which consent
shall not be unreasonably withheld. The Company will promptly, upon the
reasonable request of the Initial Purchasers or counsel to the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in the opinion of the
Initial Purchasers or counsel to the Initial Purchasers in connection with the
resale of the Senior Notes by the Initial Purchasers.
(b) The Company and the Guarantors will cooperate with the
Initial Purchasers in arranging for the qualification of the Senior Notes for
offering and sale under the securities or "Blue Sky" laws of such jurisdictions
as the Initial Purchasers may designate and will continue such qualifications in
effect for as long as may be reasonably necessary to complete the resale of the
Senior Notes; provided, however, that in connection therewith, none of the
Company and the Guarantors shall be required to qualify as a foreign corporation
or to execute a general consent to service of process in any jurisdiction or
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Senior Notes, the Exchange Notes
or the Private Exchange Notes, any event occurs or information becomes known as
a result of which the Final Memorandum as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum to comply with
applicable law, the Company will promptly notify the Initial Purchasers thereof
(who thereafter will not use such Final Memorandum until appropriately amended
or supplemented) and will prepare, at the expense of the Company, an amendment
or supplement to the Final Memorandum that corrects such statement or omission
or effects such compliance; provided, however, that the Company's obligation
hereunder shall not be applicable to the extent resale by the Initial Purchasers
may be accomplished pursuant to a Registration Statement (as defined in the
Senior Note Registration Rights Agreement).
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel to the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of
the Senior Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For and during the period ending on the date no Senior
Notes or Exchange Notes are outstanding, the Company and the Guarantors will
furnish to the Initial Purchasers copies of all reports and other communications
(financial or otherwise) furnished by the Company or any of the Guarantors to
the Trustee or the holders of the Senior Notes or Exchange Notes and, promptly
after available, copies of any reports or financial statements furnished to or
filed by the Company or any of the Guarantors with the Commission or any
national securities exchange on which any class of securities of the Company or
any of the Guarantors may be listed or the Nasdaq National Market.
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(g) Prior to the Time of Purchase, the Company and the
Guarantors will furnish to the Initial Purchasers, as soon as they have been
prepared, a copy of any unaudited interim financial statements of the Company
and the Guarantors for any period subsequent to the period covered by the most
recent financial statements appearing in the Final Memorandum.
(h) None of the Company, the Guarantors, or any of their
Affiliates will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act) which could be
integrated with the sale of the Senior Notes in a manner which would require the
registration under the Act of the Senior Notes.
(i) The Company and the Guarantors will not, and will not
permit any of their Subsidiaries to, solicit any offer to buy or offer to sell
the Senior Notes by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act.
(j) For so long as any of the Senior Notes remain outstanding
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Act and not salable in full under Rule 144 under the Act (or any successor
provision), the Company and the Guarantors will make available, upon request, to
any seller of such Senior Notes the information specified in Rule 144A(d)(4)
under the Act, unless the Company and the Guarantors are then subject to Section
13 or 15(d) of the Exchange Act.
(k) The Company and the Guarantors will use their best efforts
to (I) permit the Senior Notes to be included for quotation on PORTAL and (ii)
permit the Senior Notes to be eligible for clearance and settlement through The
Depository Trust Company.
(l) The Company and the Guarantors will use their best efforts
to do and perform all things required to be done and performed by them under
this Agreement and the other Basic Documents prior to or after the Closing and
to satisfy all conditions precedent on their part to the obligations of the
Initial Purchasers to purchase and accept delivery of the Senior Notes.
ARTICLE VI
FEES
Section 6.1. Costs, Expenses and Taxes. The Company and the
Guarantors agree to pay all costs and expenses incident to the performance of
their obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 8.2 hereof, including, but not limited to, all costs and expenses
incident to (i) the negotiation, preparation, printing, typing, reproduction,
execution and delivery of this Agreement and each of the other Basic Documents,
any amendment or supplement to or modification of any of the foregoing and any
and all other documents furnished pursuant hereto or thereto or in connection
herewith or therewith, (ii) any costs of printing the Preliminary Memorandum and
the Final Memorandum and any amendment or supplement thereto, any other
marketing related materials and any "Blue Sky" memoranda (which shall include
the reasonable disbursements of counsel to the Initial Purchasers in respect
thereof), (iii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iv) the fees and disbursements
of the counsel, the accountants and any other experts or advisors retained by
the Company, (v) preparation (including printing), issuance and delivery to the
Initial Purchasers of the Senior Notes, (vi) the qualification of the Senior
Notes under state securities and
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"Blue Sky" laws, including filing fees and reasonable fees and disbursements of
counsel to the Initial Purchasers relating thereto, (vii) expenses and the cost
of any private or chartered airplanes or other transportation in connection with
any meetings with prospective investors in the Senior Notes, (viii) fees and
expenses of the Trustee including fees and expenses of counsel to the Trustee,
(ix) all expenses and listing fees incurred in connection with the application
for quotation of the Senior Notes on PORTAL, (x) any fees charged by investment
rating agencies for the rating of the Senior Notes and (xi) except as limited by
Article VII, all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), if any, in connection with the enforcement of
this Agreement, the Senior Notes or any other agreement furnished pursuant
hereto or thereto or in connection herewith or therewith. In addition, the
Company and the Guarantors shall pay any and all stamp, transfer and other
similar taxes (but excluding any income, franchise, personal property, ad
valorem or gross receipts taxes) payable or determined to be payable in
connection with the execution and delivery of this Agreement, any of the other
Basic Documents or the issuance of the Senior Notes, and shall save and hold the
Initial Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying, or omission to pay, such taxes
(other than if such delay is caused by the Initial Purchasers).
ARTICLE VII
INDEMNITY
Section 7.1. Indemnity.
(a) Indemnification by the Company and Guarantors. Each of the
Company and the Guarantors jointly and severally agrees and covenants to hold
harmless and indemnify each Initial Purchaser, their Affiliates, the directors,
officers, employees, affiliates and agents of each of the Initial Purchaser and
their Affiliates and each person, if any, who controls each of the Initial
Purchasers and their Affiliates within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act (collectively referred to for the purposes of
this Article VII as the "Initial Purchasers"), from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding between any
parties to this Agreement or between any party to this Agreement and any third
party, or otherwise, or any claim asserted) (collectively, "Losses") to which
they, or any of them may become subject arising out of or based upon any untrue
statement or alleged untrue statement of any fact contained in the Memorandum
and any amendments or supplements thereto, the Basic Documents, or any documents
filed with the Commission or any State Commission (collectively, the "Offering
Materials") or arising out of or based upon the omission or alleged omission to
state in any of the Offering Materials a fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company and the Guarantors shall not be liable to any Initial Purchaser
under this paragraph (a) to the extent that such Losses arose out of or are
based upon an untrue statement or omission made in any of the documents referred
to in this paragraph (a) in reliance upon and in conformity with the information
relating to such Initial Purchaser or the plan of distribution furnished in
writing by such Initial Purchasers expressly for inclusion therein (or for a
breach by the Initial Purchasers of any representation or warranty contained in
this Agreement). The Company and the Guarantors further agree to reimburse the
Initial Purchasers for any reasonable legal and other expenses as they are
incurred by them in connection with investigating, preparing to defend,
defending or appearing as a third-party witness in connection with any lawsuits,
claims or other proceedings or investigations arising in any manner out of or in
connection
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with the Memorandum and any amendments or supplements thereto, the execution or
delivery of any of the Basic Documents, any Offering Materials or any
Transaction; provided that if the Company reimburses any Initial Purchaser
hereunder for any expenses incurred in connection with a lawsuit, claim or other
proceeding for which indemnification is sought, such Initial Purchaser hereby
agrees to refund such reimbursement of expenses to the extent that the lawsuit,
claim or other proceeding arises out of or is based upon an untrue statement or
omission made in any of the documents referred to in this paragraph (a) in
reliance upon and in conformity with the information relating to such Initial
Purchaser furnished in writing by such Initial Purchasers expressly for
inclusion therein (or for a breach by such Initial Purchaser of any
representation or warranty contained in this Agreement). The Company and the
Guarantors further agree that the indemnification, contribution and
reimbursement commitments set forth in this Article VII shall apply whether or
not the Initial Purchasers are formal parties to any such lawsuits, claims or
other proceedings. The indemnity, contribution and expense reimbursement
obligations of the Company and the Guarantors under this Article VII shall be in
addition to any liability the Company or the Guarantors may otherwise have under
common law or otherwise.
(b) Indemnification by the Initial Purchasers. Each Initial
Purchaser, severally and not jointly, agrees and covenants to hold harmless and
indemnify the Company, the Guarantors, their Affiliates, the directors,
officers, employees, agents and each person, if any, who controls each of the
Company and the Guarantors and their Affiliates (collectively referred to for
the purposes of this Article VII as the "Company") from and against any Losses,
insofar as such Losses arise out of or are based upon or relate to any untrue
statement of any material fact contained in the Offering Materials, or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in reliance upon and in conformity with the information relating to such Initial
Purchaser furnished in writing by such Initial Purchaser expressly for inclusion
therein. The indemnity, contribution and expense reimbursement obligations of
the Initial Purchasers under this Article VI[I shall be in addition to any
liability the Initial Purchasers may otherwise have under common law or
otherwise.
(c) Procedure. If any Person shall be entitled to indemnity
hereunder (each an "Indemnified Party"), such Indemnified Party shall give
prompt written notice to the party or parties from which such indemnity is
sought (each an "Indemnifying Party") of the commencement of any action, suit,
investigation or proceeding, governmental or otherwise (a "Proceeding"), with
respect to which such Indemnified Party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure so to notify the
Indemnifying Parties shall not relieve the Indemnifying Parties from any
obligation or liability except to the extent that the Indemnifying Parties have
been prejudiced materially by such failure. The Indemnifying Parties shall have
the right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such
Proceeding, to assume, at the Indemnifying Parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that an Indemnified Party or parties (if more than one such
Indemnified Party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or parties unless: (1) the Indemnifying Parties agree to
pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified
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Party or parties and the Indemnifying Party or an Affiliate of the Indemnifying
Party and such Indemnified Parties, and the Indemnified Parties shall have been
advised by counsel that there may be one or more legal defenses available to
such Indemnified Party or parties that are different from or additional to those
available to the Indemnifying Parties, in which case, if such Indemnified Party
or parties notifies the Indemnifying Parties in writing that it elects to employ
separate counsel at the expense of the Indemnifying Parties, the Indemnifying
Parties shall not have the right to assume the defense thereof with respect to
the Indemnified Parties and such counsel shall be at the expense of the
Indemnifying Parties, it being understood, however, that the Indemnifying
Parties shall not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such Indemnified Party or parties, or for fees
and expenses that are not reasonable. No Indemnified Party or Parties will
settle any Proceeding without the consent of the Indemnifying Party or parties
(but such consent shall not be unreasonably withheld). No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened Proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability or claims
that are the subject of such Proceeding.
Section 7.2. Contribution. If for any reason the
indemnification provided for in Section 7.1 of this Agreement is unavailable to
an Indemnified Party, or insufficient to hold it entirely harmless, in respect
of any Losses, then each applicable Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such Losses, as
well as any other relevant equitable considerations. The relative benefits
received by the Indemnifying and Indemnified Parties shall be deemed to be in
the same proportion as the total proceeds from the offering of the Senior Notes
(before deducting expenses, but after giving effect to the Initial Purchasers'
discount) received by the Company bear to the total discounts and commissions
received by the Initial Purchasers. The relative fault of the Indemnifying and
Indemnified Parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying or Indemnified Parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the Losses, referred to above shall be deemed to include any legal or other fees
or expenses incurred by such party in connection with investigating or defending
any such claim.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to the immediately preceding
paragraph were determined pro rata or per capita or by any other method of
allocation which does not take into account the equitable considerations
referred to in such paragraph. Notwithstanding any other provision of this
Section 7.2, the Initial Purchasers shall not be obligated to make contributions
hereunder that in the aggregate exceed the total discounts, commissions and
other compensation received by the Initial Purchasers under this Agreement, less
the aggregate amount of any damages that the Initial Purchasers have otherwise
been required to pay by reason of the untrue or
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alleged untrue statements or a breach of a representation or warranty or the
omissions or alleged omissions to state a material fact. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
Section 7.3. Senior Note Registration Rights Agreement.
Notwithstanding anything to the contrary in this Article VII, the
indemnification and contribution provisions of the Senior Note Registration
Rights Agreement shall govern any claim with respect thereto.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions. The representations,
warranties and covenants of the Company, its officers and the Initial Purchasers
made herein, the indemnity and contribution agreements contained herein and each
of the provisions of Articles V, VII and VIII shall remain operative and in full
force and effect regardless of (a) the investigation made by or on behalf of the
Company, the Initial Purchasers or any Indemnified Person, (b) acceptance of any
of the Senior Notes and payment therefor, (c) any termination of this Agreement
or (d) disposition of the Senior Notes by the Initial Purchasers whether by
redemption, exchange, sale or otherwise.
Section 8.2. Termination.
(a) This Agreement may be terminated in the sole discretion of
the Initial Purchasers by notice to the Company given prior to the Time of
Purchase in the event that the Company shall have failed, refused or been unable
to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing:
(i) the Company or any of its Subsidiaries shall have
sustained any loss or interference with respect to its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage or
any legal or governmental proceeding or any action of any governmental
reimbursement source or intermediary therefor, which loss or interference, in
the sole judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the aggregate, has
or could be reasonably likely to have a Material Adverse Effect (including
without limitation a change in control of the Company or any of its
Subsidiaries), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in
securities generally on the New York Stock Exchange, American Stock Exchange or
the Nasdaq National Market shall have been suspended or minimum or maximum
prices shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared
by New York or United States authorities;
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power, or
(B) an outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity or
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emergency, or (c) any material change in the financial markets of the United
States which, in the case of (A), (B) or (c) above and in the sole judgment of
the Initial Purchasers, makes it impracticable or inadvisable to proceed with
the offering or the delivery of the Senior Notes as contemplated by the Final
Memorandum; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2
shall be without liability of any party to any other party except as provided in
Section 8.1 hereof
Section 8.3. Defaulting Initial Purchasers. (a) If, on the day
of the Closing, any Initial Purchaser defaults in the performance of its
obligations under this Agreement, the non-defaulting Initial Purchasers may make
arrangements for the purchase of such Senior Notes by other persons satisfactory
to the Company and the Guarantors but if no such arrangements are made within 36
hours after such default, this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers, the Company or the Guarantors
except that the Company and the Guarantors will continue to be liable for the
payment of expenses to the extent set forth in Article VI and the provisions of
Article VII shall not terminate and shall remain in effect. As used in this
Agreement, the term "Initial Purchaser" includes, for all purposes of this
Agreement unless the context otherwise requires, any party not listed in
Schedule I hereto who, pursuant to this Section 8.3, purchases Senior Notes
which a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Company, the Guarantors or
the nondefaulting Initial Purchasers for damages caused by its default. If other
persons are obligated or agree to purchase the Senior Notes of a defaulting
Initial Purchaser, either the non-defaulting Initial Purchasers or the Company
may postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Initial Purchasers may be necessary in the Offering Memorandum or in any
other document or arrangement, and the Company agrees to promptly make any
amendment or supplement to the Offering Memorandum that effects any such
changes.
Section 8.4. No Waiver; Modifications in Writing. No failure or delay
on the part of the Company, the Guarantors or the Initial Purchasers in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company, the
Guarantors or the Initial Purchasers at law or in equity or otherwise. No waiver
of or consent to any departure by the Company, the Guarantors or the Initial
Purchasers from any provision of this Agreement shall be effective unless signed
in writing by the party entitled to the benefit thereof, provided that notice of
any such waiver shall be given to each party hereto as set forth below. Except
as otherwise provided herein, no amendment, modification or termination of any
provision of this Agreement shall be effective unless signed in writing by or on
behalf of each of the Company, the Guarantors and the Initial Purchasers. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company, the Guarantors or the Initial Purchasers from the terms of any
provision of this Agreement, shall be effective only in the specific
23
<PAGE> 24
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on the
Company or the Guarantors in any case shall entitle the Company or the
Guarantors to any other or further notice or demand in similar or other
circumstances.
Section 8.5. Information Supplied by the Initial Purchasers.
The statements set forth in the legend on pages (i) and (ii) of the Final
Memorandum and in the second and third sentences of the third paragraph and the
seventh, eighth and ninth paragraphs under the heading "Plan of Distribution" in
the Final Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 3.1(a) and 7.1(a) and (b) hereof.
Section 8.6 Allocation of Expenses of Initial Purchasers. Each
of the Initial Purchasers hereby agrees that any expenses or disbursements to be
paid collectively by the Initial Purchasers (including, without limitation, the
fees and disbursements of counsel to the Initial Purchasers) shall be allocated
among the Initial Purchasers as follows: CIBC Wood Gundy Securities Corp., 50%;
Cruttenden Roth Incorporated, 42.5%; Wheat, First, Securities, Inc., 7.5%.
Section 8.7. Communications. All notices, demands and other
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchasers, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to the initial Purchasers in care of CIBC Wood Gundy
Securities Corp., 425 Lexington Avenue, 3rd Floor, New York, New York 10017,
Attention: Neal Thomas, with a copy to Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, New York 10019, Attention: Carl L.
Reisner, Esq., and (b) if to the Company or any Guarantor, shall be given by
similar means to Unison Healthcare Corporation, 7272 E. Indian School Road,
Suite 214, Scottsdale, Arizona 8525 1, Attention: Chief Financial Officer, with
a copy to Quarles & Brady, One East Camelback Road, Suite 400, Phoenix, Arizona
85012, Attention: P. Robert Moya, Esq. In each case, notices, demands and other
communications shall be deemed given when received.
Section 8.8. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.9. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchasers, the Company, the
Guarantors and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other Person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained; this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such Persons and for the benefit of
no other Person except that (i) the indemnities of the Company and the
Guarantors contained in Section 7.1(a) of this Agreement shall also be for the
benefit of the directors, officers, employees and agents of the Initial
Purchasers and any Person or Persons who control the Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii)
the indemnities of the Initial Purchasers contained in Section 7.1(b) of this
Agreement shall also be for the benefit of the directors of the Company, the
Guarantors, their officers, employees and agents and any Person or Persons who
control the Company or any Guarantor
24
<PAGE> 25
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Senior Notes from the Initial Purchasers will be deemed a
successor because of such purchase.
Section 8.10. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.11. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.12. Headings. The Article and Section headings and
Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Craig R. Clark
-------------------------------
Name: Craig R. Clark
Title: EVP & CFO
SUNQUEST SPC, INC.
BRITWILL HEALTHCARE COMPANY
QUEST PHARMACIES, INC.
SUNBELT THERAPY MANAGEMENT SERVICES, INC., an Arizona corporation
DECATUR SPORTS FIT & WELLNESS CENTER, INC.
HENDERSON & ASSOCIATES REHABILITATION, INC.
SUNBELT THERAPY MANAGEMENT SERVICES, INC., an Alabama corporation
BRITWILL INVESTMENTS - I, INC.
BRITWILL INVESTMENTS - II, INC.
BRITWILL FUNDING CORPORATION
EMORY CARE CENTER, INC.
THERAPY HEALTH SYSTEMS, INC.
By: /s/ Jerry M. Walker
-------------------------------
Name: Jerry M. Walker
Title: President
By: /s/ Phillip R. Rollins
-------------------------------
Name: Phillip R. Rollins
Title: Secretary
25
<PAGE> 26
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ John J. Navin
------------------------------------
Name: John J. Navin
Title: Director
CRUTTENDEN ROTH INCORPORATED
By: /s/ Edward J. Hall
------------------------------------
Name: Edward J. Hall
Title: Chief Financial Officer
WHEAT, FIRST SECURITIES, INC.
By: /s/
------------------------------------
Name:
Title:
26
<PAGE> 27
Schedule I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Senior Notes
----------------- ---------------
<S> <C>
CIBC Wood Gundy Securities Corp.............................. $ 58,333,333
Cruttenden Roth Incorporated ................................ 32,916,667
Wheat, First Securities, Inc................................. 8,750,000
------------
$100,000,000
============
</TABLE>
27
<PAGE> 28
Schedule II
Subsidiaries
Sunquest SPC, Inc.
BritWill Healthcare Company
Quest Pharmacies, Inc.
Sunbelt Therapy Management Services, Inc. (Arizona)
Decatur Sports Fit & Wellness Center, Inc.
Henderson & Associates Rehabilitation, Inc.
Sunbelt Therapy Management Services, Inc. (Alabama)
BritWill Investments I, Inc.
BritWill Investments II, Inc.
BritWill Funding Corporation
Emory Care Center, Inc.
Therapy Health Systems, Inc.
28
<PAGE> 29
EXHIBIT 1
CIBC WOOD GUNDY SECURITIES CORP.
CRUTTENDEN ROTH INCORPORATED
WHEAT, FIRST SECURITIES, INC.
as Initial Purchasers
c/o CIBC Wood Gundy Securities Corp.
425 Lexington Avenue, 3rd Floor
New York, NY 10017
Ladies and Gentlemen:
We have represented Unison HealthCare Corporation, a Delaware
corporation (the "Company"), in connection with the Securities Purchase
Agreement dated as of October 28, 1996 (the "Purchase Agreement") among you as
Initial Purchasers (the "Initial Purchasers"), the Company and the Guarantors
named in Schedule II thereto (the "Guarantors"), with respect to the issue and
sale by the Company of $100,000,000 aggregate principal amount of Senior Notes
to the Initial Purchasers and the offering thereof by the Initial Purchasers.
Unless otherwise defined herein, the definitions of terms used in this opinion
shall be those in the Purchase Agreement.
In such capacity, we have examined copies of the Final Offering
Memorandum of the Company with respect to the Senior Notes (the "Final
Memorandum") and the Purchase Agreement, and the forms of the Senior Notes, the
Indenture and the Senior Note Registration Rights Agreement referred to therein
(referred to with the Purchase Agreement as the "Basic Documents" herein). We
have also examined the originals, or copies identified to our satisfaction, of
such corporate records of the Company and the Guarantors, such other agreements
and instruments, certificates of public officials, officers of the Company and
other persons as we have deemed necessary as a basis for the opinions expressed
below. In all such examinations, we have assumed the genuineness of all
signatures, the authenticity of all documents, certificates and instruments
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies. In rendering the opinions expressed below,
we relied upon certificates of the Company given by certain of its officers
(copies of which certificates are attached hereto) as to factual matters, and on
certificates of public officials. We believe you and we are justified in relying
upon such certificates.
Based upon the foregoing, we are of the opinion that:
1. The Company and each of the Guarantors have been duly incorporated,
and are validly existing and in good standing under the laws of their respective
jurisdictions of incorporation.
2. Each of the Company and the Guarantors is duly qualified and in good
standing as a foreign corporation and is authorized to do business, in each
jurisdiction in which the ownership or leasing of any property or the character
of its operations makes such qualification necessary and in which the failure so
to qualify could have a Material Adverse Effect.
3. Except as set forth in the Final Memorandum, all outstanding shares
of capital stock of the Subsidiaries are owned by the Company either directly or
through wholly-owned subsidiaries.
29
<PAGE> 30
4. Except as set forth or contemplated in the Final Memorandum, nothing
has come to our attention that gives us reason to believe there exists any
defect in title or leasehold interest, or any lien, claim or encumbrance which
would materially affect the use made and, to the best of our knowledge, proposed
to be made, or any of the property of the Company or any of the Subsidiaries.
5. Each of the Company and the Guarantors has all requisite corporate
power and authority, as the case may be, to issue, sell and deliver the Senior
Notes, to execute and deliver the Basic Documents to which it is a party, to
perform all its obligations thereunder and to consummate the transactions
contemplated thereby. Each of the Company and its Subsidiaries has the corporate
power and authority to own or lease and operate its respective property and
assets and to conduct its respective business as described in the Final
Memorandum.
6. All necessary corporate action has been taken by each of the Company
and the Guarantors to authorize the execution, delivery and performance by it of
the Basic Documents to which it is a party, to consummate all of the
transactions contemplated thereby and to issue, sell and deliver the Senior
Notes.
7. The beneficial ownership of the equity interests in the Company is
as set forth in the Final Memorandum under the heading "Principal Stockholders."
8. The Purchase Agreement has been duly authorized by the Company and
the Guarantors and the Company and the Guarantors each have all requisite
corporate power and authority to execute, issue and deliver the Purchase
Agreement and to incur and perform its obligations provided for therein. The
Purchase Agreement, when executed and delivered by the Company and the
Guarantors (assuming the due authorization, execution and delivery by the
Initial Purchasers), will constitute a valid and legally binding agreement of
the Company and the Guarantors, enforceable against each of them in accordance
with its terms except (i) that the enforcement thereof may be subject to
bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance,
moratorium or other similar laws now or hereafter in effect and relating to or
affecting creditors' rights generally, and to general principles of equity and
the discretion of the court before which any proceeding therefor may be brought,
(ii) the enforceability of any provision requiring the payment of attorney's
fees may be subject to a court determination that such fees are reasonable and
(iii) as any rights to indemnity or contribution hereunder may be limited by
federal or state securities laws and public policy considerations.
9. The Indenture has been duly authorized by the Company and each of
the Guarantors and the Company and each of the Guarantors shall have all
requisite corporate power and authority to execute, issue and deliver the
Indenture and the Guarantees and to incur and perform their respective
obligations provided for therein. The Indenture, when executed and delivered by
the Company and each of the Guarantors (assuming the due authorization,
execution and delivery by the Trustee), will constitute a valid and legally
binding agreement of the Company and each of the Guarantors, enforceable against
each of them in accordance with its terms except that (i)
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<PAGE> 31
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or conveyance and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally, (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, (iii) the
enforceability of provisions imposing penalties, forfeitures, late payment
charges or an increase in interest rate upon delinquency in payment or the
occurrence of a default may be limited in certain circumstances, and (iv) the
enforceability of any provision requiring the payment of attorneys' fees may be
subject to a court determination that such fees are reasonable. The Indenture is
in sufficient form for due qualification under the Trust Indenture Act of 1939,
as amended.
10. The Senior Note Registration Rights Agreement has been duly
authorized by the Company and the Guarantors and the Company and the Guarantors
each have all requisite corporate power and authority to execute, issue and
deliver the Senior Note Registration Rights Agreement and to incur and perform
their respective obligations provided for therein. The Senior Note Registration
Rights Agreement, when executed and delivered by the Company and the Guarantors
(assuming the due authorization, execution and delivery by the Initial
Purchasers), will constitute a valid and legally binding agreement of the
Company, enforceable against each of them in accordance with its terms except
that (i) rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations; (ii)
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or conveyance and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally, (iii)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, (iv) the
enforceability of provisions imposing penalties, forfeitures, late payment
charges or an increase in interest rate upon delinquency in payment or the
occurrence of a default may be limited in certain circumstances, and (v) the
enforceability of any provision requiring the payment of attorneys' fees may be
subject to a court determination that such fees are reasonable, rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
11. The Senior Notes have each been duly authorized by the Company and
the Guarantors and the Company and the Guarantors each have all requisite
corporate power and authority to execute, issue and deliver the Senior Notes and
to incur and perform their respective obligations provided for therein. The
Senior Notes, when executed and delivered by the Company and the Guarantors
(assuming the due authorization, execution and delivery by the Trustee) in
accordance with the provisions of the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of the Purchase Agreement,
will be entitled to the benefits of the Indenture and will constitute valid and
legally binding obligations of the Company and the Guarantors enforceable
against each of them in accordance with their terms, except that (i)
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or conveyance and other similar laws now or
hereafter in effect relating to or affecting creditors'
31
<PAGE> 32
rights generally, (ii) the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought,
(iii) the enforceability of provisions imposing penalties, forfeitures, late
payment charges or an increase in interest rate upon delinquency in payment or
the occurrence of a default may be limited in certain circumstances, and (iv)
the enforceability of any provision requiring the payment of attorneys' fees may
be subject to a court determination that such fees are reasonable. The ranking
of the Senior Notes is as set forth in the Final Memorandum.
12. Each of the Guarantees have each been duly authorized by the
Guarantors and each Guarantor has all requisite corporate power and authority to
execute, issue and deliver its respective Guarantee and to incur and perform its
respective obligations provided for therein. The Guarantees, when executed and
delivered by the Guarantors in accordance with the provisions of the Indenture
will constitute valid and legally binding obligations of the Guarantors
enforceable against each of them in accordance with their terms, except that (i)
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or conveyance and other similar laws nor or
hereafter in effect relating to or affecting creditors' rights generally, (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, (iii) the
enforceability of provisions imposing penalties, forfeitures, late payment
charges or an increase in interest rate upon delinquency in payment or the
occurrence of a default may be limited in certain circumstances, and (iv) the
enforceability of any provision requiring the payment of attorneys' fees may be
subject to a court determination that such fees are reasonable. The ranking of
the Guarantees is as set forth in the Final Memorandum.
13. The Company and the Guarantors have all requisite corporate power
and authority under the laws of their respective state of incorporation to
execute, deliver and perform their respective obligations under the Purchase
Agreement and to consummate each of the Transactions set forth in the Final
Memorandum. Each of the Company and the Guarantors has all requisite corporate
power and authority under the laws of their respective state of incorporation to
(i) execute, deliver and perform its obligations under the Purchase Agreement
and each of the Basic Documents, (ii) execute, deliver and perform its
obligations under all other agreements and instruments executed and delivered by
the Company and the Guarantors pursuant to or in connection with the Purchase
Agreement, each of the Basic Documents and the Transactions and (iii) issue the
Senior Notes in the manner and for the purpose contemplated by the Purchase
Agreement.
14. To the best of our knowledge and other than as described in the
Final Memorandum, there is no action, suit, investigation or proceeding,
governmental or otherwise, pending or, to the best knowledge of the Company and
the Guarantors, threatened to which either the Company or any of the Guarantors
is or would be a party or of which the properties of either the Company or any
of the Guarantors are or may be subject, that (i) seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge the issuance and sale of the
Senior Notes by the Company and the Guarantors or
32
<PAGE> 33
any of the transactions contemplated by the Transactions, (ii) questions the
legality or validity of any of the transactions contemplated by the Transactions
or seeks to recover damages or obtain other relief in connection with any of the
transactions contemplated by the Transactions, (iii) could reasonably be
expected to have any material adverse effect on the power or ability of either
the Company or any of the Guarantors to perform its obligations under the Basic
Documents or to consummate the transactions contemplated hereby or thereby or
(iv) could reasonably be expected to have a Material Adverse Effect.
15. The execution, delivery and performance by the Company and the
Guarantors of the Basic Documents, the issuance and sale by the Company of the
Senior Notes and the execution, delivery and performance by the Company and the
Guarantors of all other agreements and instruments to be executed and delivered
by the Company and the Guarantors, pursuant hereto or thereto or in connection
herewith or therewith or in connection with any of the other transactions
contemplated by the Transactions, and compliance by the Company and the
Guarantors with the terms and provisions hereof and thereof, do not and will not
(i) violate any provision of any law, rule or regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System but excluding state "blue Sky" and legal investment laws and
regulations), order, writ, judgment, decree, determination or award known to us
presently in effect or in effect at the Time of Purchase having applicability to
either of the Company or any of the Guarantors, (ii) conflict with or result in
a breach or violation of (A) any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) by either the Company or any of the Guarantors or, except
as described in the Final Memorandum, give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness under any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
management agreement, authorization, permit, certificate or other agreement or
document known to us to which either the Company or any of the Guarantors is a
party or by which any of them may be bound, or to which any of them or any of
their respective assets or businesses is subject or (B) the certificate of
incorporation or bylaws (each, an "Organizational Document"), of either the
Company or any of the Guarantors, or (iii) 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 either the Company or any of the Guarantors, except, in
each case, where such violation, conflict, breach, default or creation or
imposition of any Lien would not (individually or in the aggregate) (1) have a
Material Adverse Effect, (2) materially impair either the Company's or any of
the Guarantors' ability to perform the obligations contemplated by the Basic
Documents and the Final Memorandum or (3) materially affect the consummation of
the transactions contemplated by the Basic Documents and the Final Memorandum
and the Transactions.
16. Except as set forth in the Final Memorandum, no authorization,
consent, approval, license, qualification or formal exemption from, nor any
filing, declaration or registration with, any court, governmental agency or
regulatory authority or any securities exchange is required (i) in connection
with the execution, delivery or performance by the Company and the Guarantors
of, any of the Basic Documents or any of the transactions contemplated by the
Transactions or (ii) to permit the Company and the Guarantors to effect
33
<PAGE> 34
payments of principal of, premium and interest on the Senior Notes except (A) as
may be required under state securities or "Blue Sky" laws or the laws of any
foreign jurisdiction in connection with the offer and sale of the Senior Notes
or (B) as would not (individually or in the aggregate) have a Material Adverse
Effect.
17. Neither the Company nor any of the Guarantors is nor immediately
after the Time of Purchase will be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
18. The statements set forth under the heading "Description of the
Senior Notes" in the Final Memorandum, insofar as such statements purport to
summarize certain provisions of the Senior Notes and the Indenture, provide a
fair summary of such provisions and information with respect thereto.
19. Assuming the accuracy of the representations of the Company and the
Guarantors in Section 3.1 of the Purchase Agreement and of the Initial
Purchasers set forth in Section 3.2 of the Purchase Agreement, it is not
necessary in connection with the offer and sale of the Senior Notes by the
Company and the Guarantors to the Initial Purchase under the circumstances
contemplated by the Purchase Agreement to register the Senior Notes under the
Act or to quality the Indenture under the Trust Indenture Act of 1939, as
amended.
20. No filing or registration with, notice to, or consent, approval,
authorization, order or other action of, any court or governmental authority or
agency is required for the consummation by the Company and the Guarantors of the
transactions contemplated by the Basic Documents except such as have been
obtained or made and except such as may be required under the state securities
or Blue Sky laws.
21. The execution and delivery of the Exchange Notes and the Private
Exchange Notes has been duly authorized by all necessary corporate action of the
Company and the Guarantors and the Exchange Notes and the Private Exchange
Notes, when duly executed and delivered by the Company and the Guarantors, all
in accordance with the terms of the Senior Note Registration Rights Agreement
and the Indenture, and assuming due authentication by the Trustee, will be the
legal, valid, and binding obligations of the Company and the Guarantors and will
be enforceable in accordance with their terms except that (i) enforceability may
be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer or conveyance and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, (ii) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, (iii) the enforceability of
provisions imposing penalties, forfeitures, late payment charges or an increase
in interest rate upon delinquency in payment or the occurrence of a default may
be limited in certain circumstances, and (iv) the enforceability of any
provision requiring the payment of attorneys' fees may be subject to a court
determination that such fees are reasonable.
22. The descriptions in the Final Memorandum and any further amendments
or supplements thereto of contracts, agreements or other legal
34
<PAGE> 35
documents or which purport to summarize statutes, legal and governmental
proceedings or legal conclusions and other documents are accurate and fairly
present the information required to be shown.
23. We have no reason to believe that any Permit is not in full force
and effect and, to the best of our knowledge, other than as described or
contemplated in the Final Memorandum, there are no proceedings pending or
threatened against the Company, or any of its Subsidiaries or Facilities that
may cause any such Permit that is material to the conduct of the business of the
Company or any of its Subsidiaries as presently conducted to be revoked,
withdrawn, canceled, suspended or not renewed.
24. To the best of our knowledge, (a) the Company's and each
Subsidiary's and Facility's business practices do not violate any applicable
provisions of federal or state laws or regulations governing Medicare or any
state Medicaid programs, (b) no individual with an ownership or control
interest, as defined in 42 U.S.C. Section 1320a-3(a)(3), in the Company or any
Subsidiary, or who is an officer, director, or managing employee as defined in
42 U.S.C. Section 1320a-5(b), of the Company or any Subsidiary is a person
described in 42 U.S.C. Section 1320a-7(b)(8)(B), and (c) the Company's, and each
Subsidiary's and Facility's business practices do not violate any applicable
provisions of federal or state laws or regulations regarding physician ownership
of (or financial relationship with) and referral to entities providing health
care related goods or services, or laws requiring disclosure of financial
interests held by physicians in entities to which they may refer patients for
the provisions of health care related goods or services.
25. The statements regarding regulation of the Company and the
Subsidiaries under the captions "Business -- Government Regulation," "Risk
Factors -- Extensive Government Regulations," "--Healthcare Reform" and
"--Reimbursement by Third-Party Payors" (collectively, the "Regulatory
Sections ") in the Final Memorandum, to the extent that they constitute,
summarize or describe matters of law or legal conclusions, are correct in all
material respects and fairly describe the applicability of regulations to the
operations of the Company and the Subsidiaries as described in the Final
Memorandum, and nothing has come to our attention that caused us to believe that
the statements regarding regulation of the Company in the Regulatory Sections in
the Final Memorandum contain any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
We have participated in the preparation of the Final Memorandum and in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
the contents of the Final Memorandum and related matters were discussed and,
although we are not passing upon and do not assume responsibility for the
accuracy, completeness or fairness of the statements contained in the Final
Memorandum (except as otherwise indicated above), on the foregoing basis, no
facts have come to our attention that leads us to believe that, as of the date
of the Final Memorandum or as of the date hereof, the Final Memorandum (other
than the financial statements and other financial and statistical data and
information included therein or omitted therefrom (including, without
limitation, any projected financial data or information),
35
<PAGE> 36
as to which we express no opinion) contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.
We are admitted to practice only in the States of Arizona, Florida and
Wisconsin, and we are not admitted to practice in any other jurisdiction or
expert in the law of any other jurisdiction. Accordingly, we express no opinion
on the laws of any jurisdiction other than the federal laws of the United
States, the general corporation law of the State of Delaware and the laws of the
States of Arizona, Florida and Wisconsin. We have assumed for purposes of
paragraphs 8, 9, 10, 11 and 12 and to the extent that the laws of the State of
New York govern the legality and interpretation of the documents and instruments
referenced therein, that the applicable laws of the State of New York are
identical to the laws of the State of Arizona. However, with respect to the
opinions rendered in paragraphs 16 and 24-25, we have with your permission,
relied on the opinions of Krieg, Devault, Alexander & Capehart; Vinson & Elkins;
Capell, Howard, Knabe & Cobbs, P.A.; Saul, Emory, Remick & Saul; Fraser,
Trebilcock, Davis & Foster, P.C.; Moffatt, Thomas, Barrett, Rock & Fields,
Chartered; Bass, Berry & Sims; Carney Badley Smith & Spellman, P.S.; Ireland,
Stapleton, Pryor & Pascoe, S.C; and Goodell, Stratton, Edmonds & Palmer, L.L.P.
regarding certain state healthcare laws and regulations in the States of
Indiana, Texas, Alabama, Pennsylvania, Michigan, Idaho, Tennessee, Washington,
Colorado and Kansas, and in certain respects upon a certificate from officers of
the Company.
The qualification of any opinion or statement herein by the words "to
the best of our knowledge" or similar words means that, during the course of our
representation as described herein, no information has come to the attention of
the attorneys in this firm involved in the transactions which are the subject of
this opinion which would give such attorneys current actual knowledge of the
existence of the facts so qualified.
This opinion is being delivered to you at the request of the Company
under Section 4.1(a) of the Purchase Agreement and is intended solely for the
benefit of the Initial Purchasers. Except as may be required by law, it is not
to be quoted, filed with any governmental authority or used for any other
purpose or by any other person without our prior written consent. This opinion
is rendered as of the date hereof, and we disclaim any obligation to advise you
of any changes or any new developments which might affect any matters or
opinions set forth herein. This opinion is limited to the matters stated herein
and no opinions may be inferred or implied beyond the matters expressly stated
herein.
Very truly yours,
Quarles & Brady
36
<PAGE> 37
EXHIBIT 2
October 31, 1996
CIBC WOOD GUNDY SECURITIES CORP.
CRUTTENDEN ROTH INCORPORATED
WHEAT, FIRST SECURITIES, INC.
As Initial Purchasers
c/o CIBC Wood Gundy Securities Corp.
415 Lexington Avenue, 3rd Floor
New York, NY 10017
Re: Unison HealthCare Corporation
Ladies and Gentlemen:
We have acted as special healthcare regulatory counsel to Unison
HealthCare Corporation, a Delaware corporation, and its Subsidiaries
(collectively, the "Company") pursuant to that certain Securities Purchase
Agreement dated October 28, 1996 (the "Purchase Agreement"), related to the
offer and sale of $100,000,000 aggregate principal amount of the Senior Notes
and the guarantee thereof by the Guarantors listed on Schedule II to the
Purchase Agreement. Unless otherwise expressly defined herein, capitalized terms
used herein shall have the same meanings given to them in the Purchase
Agreement. This opinion is being rendered pursuant to Section 4.1(b) of the
Purchase Agreement.
In our capacity as special healthcare regulatory counsel to the
Company, we have examined originals or copies otherwise identified to our
satisfaction as being true and correct copies or otherwise satisfied ourselves
as to existence of the following documents of the Company and those facilities
listed on Exhibit A to this opinion (the "Facilities"):
(a) Licenses issued by the state agencies listed on Exhibit A with
effective dates stated thereon for the operation of the
Facilities (the "License");
(b) Medicare and Medicaid Provider Agreements listed on Exhibit A
(and in each case, including those for which Exhibit A
indicates that an agreement has not been reviewed, either the
Company or Signature Health Care Corporation, or its
subsidiaries or affiliates, as applicable ("Signature"), has
confirmed to us that such agreement exists, that the Medicare
and/or Medicaid provider number relating thereto is currently
in effect, that the Company or Signature (or the Facility) is
billing and receiving reimbursement from Medicare and/or
Medicaid, as appropriate, and that the Company or Signature is
certified to receive such reimbursement);
(c) The final Offering Memorandum of the Company dated as of
October 28, 1996 with respect to the issuance and sale of the
Senior Notes (the "Final Memorandum");
(d) The Purchase Agreement.
37
<PAGE> 38
In rendering the opinions expressed below, we have relied, with your
permission, to the extent we deemed reasonable, on opinions from counsel in the
states of Alabama, Colorado, Idaho, Indiana, Kansas, Michigan, Pennsylvania,
Tennessee, Texas, and Washington, on certificates and certain other information
provided to us by officers of the Company and Signature and public officials as
to matters of fact of which the maker of such certificates or the person
providing such other information had knowledge. Furthermore, in rendering such
opinions we have assumed that the signatures on all documents examined are
genuine, that all documents submitted to us as originals are accurate and
complete, and that all documents submitted to us as copies are true, correct and
complete copies of the originals thereof.
We are admitted to practice only in the States of Arizona, Florida and
Wisconsin, and we are not admitted to practice in any other jurisdiction or
expert in the law of any other jurisdiction. To the extent this opinion relates
to the laws of other states (other than Alabama, Colorado, Idaho, Indiana,
Kansas, Michigan, Pennsylvania, Tennessee, Texas, and Washington, as to which we
have relied on opinions of counsel in these states as indicated above) it is
based upon examination of statutes and regulations of those states and upon
responses to inquiries we have made to representatives of certain jurisdictions.
This opinion relates solely to the laws of each of the states in which
Facilities are located, and the federal laws of the United States, and we
express no opinion with respect to the effect or applicability of the laws in
other areas or of other jurisdictions other than the general corporation law of
the State of Delaware.
The qualification of any opinion or statement herein by the words "to
our knowledge" or similar words means that, during the course of our
representation as described herein, no information has come to the attention of
the attorneys in this firm involved in the transactions which are the subject of
this opinion which would give such attorneys current actual knowledge of the
existence of the facts so qualified.
Based upon the foregoing and on our consideration of such other matters
of fact and questions of law as we consider relevant in the circumstances, we
are of the opinion that:
1. The Company (or an appropriate Subsidiary) and each Facility
identified in the Final Memorandum as a facility leased by the Company or a
Subsidiary or owned or leased by Signature, as the case may be, has all
necessary health care licenses, permits, approvals, consents, qualifications,
authorizations and accreditations of any governmental agency or authority to
lease or own and operate such Facility as a long-term care facility comprising
the number of long-term care beds, or as an assisted or independent living
facility comprising the number of units, as now leased or owned and operated and
as set forth in the Final Memorandum (the "Approvals").
2. No Approvals of any government agency or authority were required by
the Company or any Facility, as the case may be, prior to and in connection with
execution, delivery and performance of the Signature merger agreements or with
any of the transactions contemplated thereby and which are necessary to lease or
own and operate such Facility as now leased or owned and operated, except for
such Approvals as have been obtained or waived as of the date of this opinion.
The continuation, validity and effectiveness of all such Approvals will not be
adversely affected by the transactions contemplated by the acquisition of
Signature by the Company.
3. No Approvals of any governmental agency or authority which are
necessary to lease or own and operate each Facility as now leased or owned and
operated (as described in the Final Memorandum) were required by the Company or
any Facility, as the case may be, prior to and in connection with
38
<PAGE> 39
the execution, delivery and performance of the sale of the Senior Notes to the
Initial Purchasers (the "Offering") or with any of the transactions contemplated
thereby, including the Transactions specified in the Final Memorandum, except
for such Approvals as have been obtained or waived as of the date of this
opinion. The continuation, validity and effectiveness of all such Approvals will
not be adversely affected by the transactions contemplated by the Offering.
4. To our knowledge, (a) no condition exists, and no event has
occurred, which, with the giving of notice, the passage of time or both, would
result in the suspension, revocation, impairment, forfeiture or nonrenewal of
any of the Approvals, and (b) there is no claim pending challenging the validity
of any of the Approvals.
5. With respect to Facilities which the Final Memorandum indicates
participate in the Medicare program or the Medicaid program, the applicable
Subsidiary and/or such Facility, upon consummation of the transactions
contemplated by the Purchase Agreement and after giving effect to the
Transactions, has the requisite provider agreement, provider number or other
authorization to bill the Medicare program and the respective Medicaid program
in the state or states in which such Facility is located. The number of licensed
beds and the number of Medicare certified beds at each of the Facilities are as
indicated in the Final Memorandum. Except for routine surveys and as otherwise
set forth in the Final Memorandum, there is no action threatened or pending
which could reasonably be expected to result in a revocation of any such
provider number or authorization or the Company's, or any Subsidiary's or
Facility's exclusion from the Medicare or any state Medicaid programs. Except as
otherwise set forth in the Final Memorandum, the Company and/or each Facility
has made all material filings necessary to (a) the United States Department of
Health and Human Services in order to meet the requirements for continued
participation by the Facility in the Medicare program; and (b) the state
Department of Human Services in order to meet the requirements for continued
participation by the Facility in the Medicaid program.
6. To our knowledge, except as set forth in the Final Memorandum there
is not pending or threatened against the Company or any Facility any action,
suit, proceeding or investigation before or by any court, regulatory body, or
administrative agency or any other governmental agency or body which would
reasonably be expected to have a material adverse effect on the Company.
7. To our knowledge, except as set forth in the Final Memorandum there
is no pending legislation, or proposed regulations, guidelines or instructions,
or pending or threatened action, suit or proceeding before any court or
governmental agency, authority or arbitrator to change the method or structure
of Medicaid coverage, eligibility, reimbursement or payment which would
reasonably be expected to have a Material Adverse Effect on the Company or any
Facility.
8. To our knowledge, except as set forth in the Final Memorandum there
is no pending legislation or proposed regulations, guidelines or instructions,
or pending or threatened action, suit or proceeding before any court or
governmental agency, authority or arbitrator to require licensure,
39
<PAGE> 40
certificate of need or other health planning approval, accreditation or any
other regulatory approval for the operation of a subacute or long-term care
facility or the provision of subacute or long-term care services which would
reasonably be expected to have a material adverse effect on the Company or any
Facility.
This opinion is furnished by us to you and is solely for your benefit.
Except as may be required by law, this opinion is not to be quoted, filed with
any governmental authority or used for any other purpose, and it may not be
relied upon by any other person, firm or corporation without our prior written
consent. This opinion is rendered as of the date first written above and we
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein. This opinion is limited
to the matters stated herein an no opinions may be inferred or implied beyond
the matters expressly stated herein.
Sincerely,
Quarles & Brady
40
<PAGE> 41
EXHIBIT 3
October [__], 1996
CIBC Wood Gundy Securities Corp.
Cruttenden Roth Incorporated
Wheat, First Securities, Inc.
c/o CIBC Wood Gundy Securities Corp.
425 Lexington Avenue, 3rd Floor
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel for the several Initial Purchasers
(the "Initial Purchasers") named in the Securities Purchase Agreement, dated
October [__], 1996 (the "Purchase Agreement") relating to the issuance and sale
by Unison HealthCare Corporation, a Delaware corporation (the "Company") of
$100,000,000 aggregate principal amount of Senior Notes unconditionally
guaranteed by each of the Guarantors named in the Purchase Agreement (the
"Senior Notes"). This opinion is being furnished to you pursuant to Section
4.1(c) of the Purchase Agreement. Capitalized terms used herein but not
otherwise defined shall have the respective meanings assigned to them in the
Purchase Agreement.
In connection with furnishing this opinion, we have examined:
(1) the Purchase Agreement; (2) the Indenture, dated October [__], 1996, among
the Company, the, Guarantors named therein and First Bank National Association,
as trustee; (3) the form of the Senior Notes attached as Exhibit A to the
Indenture; (4) the Offering Memorandum relating to the Senior Notes, dated
October [__], 1996 (the "Final Memorandum"); and (5) the Senior Note
Registration Rights Agreement dated October [__], 1996 among the Company, the
Guarantors and the Initial Purchasers.
In addition, in connection with the opinions expressed below, we have
made such other investigations of fact and law and have relied upon the
originals or copies, certified or otherwise identified to our satisfaction, of
such other documents, records, certificates or other instruments, and have
relied upon such factual information otherwise supplied to us, as in our
judgment were necessary or appropriate to enable us to render the opinions
expressed below.
In rendering the opinions expressed below, we have assumed (1) the
enforceability of the Basic Documents, (2) the authenticity of all documents and
instruments submitted to us as originals, (3) that each of the parties (other
than the Initial Purchasers) has complied with all if its obligations and
agreements arising with the Basic Documents, (4) that the statements regarding
matters of fact made in the agreements, documents, records, certificates and
instruments that we have examined are accurate and complete, (5) the genuineness
of all signatures, (6) that all documents and instruments submitted to us as
copies conform to the originals thereof, and (7) the legal
41
<PAGE> 42
capacity of natural persons executing such documents, none of which matters we
have independently verified.
The opinions expressed herein are limited to Applicable Law. As used
herein, "Applicable Law" shall mean the federal laws of the United States, the
laws of the State of New York and the General Corporation Law of the State of
Delaware (the "GCL"), in each case which, in our experience, are normally
applicable to transactions of the type contemplated by the Basic Documents,
except that you expressly understand and agree that we express no opinion with
respect to laws, rules and regulations and legal and governmental proceedings
relating to Medicare or Medicaid or, federal, state or local licensure and
certification laws. Our opinions are rendered only with respect to the laws and
the rules, regulations and orders thereunder which are currently in effect. To
the extent the opinions set forth below relate to the Company, we have, without
independent investigation and with your consent, relied on the opinion of
Quarles & Brady, counsel to the Company, and the Guarantors dated the date
hereof and delivered to you pursuant to the Purchase Agreement.
Based upon the foregoing, and subject to the limitations and
qualifications stated herein, we are of the opinion that:
1. Assuming that the Basic Documents (other than the Senior Notes) have
been duly authorized, executed and delivered by each of the Company and the
Guarantors and assuming that the Indenture has been duly authorized, executed
and delivered by the Trustee, and assuming the power and authority of the
Company and the Guarantors to enter into the same, each of the Basic Documents
(other than the Senior Notes) constitutes a legal, valid and binding obligation
of each of the Company and the Guarantors, enforceable against each of them in
accordance with its terms except that (i) rights to indemnity and contribution
may be limited by federal or state securities law or public policy, (ii)
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or conveyance and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally, (iii)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, (iv) the
enforceability of provisions imposing penalties, forfeitures, late payment
charges of an increase in interest rate upon delinquency in payment or the
occurrence, of a default may be limited in @n circumstances, and (v) the
enforceability of any provision requiring the payment of attorneys' fees may be
subject to a court determination that such fees are reasonable.
2. Assuming that the Senior Notes have been duly authorized by the
Company and the Guarantors and assuming the power and authority of the Company
and the Guarantors to execute, delivery and perform the same, when executed and
authenticated in accordance with the terms of the Indenture and delivered to and
paid for by you in accordance with the terms of the Purchase Agreement, the
Senior Notes will constitute the legal, valid and binding obligations of the
Company and the Guarantors, enforceable against each of them in accordance with
their terms except that (i) enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, fraudulent transfer or conveyance and
other similar laws now or hereafter in effect
42
<PAGE> 43
relating to or affecting creditors' rights generally, (ii) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and (iii) the enforceability of
provisions imposing penalties, forfeitures, late payment charges or an increase
in interest rate upon delinquency in payment or the occurrence of a default may
be limited in certain circumstances.
3. The Senior Notes and the indenture conform in all material respects
to the descriptions thereof contained in the Final Memorandum.
4. Assuming the accuracy of the representations of the Company and the
Guarantors in Section 3.1 of the Purchase Agreement and of the Initial
Purchasers set forth in Section 3.2 of the Purchase Agreement, it is not
necessary in connection with the issuance and sale of the Senior Notes by the
Company and the Guarantors to the Initial Purchasers under the circumstances
contemplated by the Purchase Agreement to register the Senior Notes under the
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
We are furnishing this opinion to you as your counsel in connection
with the sale of the Senior Notes pursuant to the Purchase Agreement. This
opinion is solely for your benefit and is not to be used, circulated, quoted,
otherwise referred to for any other purpose or relied upon by any person other
than you without our prior written consent.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON GARRISON
43
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
================================================================================
UNISON HEALTHCARE CORPORATION, as Issuer,
THE GUARANTORS (as defined herein), as Guarantors,
and
FIRST BANK NATIONAL ASSOCIATION, as Trustee
--------------------
INDENTURE
Dated as of October 31, 1996
--------------------
$100,000,000
12-1/4% Senior Notes due 2006
================================================================================
<PAGE> 2
Reconciliation and Tie between Trust Indenture Act
of 1939 and Indenture, dated as of October 31, 1996
---------------------------------------------------
Trust Indenture Indenture
Act Section Section
----------- -------
<TABLE>
<S> <C>
Section 310 (a)(1) ......................................... 7.10
(a)(2) ......................................... 7.10
(a)(3) ......................................... N.A.
(a)(4) ......................................... N.A.
(b) ............................................ 7.08; 13.02
(b)(1) ......................................... 7.10
(b)(9) ......................................... 7.10
(c) ............................................ N.A.
Section 311 (a) ............................................ 7.11
(b) ............................................ 7.11
(c) ............................................ N.A
Section 312 (a) ............................................ 2.05
(b) ............................................ 11.03
(c) ............................................ 11.03
Section 313 (a) ............................................ 7.06
(b)(1) ......................................... N.A.
(b)(2) ......................................... 7.06
(c) ............................................ 7.06; 11.02
(d) ............................................ 7.06
Section 314 (a) ............................................ 4.02; 4.04; 11.02
(b) ............................................ N.A.
(c)(1) ......................................... 11.04; 11.05
(c)(2) ......................................... 11.04; 11.05
(c)(3) ......................................... 11.04; 11.05
(d) ............................................ N.A.
(e) ............................................ 11.05
(f) ............................................ N.A.
Section 315 (a) ............................................ 7.01; 7.02
(b) ............................................ 7.05; 11.02
(c) ............................................ 7.01
(d) ............................................ 6.05; 7.01; 7.02
(e) ............................................ 6.11
Section 316 (a)(last sentence) ............................. 11.06
(a)(1)(A) ...................................... 6.05
(a)(1)(B) ...................................... 6.04
(a)(2) ......................................... 8.02
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C>
(b) ............................................ 6.07
(c) ............................................ 8.04
Section 317 (a)(1) ......................................... 6.08
(a)(2) ......................................... 6.09
(b) ............................................ 7.12
Section 318 (a) ............................................ 11.01
</TABLE>
N.A. means Not Applicable.
- --------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE .......................... 1
Section 1.01. Definitions .................................................... 1
Section 1.02. Other Definitions .............................................. 21
Section 1.03. Incorporation by Reference of Trust Indenture Act .............. 22
Section 1.04. Rules of Construction .......................................... 22
ARTICLE 2. THE SENIOR NOTES .................................................... 23
Section 2.01. Dating; Incorporation of Form in Indenture ..................... 23
Section 2.02. Execution and Authentication ................................... 23
Section 2.03. Registrar and Paying Agent ..................................... 24
Section 2.04. Paying Agent to Hold Money in Trust ............................ 25
Section 2.05. Noteholder Lists ............................................... 25
Section 2.06. Transfer and Exchange .......................................... 26
Section 2.07. Replacement Senior Notes ....................................... 26
Section 2.08. Outstanding Senior Notes ....................................... 27
Section 2.09. Temporary Senior Notes ......................................... 27
Section 2.10. Cancellation ................................................... 28
Section 2.11. Defaulted Interest ............................................. 28
Section 2.12. Deposit of Moneys .............................................. 28
Section 2.13. CUSIP Number ................................................... 29
Section 2.14. Wire Payments to Holders ....................................... 29
Section 2.15. Book-Entry Provisions for Global Notes ......................... 29
Section 2.16. Special Transfer Provisions .................................... 31
ARTICLE 3. REDEMPTION .......................................................... 33
Section 3.01. Notices to Trustee ............................................. 33
Section 3.02. Selection by Trustee of Senior Notes to Be Redeemed ............ 33
Section 3.03. Notice of Redemption ........................................... 33
Section 3.04. Effect of Notice of Redemption ................................. 34
Section 3.05. Deposit of Redemption Price .................................... 35
Section 3.06. Senior Notes Redeemed in Part .................................. 35
Section 3.07. Optional Redemption ............................................ 35
ARTICLE 4. COVENANTS ........................................................... 36
Section 4.01. Payment of Senior Notes ........................................ 36
Section 4.02. Reports ........................................................ 36
Section 4.03. Waiver of Stay, Extension or Usury Laws ........................ 37
Section 4.04. Compliance Certificate ......................................... 37
Section 4.05. Taxes .......................................................... 38
Section 4.06. Limitation on Additional Indebtedness .......................... 39
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 4.07. Limitation on Restricted Payments .............................. 39
Section 4.08. Limitation on Certain Asset Sales .............................. 41
Section 4.09. Limitation on Transactions with Affiliates ..................... 43
Section 4.10. Limitations on Liens ........................................... 44
Section 4.11. Limitations on Investments ..................................... 44
Section 4.12. Limitation on Creation of Subsidiaries ......................... 44
Section 4.13. Limitation on Indebtedness of Subsidiaries ..................... 45
Section 4.14. Limitation on Subsidiaries and Unrestricted Subsidiaries ....... 45
Section 4.15. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries ............................ 46
Section 4.16. Restriction on Sale and Issuance of Subsidiary
Equity Interests ............................................... 47
Section 4.17. Limitation on Sale and Lease-Back Transactions ................. 47
Section 4.18. Line of Business ............................................... 47
Section 4.19. Limitation on Status as Investment Company ..................... 48
Section 4.20. Payments for Consent ........................................... 48
Section 4.21. Corporate Existence ............................................ 48
Section 4.22. Change of Control .............................................. 48
Section 4.23. Maintenance of Office or Agency ................................ 51
Section 4.24. Maintenance of Properties and Insurance; Books and Records;
Compliance with Laws ........................................... 52
Section 4.25. Further Assurance to the Trustee ............................... 53
ARTICLE 5. SUCCESSOR CORPORATION ............................................... 53
Section 5.01. Merger, Consolidation or Sale of Assets ........................ 53
Section 5.02. Successor Person Substituted ................................... 54
ARTICLE 6. DEFAULTS AND REMEDIES ............................................... 54
Section 6.01. Events of Default .............................................. 54
Section 6.02. Acceleration ................................................... 56
Section 6.03. Other Remedies ................................................. 56
Section 6.04. Waiver of Past Defaults and Events of Default .................. 56
Section 6.05. Control by Majority ............................................ 57
Section 6.06. Limitation on Suits ............................................ 57
Section 6.07. Rights of Holders to Receive Payment ........................... 58
Section 6.08. Collection Suit by Trustee ..................................... 58
Section 6.09. Trustee May File Proofs of Claim ............................... 58
Section 6.10. Priorities ..................................................... 59
Section 6.11. Undertaking for Costs .......................................... 59
Section 6.12. Restoration of Rights and Remedies ............................. 59
ARTICLE 7. TRUSTEE ............................................................. 60
Section 7.01. Duties of Trustee .............................................. 60
Section 7.02. Rights of Trustee .............................................. 61
Section 7.03. Individual Rights of Trustee ................................... 62
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Section 7.04. Trustee's Disclaimer ........................................... 62
Section 7.05. Notice of Defaults ............................................. 62
Section 7.06. Reports by Trustee to Holders .................................. 62
Section 7.07. Compensation and Indemnity ..................................... 63
Section 7.08. Replacement of Trustee ......................................... 64
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion ....... 65
Section 7.10. Eligibility; Disqualification .................................. 65
Section 7.11. Preferential Collection of Claims Against Company .............. 65
Section 7.12. Paying Agents .................................................. 65
ARTICLE 8. AMENDMENTS, SUPPLEMENTS AND WAIVERS ................................. 66
Section 8.01. Without Consent of Holders ..................................... 66
Section 8.02. With Consent of Holders ........................................ 66
Section 8.03. Compliance with Trust Indenture Act ............................ 68
Section 8.04. Revocation and Effect of Consents .............................. 68
Section 8.05. Notation on or Exchange of Senior Notes ........................ 68
Section 8.06. Trustee to Sign Amendments, etc ................................ 69
ARTICLE 9. DISCHARGE OF INDENTURE; DEFEASANCE .................................. 69
Section 9.01. Discharge of Indenture ......................................... 69
Section 9.02. Legal Defeasance ............................................... 70
Section 9.03. Covenant Defeasance ............................................ 70
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance .......... 71
Section 9.05. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions ............ 72
Section 9.06. Reinstatement .................................................. 73
Section 9.07. Moneys Held by Paying Agent .................................... 73
Section 9.08. Moneys Held by Trustee ......................................... 73
ARTICLE 10. GUARANTEE OF SENIOR NOTES .......................................... 74
Section 10.01. Guarantee ...................................................... 74
Section 10.02. Execution and Delivery of Guarantees ........................... 75
Section 10.03. Limitation of Guarantee ........................................ 76
Section 10.04. Release of Guarantor ........................................... 76
Section 10.05. Additional Guarantors .......................................... 77
ARTICLE 11. MISCELLANEOUS ...................................................... 77
Section 11.01. Trust Indenture Act Controls ................................... 77
Section 11.02. Notices ........................................................ 77
Section 11.03. Communications by Holders with Other Holders ................... 78
Section 11.04. Certificate and Opinion as to Conditions Precedent ............. 79
Section 11.05. Statements Required in Certificate and Opinion ................. 79
Section 11.06. When Treasury Senior Notes Disregarded ......................... 79
Section 11.07. Rules by Trustee and Agents .................................... 80
Section 11.08. Business Days; Legal Holidays .................................. 80
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
Section 11.09. Governing Law .................................................. 80
Section 11.10. No Adverse Interpretation of Other Agreements .................. 80
Section 11.11. No Recourse Against Others ..................................... 80
Section 11.12. Successors ..................................................... 81
Section 11.13. Multiple Counterparts .......................................... 81
Section 11.14. Table of Contents, Headings, etc ............................... 81
Section 11.15. Separability ................................................... 82
</TABLE>
<PAGE> 8
INDENTURE, dated as of October 31, 1996, among UNISON
HEALTHCARE CORPORATION, a Delaware corporation, as Issuer (the "Company"), the
GUARANTORS listed on Schedule 1 hereto and FIRST BANK NATIONAL ASSOCIATION, as
Trustee (the "Trustee").
The Company and the Guarantors have duly authorized the
execution and delivery of this Indenture to provide for the issuance of the
Senior Notes (as hereinafter defined) to be issued as provided for in this
Indenture.
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
12-1/4% Senior Notes due 2006, unconditionally guaranteed by the Guarantors (the
"Senior Notes").
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed in connection
with an Asset Acquisition from such Person.
"Acquisition Indebtedness" means Indebtedness incurred by the
Company or by a Subsidiary after the Issue Date the proceeds of which are used
for an Asset Acquisition not prohibited by Section 4.18.
"Additional Interest" means additional interest on the Senior
Notes which the Company agrees to pay pursuant to Section 4 of the Registration
Rights Agreement.
"Adjusted Net Assets" of a Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities (including, without limitation, any guarantees of
Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities (including, without limitation, any
guarantees of Indebtedness) and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
<PAGE> 9
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company, or shall be merged with or into the
Company or any Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any Person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such Person or (c) the acquisition by the Company or any Subsidiary of
the Company of any division or line of business of any Person (other than a
Subsidiary of the Company).
"Asset Sale" means the direct or indirect sale, transfer,
issuance, conveyance, lease (other than operating leases entered into in the
ordinary course of business pursuant to ordinary business terms, it being
understood that the lease of a healthcare facility shall not be considered to be
in the ordinary course but that leases of portions of a healthcare facility to
service providers shall be considered to be in the ordinary course), assignment
or other disposition (including, without limitation, by eminent domain,
condemnation or similar governmental proceeding) and any merger or consolidation
of any Subsidiary of the Company with or into another Person (other than the
Company or any Wholly-Owned Subsidiary of the Company whereby such Subsidiary
shall cease to be a Wholly-Owned Subsidiary of the Company) in any single
transaction or series of related transactions (separate eminent domain,
condemnation or similar governmental proceedings to each be considered a single
transaction but not to be considered together as a series of related
transactions) involving property or assets with a fair market value in excess of
$250,000 of (a) any Equity Interest in any Subsidiary, (b) real property owned
by the Company or any Subsidiary thereof, or a division, line of business or
healthcare facility or comparable business segment of the Company or any
Subsidiary thereof or (c) other property, assets or rights (including, without
limitation, leasehold rights) of the Company, any Subsidiary thereof or any
division, line of business or healthcare facility of the Company or any
Subsidiary thereof, provided, however, that Asset Sales shall not include (i)
sales, leases, conveyances, transfers or other dispositions to the Company or to
a Subsidiary thereof or to any other Person if after giving effect to such sale,
lease, conveyance, transfer or other disposition such other Person becomes a
Wholly-Owned Subsidiary of the Company, (ii) transactions complying with Section
5.01
<PAGE> 10
(except as otherwise provided in Section 4.08 hereof), and (iii) sales,
transfers, issuances, conveyances, leases, assignments or other dispositions to
the Company or any Wholly-Owned Subsidiary of the Company.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(i) cash received by the Company or any Subsidiary thereof from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary as a result of such Asset Sale, (d) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale and (e) deduction
of appropriate amounts to be provided by the Company or a Subsidiary thereof as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Company or a
Subsidiary thereof after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other non-cash consideration received by the Company or any Subsidiary thereof
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or non-cash consideration into cash.
"Attributable Indebtedness" when used with respect to any
Sale-Lease-Back Transaction or an operating lease with respect to a long-term
care facility means, as at the time of determination, the present value
(discounted at a rate equivalent to the interest rate implicit in the lease,
compounded on a semi-annual basis) of the total obligations of the lessee for
rental payments (after excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, utilities and other similar expenses
payable by the lessee pursuant to the terms of the lease) during the remaining
term of the lease included in any such Sale-Lease-Back Transaction or such
operating lease or until the earliest date on which the lessee may terminate
such lease without penalty or upon payment of a penalty (in which case the
rental payments shall include such penalty); provided, that the Attributable
Indebtedness with respect to a Sale-Lease-Back Transaction shall be no less than
the fair market value (as determined reasonably and in good faith by the Board
of Directors of the Person incurring the Attributable Indebtedness) of the
property subject to such Sale-Lease-Back Transaction.
"Board of Directors" means, as to any Person, the board of
directors or any duly authorized committee thereof of such Person or, if such
Person is a partnership (or other non-corporate Person), of the managing general
partner or partners (or Persons serving an analogous function) of such Person.
<PAGE> 11
"Board Resolution" means, as to any Person, a copy of a
resolution certified pursuant to an Officers' Certificate to have been duly
adopted by the Board of Directors of such Person, and to be in full force and
effect, and, if required hereunder, delivered to the Trustee.
"Capitalized Lease Obligations" means Indebtedness
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"Change of Control" means (i) any sale, merger or
consolidation with or into any Person or any transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" other than an Excluded Person is or becomes the "beneficial
owner" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable), directly or indirectly, of more than
50% of the total voting power in the aggregate normally entitled to vote in the
election of the Board of Directors, of the transferee or surviving entity, (ii)
any "person" or "group" other than an Excluded Person is or becomes the
"beneficial owner" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), directly or indirectly,
of more than 50% of the total voting power in the aggregate of all classes of
Equity Interests of the Company then outstanding normally entitled to vote in
elections of the Board of Directors or (iii) during any period of 12 consecutive
months after the Issue Date, individuals who at the beginning of any such
12-month period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors then in office.
"Common Equity Interest" of any Person means all Equity
Interests of such Person that are generally entitled to (i) vote in the election
of directors of such Person or (ii) if such Person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners, managers
or others that will control the management and policies of such Person.
"Company" means the party named as such in the first
paragraph of this Indenture until a successor replaces such party pursuant to
Article 5 of this Indenture and thereafter means the successor.
"Company Request" means any written request signed in the name
of the Company by any two of the following: the Chief Executive Officer; the
President;
<PAGE> 12
any Vice President; the Chief Financial Officer; the Treasurer; or the Secretary
or any Assistant Secretary (but not both the Secretary and any Assistant
Secretary) of the Company.
"Consolidated Cash Flow Available for Fixed Charges" means,
with respect to any Person for any period, on a consolidated basis in accordance
with GAAP, the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (A) (i) Consolidated Net Income, (ii)
Consolidated Non-cash Charges, (iii) Consolidated Interest Expense, (iv)
Consolidated Income Tax Expense, and (v) one-third of Consolidated Rental
Payments less (B) any non-cash items increasing Consolidated Net Income for such
period.
"Consolidated Fixed Charge Coverage Ratio" means with respect
to any Person, the ratio of the aggregate amount of Consolidated Cash Flow
Available for Fixed Charges of such Person for the four full fiscal quarters
immediately preceding the date of the transaction (the "Transaction Date")
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (such four full fiscal quarter period being referred to herein as the
"Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated Cash Flow
Available for Fixed Charges" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to, without duplication, (a) the incurrence of any Indebtedness of
such Person or any of its Subsidiaries (and the application of the net proceeds
thereof) during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation (and the application of the net proceeds
thereof), as if such incurrence (and application) occurred on the first day of
the Four Quarter Period (it being understood that with respect to Indebtedness
incurred under a revolving facility used primarily to finance working capital,
the average daily principal amount outstanding during the Reference Period shall
be deemed to be the amount incurred during the Reference Period), and (b) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Subsidiaries (including any Person who becomes a Subsidiary
as a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness) occurring during the Four Quarter Period, as
if such Asset Sale or Asset Acquisition occurred on the first day of the Four
Quarter Period. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (i) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (ii) if interest on
indebtedness actually incurred on the Transaction Date may
<PAGE> 13
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period. In calculating the Consolidated Fixed
Charge Coverage Ratio and giving pro forma effect to the incurrence of
Indebtedness during a Reference Period, pro forma effect shall be given to use
of proceeds thereof to permanently repay or retire Indebtedness. If such Person
or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, for purposes of determining the "Consolidated Fixed Charge
Coverage Ratio," effect shall be given to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any
person for any period, the sum of, without duplication, the amounts for such
period of (i) Consolidated Interest Expense, (ii) the product of (a) the
aggregate amount of dividends and other distributions paid or accrued during
such period in respect of Disqualified Equity Interests of such Person and its
Subsidiaries on a consolidated basis and (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory income tax rate of such Person, expressed as
a decimal and (iii) one-third of Consolidated Rental Payments.
"Consolidated Income Tax Expense" means, with respect to any
Person for any period, the provision for federal, state, local and foreign
income taxes of such Person and its Subsidiaries for each period as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person, on a consolidated basis in accordance with GAAP, for any period, the sum
of, without duplication, (a) the aggregate amount of interest which, in
conformity with GAAP, would be set forth opposite the caption "interest expense"
or any like caption on an income statement for such Person and its Subsidiaries
on a consolidated basis, (b) imputed interest included in Capitalized Lease
Obligations, (c) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (d) the net
costs associated with Interest Rate Agreements, (e) amortization of other
financing fees and expenses, (f) the interest portion of any deferred payment
obligation, (g) amortization of discount or premium, if any, (h) all other
non-cash interest expense (other than interest amortized to cost of sales), (i)
the interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP and (j) all
interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person.
<PAGE> 14
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, plus the amount of any dividends or distributions received by such
Person from Unrestricted Subsidiaries; provided, however, that (a) the Net
Income of any Person (the "other Person") in which the Person in question or any
of its Subsidiaries has less than a 100% interest (which interest does not cause
the net income of such other Person to be consolidated into the net income of
the Person in question in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid to the Person in
question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person
in question that is subject to any restriction or limitation (whether by terms
of its charter, agreement or applicable law) on the payment of dividends or the
making of other distributions shall be excluded to the extent such restriction
or limitation would prevent such Subsidiary from being able to pay dividends or
make other distributions out of its Net Income, (c)(i) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition and (ii) any net gain (but not loss) resulting from
an Asset Sale by the Person in question or any of its Subsidiaries other than in
the ordinary course of business shall be excluded, (d) extraordinary gains and
losses (including any related tax effects) shall be excluded and (e) the
cumulative effect of changes in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at
any date, the consolidated stockholders' equity of such Person less the amount
of such stockholders' equity attributable to Disqualified Equity Interests of
such Person and its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any
Person for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which required an
accrual of or a reserve for cash charges for any future period).
"Consolidated Rental Payments" of any Person means, for any
period, the aggregate rental obligations of such Person and its consolidated
Subsidiaries (not including taxes, utilities, insurance, maintenance and repairs
and other similar expenses that the lessee is obligated to pay under the terms
of the relevant leases), determined on a consolidated basis in accordance with
GAAP, payable in respect of such period (net of income from subleases thereof,
not including taxes, utilities, insurance, maintenance and repairs and other
similar expenses that the sublessee is obligated to pay under the terms of such
sublease), whether or not such obligations are reflected as liabilities or
commitments on a consolidated balance sheet of such Person and its Subsidiaries
or in the notes thereto, excluding, however, in any event,
<PAGE> 15
(i) that portion of Consolidated Interest Expense of such person representing
payments by such Person or any of its consolidated Subsidiaries in respect of
Capitalized Lease Obligations (net of payments to such Person or any of its
consolidated Subsidiaries under subleases qualifying as capitalized lease
subleases to the extent that such payments would be deducted in determining
Consolidated Interest Expense) and (ii) the aggregate amount of amortization of
obligations of such Person and its consolidated Subsidiaries in respect of such
Capitalized Lease Obligations for such period (net of payments to such Person or
any of its consolidated Subsidiaries and subleases qualifying as capitalized
lease subleases to the extent that such payments could be deducted in
determining such amortization amount).
"Corporate Trust Agency" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at First Trust of New York, 100 Wall Street, Suite 200, New York, NY 10005.
"Default" means any event that is, or after notice or passage
of time of notice or both would be, an Event of Default.
"Depository" means, with respect to the Senior Notes issued
in the form of one or more Global Notes, The Depository Trust Company or another
Person designated as Depository by the Company, which Person must be a clearing
agency registered under the Exchange Act.
"Disqualified Equity Interests" means any Equity Interest
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the Maturity Date of the
Senior Notes, for cash or securities constituting Indebtedness. Without
limitation of the foregoing, Disqualified Equity Interests shall be deemed to
include (i) any Preferred Equity Interests of a Subsidiary of the Company and
(ii) any Preferred Equity Interests of the Company, with respect to either of
which, under the terms of such Preferred Equity Interests, by agreement or
otherwise, such Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the Maturity Date; provided,
however, that Preferred Equity Interests of the Company or any Subsidiary
thereof that are issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Equity Interest in the event of a
Change of Control of the Company or such Subsidiary, which provisions have
substantially the same effect as the provisions described in Section 4.22, shall
not be deemed to be Disqualified Equity Interests solely by virtue of such
provisions.
"Equity Interests" means, with respect to any Person, any and
all shares or other equivalents (however designated) of capital stock,
partnership interests
<PAGE> 16
or any other participation, right or other interests in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into or exchangeable for any of the foregoing; provided that the contingent
obligations to the former BritWill shareholders shall or not be deemed to be an
Equity Interest.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Person" means all or any of Bruce H. Whitehead,
Jerry M. Walker, Phillip H. Rollins, Craig R. Clark or Paul J. Contris and their
Related Parties.
"fair market value" or "fair value" means, with respect to any
assets or property, the price which could be negotiated in an arm's-length free
market transaction, for cash, between a willing seller and a fully informed,
willing and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction, all as reasonably determined by a majority of the
Board of Directors acting in good faith, such determination to be evidenced by a
Board Resolution delivered to the Trustee. No such determination need be
supported by an appraisal or expert opinion.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Senior Notes by each Guarantor pursuant to the terms
of Article 10 hereof, substantially in the form set forth in Exhibit E.
"Guarantor" means (i) each of the Subsidiaries of the Company
on the Issue Date and (ii) each Subsidiary of the Company that hereafter becomes
a Guarantor pursuant to Section 4.12 and 10.05 hereof, and "Guarantors" means
such entities, collectively.
"Holder" or "Noteholder" means the Person in whose name a
Senior Note is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become, directly or indirectly,
liable in respect of such Indebtedness or other obligation or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "incurrence," "incurred,"
"incurrable," and "incurring" shall have meanings correlative to the foregoing);
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time becoming
<PAGE> 17
Indebtedness shall not be deemed an incurrence of such Indebtedness. Any
Indebtedness or Equity Interests of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Person at the time it becomes
a Subsidiary. Indebtedness consisting of reimbursement obligations in respect of
a letter of credit will be deemed to be incurred when the letter of credit is
issued or renewed.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other liabilities arising in
the ordinary course of business) and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) all Indebtedness of others of the type described in the
other clauses of this definition (including all dividends of other Persons) the
payment of which is guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds (whether or not such items would appear upon the balance sheet
of the guarantor), (iv) all obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction, (v)
Disqualified Equity Interests, (vi) obligations of any such Person under any
Interest Rate Agreement applicable to any of the foregoing, and (vii)
Attributable Indebtedness. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided, however, that (i) the amount outstanding at any time of any
Indebtedness issued with original issue discount, including the Senior Notes, is
the principal amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP, and (ii) Indebtedness shall not include any liability
for federal, state, local or other taxes. Notwithstanding any other provision of
the foregoing definition, any trade payable arising from the purchase of goods
or materials or for services obtained in the ordinary course of business shall
not be deemed to be "Indebtedness" of the Company or any Subsidiaries for
purposes of this definition. Furthermore, guarantees of (or obligations with
respect to letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
<PAGE> 18
"Independent Financial Advisor" means an accounting,
appraisal, investment banking or consulting firm of nationally recognized
standing that is, in the reasonable and good faith judgment of the Board of
Directors of the Company, qualified to perform the task for which such firm has
been engaged and is disinterested and independent with respect to the Company
and its Affiliates.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) promulgated under the Securities Act.
"interest" when used with respect to any Senior Note, means
the amount of all interest accruing on such Senior Note, including all interest
accruing subsequent to the occurrence of any events specified in Sections
6.01(7) and (8) or which would have accrued but for any such event and any
Additional Interest.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Senior Notes.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance,
account receivable (other than an account receivable arising in the ordinary
course of business, including accounts receivable arising in the ordinary course
of business and acquired as part of the assets acquired by the Company in
connection with an acquisition of assets which is otherwise permitted by the
terms of this Indenture), loan or capital contribution to (by means of transfers
of property to others, payments for property or services for the account or use
of others or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the acquisition,
by purchase or otherwise, of all or substantially all of the business or stock
or other evidence of beneficial ownership of, any Person, the guarantee or
assumption of the Indebtedness of any other Person (except for an assumption of
Indebtedness for which the assuming Person receives consideration with a fair
market value at least equal to the principal amount of the Indebtedness
assumed), the designation of a Subsidiary as an Unrestricted Subsidiary or the
making of any investment in any Person and all other items that would be
classified as investments on a balance sheet of such Person prepared in
accordance with GAAP. Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"Issue Date" means the closing date for the sale and original
issuance of the Senior Notes.
<PAGE> 19
"Lien" means, with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means November 1, 2006.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Income" means, with respect to any Person for any
period, the net income (loss) of such Person determined in accordance with GAAP.
"Net Investments" means the excess of (i) the aggregate of
all Investments made by the Company or a Subsidiary thereof on or after the
Issue Date (in the case of an Investment made other than in cash, the amount
shall be the fair market value of such Investment as determined in good faith by
the Board of Directors of the Company) over (ii) the sum of (A) the aggregate
amount returned in cash on such Investments whether through interest payments,
principal payments, dividends or other distributions and (B) the net cash
proceeds received by the Company or such Subsidiary from the disposition of all
or any portion of such Investments (other than to a Subsidiary of the Company),
provided, however, that with respect to all Investments made in Unrestricted
Subsidiaries the sum of clauses (A) and (B) above with respect to such
Investments shall not exceed the aggregate amount of all Investments made in all
Unrestricted Subsidiaries.
"Net Proceeds" means (a) in the case of any sale of Equity
Interests by the Company, the aggregate net proceeds received by the Company,
after payment of expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property (valued at the fair
market value thereof, as determined in good faith by the Board of Directors of
the Company, at the time of receipt), and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into Equity Interests of the Company which are not Disqualified Equity
Interests, the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount required
to be paid by the holder to the Company upon such exchange, exercise, conversion
or surrender, less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Company in connection
therewith).
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
<PAGE> 20
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Senior Notes as
described in the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated
October 28, 1996 pursuant to which the Senior Notes were offered.
"Officer" means, with respect to any Person, the Chief
Executive Officer, the President, any Vice President, the Chief Financial
Officer or the Treasurer of such Person, the Controller or the Secretary of the
Company or a Guarantor, or any other officer designated by the Board of
Directors of such Person, as the case may be (or, in the case of a Person that
is a partnership (or other non-corporate Person), of a general partner (or
analogous individuals) of such Person in such capacity).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person (or,
in the case of a Person that is a partnership (or other non-corporate Person),
of a general partner (or analogous individuals) of such Person in such capacity)
that shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
"Permitted Indebtedness" means:
(i) Indebtedness (plus interest, premium, fees and other
obligations associated therewith) of the Company or any Subsidiary thereof
arising under or in connection with Permitted Secured Indebtedness;
(ii) Indebtedness under the Senior Notes;
(iii) Interest Rate Agreements;
(iv) Additional Indebtedness of the Company, including
Indebtedness incurred in connection with or arising out of Capitalized Lease
Obligations, in an aggregate principal amount outstanding at any time not to
exceed the greater of (x) $10.0 million and (y) 10% of the Company's
Consolidated Net Worth;
<PAGE> 21
(v) Indebtedness of a Subsidiary issued to and held by the
Company or a Subsidiary or Indebtedness of the Company to a Subsidiary in
respect of intercompany advances or transactions;
(vi) Indebtedness outstanding on the Issue Date after giving
effect to the application of the proceeds of the Offering; and
(vii) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments
made on or after the date of this Indenture consisting of:
(i) Temporary Cash Investments;
(ii) (A) Investments in the Company or a Subsidiary of the
Company, (B) Investments in any Person, if (1) as a result of such Investment
(y) such Person becomes a Wholly-Owned Subsidiary of the Company or (z) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Wholly-Owned Subsidiary thereof and (2) after giving effect to such
Investment the Company is in compliance with Section 4.18 hereof and (C) Net
Investments in any Person, provided, however, that the aggregate amount of all
such Net Investments made pursuant to this clause (C) shall not exceed $1
million at any one time outstanding;
(iii) Investments represented by accounts receivable created
or acquired in the ordinary course of business;
(iv) Advances to employees in the ordinary course of business
not to exceed an aggregate of $250,000 outstanding at any one time;
(v) Investments under or pursuant to Interest Rate
Agreements;
(vi) An investment that is made by the Company or a
Subsidiary thereof in the form of any Equity Interests, Indebtedness or
securities that are issued by any Person solely as partial consideration for the
consummation of an Asset Sale that is otherwise permitted under Section 4.08
hereof;
(vii) Investments in the Senior Notes; and
(viii) Investments existing on the Issue Date (or made in
conjunction with the Signature Acquisition and the Ampro Acquisition (each as
defined in the Offering Memorandum)).
"Permitted Liens" means, without duplication, (i) Liens
existing on the date of this Indenture, (ii) Liens in favor of the Company or
any Subsidiary thereof,
<PAGE> 22
(iii) Liens on property of a Person existing at the time such Person becomes a
Subsidiary of, or is acquired by, merged into or consolidated with the Company
or any Subsidiary thereof, provided, however, that such Liens (a) were not
created in connection with or in anticipation of such acquisition, merger or
consolidation or such Person becoming a Subsidiary and (b) are not applicable to
any other property of the Company or any of the other Subsidiaries of the
Company, (iv) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor, (v) landlords', carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts which are
not yet delinquent or are being contested in good faith by appropriate
proceedings, (vi) pledges or deposits made in the ordinary course of business in
connection with (a) leases, performance bonds and similar obligations, (b)
workers' compensation, unemployment insurance and other social security
legislation, or (c) securing the performance of surety bonds and appeal bonds
required (1) in the ordinary course of business or in connection with the
enforcement of rights or claims of the Company or a Subsidiary thereof or (2) in
connection with judgments that do not give rise to an Event of Default and which
do not exceed $3 million in the aggregate, (vii) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
encumbrances which, in the aggregate, do not materially detract from the value
of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or any Subsidiary in connection
therewith, (viii) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture, provided, however, that (a) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, such purchase or
construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (ix) Liens securing Permitted Secured Indebtedness,
(x) Liens securing Capitalized Lease Obligations permitted to be incurred under
clause (iv) of the definition of "Permitted Indebtedness," provided, however,
that such Lien does not extend to any property other than that subject to the
underlying lease, (xi) Liens pursuant to leases and subleases of real property
which do not interfere with the ordinary conduct of the business of the Company
or any of its Subsidiaries and which are made on customary and usual terms
applicable to similar properties and in the case of any lease of a healthcare
facility do not extend to any property of the Company or a Subsidiary other than
the personal property located at such facility, (xii) Liens securing
reimbursement obligations under commercial letters of credit, but only in or
upon the goods the purchase of which were financed by such letters of credit,
(xiii) Liens securing Acquisition Indebtedness, provided that such Liens do not
extend to or cover any property other than the property directly or
<PAGE> 23
indirectly acquired with the proceeds of such Acquisition Indebtedness and any
improvements thereto (unless such Liens are otherwise Permitted Liens), and
(xiv) Liens securing Refinancing Indebtedness, provided, however, that such
Liens extend only to the assets securing the Indebtedness being extended,
refinanced, renewed or replaced, and such Indebtedness was previously secured by
such asset and provided, further, the terms of such Liens are no less favorable
to the holders of the Senior Notes than the Liens being extended, refinanced,
renewed or replaced.
"Permitted Secured Indebtedness" means any Indebtedness (plus
interest, premium, fees and other obligations associated therewith), and any
refinancing, refunding, replacement, renewal or extension of, under agreements
evidencing any Indebtedness which is secured by assets of the Company or its
Subsidiaries, provided, however, that the aggregate amount of all such
Indebtedness outstanding (or committed to be advanced under the agreements to
which such Indebtedness relates) at any time, other than Indebtedness
outstanding on the Issue Date (after giving effect to the Offering and the
application of the net proceeds therefrom), shall not exceed the greater of (i)
$30 million or (ii) the sum of 60% of the Company's inventory and 90% of the
Company's accounts receivable as set forth in the Company's consolidated
financial statements most recently delivered pursuant to Section 4.02 of this
Indenture.
"Person" means any individual, corporation, partnership,
limited liability company or partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government (including
any agency or political subdivision thereof).
"Preferred Equity Interest" means any Equity Interest of a
Person, however designated, which entitles the holder thereof to a preference
with respect to dividends, distributions or liquidation proceeds of such Person
over the holders of any other Equity Interest issued by such Person.
"principal" of a debt security means the principal amount of
the security plus, when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set
forth on the Senior Notes in the form set forth on Exhibit A.
"Property" or "property" of any Person means all types of
real, personal, tangible, intangible or mixed property owned by such Person
whether or not included in the most recent consolidated balance sheet of such
Person and its Subsidiaries under GAAP.
"Public Equity Offering" means, with respect to any Person, a
public offering by such Person of some or all of its Common Equity Interests
other than
<PAGE> 24
Disqualified Equity Interests (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such Equity
Interests.
"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
The acquisition of a healthcare facility shall not be considered to be in the
ordinary course.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Redemption Date" when used with respect to any Senior Note
to be redeemed means the date fixed for such redemption pursuant to this
Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, renews, replaces or extends any Indebtedness of the Company or its
Subsidiaries outstanding on the Issue Date or other Indebtedness permitted to be
incurred by the Company or its Subsidiaries pursuant to the terms of this
Indenture, whether involving the same or any other lender or creditor or group
of lenders or creditors, but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Senior Notes to at least the same extent as
the Indebtedness being refunded, refinanced or extended, if at all, (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Senior Notes, (iii) except where such Refinancing Indebtedness is
Attributable Indebtedness, such Refinancing Indebtedness has a weighted average
life to maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the weighted average life to maturity of the
Indebtedness being refunded, refinanced or extended, (iv) except where such
Refinancing Indebtedness is Attributable Indebtedness, such Refinancing
Indebtedness is in an aggregate principal amount that is less than or equal to
the aggregate principal or accreted amount (in the case of any Indebtedness
issued with original issue discount, as such) then outstanding under the
Indebtedness being refunded, refinanced or extended and (v) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended, except that the Company may
incur Refinancing Indebtedness to refund, refinance or extend Indebtedness of
any Wholly-Owned Subsidiary of the Company.
"Registration Rights Agreement" means the Senior Note
Registration Rights Agreement dated as of October 31, 1996 among the Company,
the Guarantors, CIBC Wood Gundy Securities Corp., Cruttenden Roth Incorporated
and Wheat, First Securities, Inc.
<PAGE> 25
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Related Party" with respect to an Excluded Person means (i)
any Wholly-Owned Subsidiary, or spouse or immediate family member of such
Excluded Person or (ii) any trust, corporation, partnership, or other entity,
the beneficiaries, stockholders, partners, owners or Persons beneficially
holding a controlling interest of which consist of such Excluded Person and/or
such other Persons referred to in the immediately preceding clause (i).
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Equity Interests of the Company or any Subsidiary thereof (including, without
limitation, any payment in connection with any merger or consolidation including
the Company) or any payment made to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Subsidiary thereof
(other than (a) dividends or distributions payable solely in Equity Interests
(other than Disqualified Equity Interests) or in options, warrants or other
rights to purchase Equity Interests (other than Disqualified Equity Interests)
or (b) in the case of Subsidiaries of the Company, dividends or distributions
payable to the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the
purchase, redemption or other acquisition or retirement for value of any Equity
Interest of the Company or any Subsidiary thereof (other than Equity Interests
owned by the Company or a Wholly-Owned Subsidiary, excluding Disqualified Equity
Interests), (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Subordinated Indebtedness, (iv) the making of any Investment or
guarantee of any Investment in any Person other than a Permitted Investment or
(v) forgiveness of any Indebtedness of an Affiliate of the Company to the
Company or a Subsidiary of the Company. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall be valued
at the face amount thereof and property other than cash shall be valued at its
fair market value.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) promulgated under the Securities Act; provided that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Senior Note is a Restricted Security.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Subsidiary of the
Company of any real or tangible personal Property, which Property (i) has been
or is to be sold, conveyed or transferred by the Company or such Subsidiary to
such Person in
<PAGE> 26
contemplation of such leasing and (ii) would constitute an Asset Sale if such
Property had been sold in an outright sale thereof.
"S&P" means Standard & Poor's Ratings Group and its
successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Notes" means the securities that are issued under
this Indenture, as amended or supplemented from time to time pursuant to this
Indenture, including, without limitation, the notes issued in accordance with
the exchange contemplated by Section 2.02 hereof.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Equity Interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, officers or trustees thereof is held by such first-named
Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint
venture, association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct or cause
the direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the
Company other than for purposes of the definition of Unrestricted Subsidiary,
unless the Company shall have designated such Unrestricted Subsidiary as a
"Subsidiary" by written notice to the Trustee. An Unrestricted Subsidiary may be
designated as a Subsidiary at any time by the Company by written notice to the
Trustee, provided, however, that (i) no Default or Event of Default shall have
occurred and be continuing or would arise therefrom and (ii) if such
Unrestricted Subsidiary is an obligor of any Indebtedness, any such designation
shall be deemed to be an incurrence as of the date of such designation by the
Company of such Indebtedness and immediately after giving effect to such
designation, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.06 of this Indenture.
"Subordinated Indebtedness" means Indebtedness of any Person
which is expressly subordinated in right of payment to any other Indebtedness of
such Person.
"Temporary Cash Investments" means (i) Investments in
marketable, direct obligations issued or fully guaranteed by the United States
of America, or of
<PAGE> 27
any governmental agency or political subdivision thereof, backed by the full
faith and credit of the United States and maturing within one year of the date
of purchase; (ii) Investments in time deposits, certificates of deposit, bankers
acceptances or commercial paper issued by a bank (or any parent company of such
bank) organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totalling more than $500 million and rated at least A by S&P
and A-2 by Moody's, maturing within one year of purchase; (iii) commercial paper
that is rated at least A- by S&P or P-1 by Moody's, issued by a company that is
incorporated under the laws of the United States or of any State and directly
issues its own commercial paper, and has a remaining term to maturity of not
more than one year; (iv) a repurchase agreement with (A) any commercial bank
that is organized under the laws of any State or any national banking
association and that has total assets of at least $500 million, or (B) any
investment bank that is organized under the laws of any State and that has total
assets of at least $500 million, which agreement is secured by any one or more
of the securities and obligations described in clauses (i), (ii) or (iii) of
this definition of Temporary Cash Investments, which shall have a market value
(exclusive of accrued interest and valued at least monthly) at least equal to
the principal amount of such investments; or (v) Investments in money market
funds that invest substantially all of such funds' assets in the Investments
described in the preceding clauses (i), (ii), (iii) and (iv).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of this Indenture (except
as provided in Section 8.03 hereof).
"Trust Officer" when used with respect to the Trustee, means
any officer or assistant officer of the Trustee assigned to the Corporate Trust
Administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of an
Unrestricted Subsidiary and (ii) any Subsidiary of the Company which is
classified after the Issue Date as an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of the Company; provided that a Subsidiary
organized or acquired after the Issue Date may be so classified as an
Unrestricted Subsidiary only if such classification is in compliance with
Section 4.14 hereof and an Unrestricted Subsidiary may be
<PAGE> 28
designated as a Subsidiary (but only if such classification is in compliance
with the definition of "Subsidiary" contained in this Section 1.01). The Trustee
shall be given prompt written notice by the Company of each resolution adopted
by the Board of Directors of the Company under this provision, together with a
copy of each such resolution adopted.
"U.S. Government Obligations" means (i) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly-Owned Subsidiary" means any Subsidiary all of the
outstanding Equity Interests (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
Section 1.2. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" .............. 4.09
"Agent Members" ...................... 2.15
"Bankruptcy Law" ..................... 6.01
"Base Period ......................... 4.07
"Business Day" ....................... 11.08
"Change of Control Offer" ............ 4.22
"Change of Control Payment Date" ..... 4.22
"Change of Control Purchase Price" ... 4.22
"Covenant Defeasance" ................ 9.03
"Custodian" .......................... 6.01
"Event of Default" ................... 6.01
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
"Excess Proceeds" .................... 4.08
"Excess Proceeds Offer" .............. 4.08
"Exchange Notes" ..................... 2.02
"Global Notes" ....................... 2.01
"Legal Defeasance" ................... 9.02
"Legal Holiday" ...................... 11.08
"Paying Agent" ....................... 2.03
"Physical Notes" ..................... 2.01
"Private Exchange Notes" ............. 2.02
"Registrar" .......................... 2.03
"Reinvestment Date" .................. 4.08
"Required Filing Date" ............... 4.02
"transfer" ........................... 5.01
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Senior Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Company, the
Guarantors or any other obligor on the Senior Notes.
All other terms used in this Indenture that are defined by
the TIA, defined in the TIA by reference to another statute or defined by SEC
rule have the meanings therein assigned to them.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
<PAGE> 30
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) words used herein implying any gender shall apply to
every gender; and
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
Subdivision, unless expressly stated otherwise.
ARTICLE 2.
THE SENIOR NOTES
Section 2.1. Dating; Incorporation of Form in Indenture.
The Senior Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A which is
incorporated in and made part of this Indenture. The Senior Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company may use "CUSIP" numbers in issuing the Senior Notes. The
Company shall approve the form of the Senior Notes. Each Senior Note shall be
dated the date of its authentication.
The Senior Notes offered and sold in reliance on Rule 144A
shall be issued initially in the form of one or more permanent Global Notes in
registered form, substantially in the form set forth in Exhibit A ("Global
Notes"), deposited with the Trustee, as custodian for the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter provided
and shall bear the legend set forth on Exhibit B. The aggregate principal amount
of any Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depository,
as hereinafter provided.
Senior Notes offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Senior Notes offered and sold in
reliance on Rule 144A may be issued, in the form of certificated Senior Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
Notes").
<PAGE> 31
Section 2.2. Execution and Authentication.
The Senior Notes shall be executed on behalf of the Company
by two Officers of the Company or an Officer and an Assistant Secretary of the
Company. Such signatures may be either manual or facsimile.
If an Officer whose signature is on a Senior Note no longer
holds that office at the time the Trustee authenticates the Senior Note or at
any time thereafter, the Senior Note shall be valid nevertheless.
A Senior Note shall not be valid until the Trustee manually
signs the certificate of authentication on the Senior Note. Such signature shall
be conclusive evidence that the Senior Note has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall authenticate
Senior Notes for original issue in the aggregate principal amount of
$100,000,000 upon a Company Request. The aggregate principal amount of Senior
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof. Upon receipt of the Company Request and an Officers'
Certificate certifying that the registration statement relating to the exchange
offer specified in the Registration Rights Agreement is effective and that the
conditions precedent to a Private Exchange thereunder have been met, the Trustee
shall authenticate an additional series of Senior Notes in an aggregate
principal amount not to exceed $100,000,000 for issuance in exchange for all
Senior Notes previously issued pursuant to an exchange offer registered under
the Securities Act or pursuant to a Private Exchange (as defined in the
Registration Rights Agreement). Exchange Notes (as defined in the Registration
Rights Agreement) or Private Exchange Notes (as defined in the Registration
Rights Agreement) may have such distinctive series designations and such changes
in the form thereof as are specified in the Company Request referred to in the
preceding sentence. The Senior Notes shall be issuable only in registered form
without coupons and only in denominations of $1,000 and integral multiples
thereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Senior Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Senior Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same right as the Trustee in dealing with the Company or an Affiliate.
Section 2.3. Registrar and Paying Agent.
The Company shall appoint a registrar, which shall maintain
an office or agency where Senior Notes may be presented for registration of
transfer or for exchange ("Registrar"), and a paying agent, which shall maintain
an office or agency located in the Borough of Manhattan, City of New York, State
of New York where
<PAGE> 32
Senior Notes may be presented for payment ("Paying Agent") and shall maintain an
office or agency where notices and demands to or upon the Company in respect of
the Senior Notes and this Indenture may be served. The Registrar shall keep a
register of the Senior Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents.
Neither the Company nor any Affiliate may act as Paying Agent. The Company may
change any Paying Agent, Registrar or co-registrar without notice to any
Noteholder.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such and shall be entitled to appropriate compensation pursuant to
Section 7.07. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Senior
Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
On or before each due date of the principal of and interest
on any Senior Notes, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal and interest so becoming due. Each Paying Agent
shall hold in trust for the benefit of the Noteholders or the Trustee all money
held by the Paying Agent for the payment of principal of or interest on the
Senior Notes (whether such money has been paid to it by the Company or any other
obligor on the Senior Notes), and the Company and the Paying Agent shall notify
the Trustee of any default by the Company (or any other obligor on the Senior
Notes) in making any such payment. Money held in trust by the Paying Agent need
not be segregated except as required by law and in no event shall the Paying
Agent be liable for any interest on any money received by it hereunder. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee, and the Trustee may at any time during the continuance of any Event
of Default specified in Section 6.01(1) or (2), upon written request to a Paying
Agent, require such Paying Agent to forthwith pay to the Trustee all sums so
held in trust by such Paying Agent together with a complete accounting of such
sums. Upon doing so, the Paying Agent shall have no further liability for the
money delivered to the Trustee.
Section 2.5. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or prior to the fifth Business Day before each
Interest Payment Date, and at such other times as the Trustee may request in
writing, a list in such form and as
<PAGE> 33
of such date as the Trustee may reasonably require of the names and addresses of
Noteholders, including the aggregate principal amount of Senior Notes held by
each such Noteholder.
Section 2.6. Transfer and Exchange.
Subject to Section 2.16, when a Senior Note is presented to
the Registrar with a request to register the transfer thereof, the Registrar
shall register the transfer as requested if the requirements of applicable law
are met and, when Senior Notes are presented to the Registrar with a request to
exchange them for an equal principal amount of Senior Notes of other authorized
denominations, the Registrar shall make the exchange as requested, provided that
every Senior Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar duly executed by
the Holder thereof or his attorney, duly authorized in writing. To permit
registration of transfers and exchanges, upon surrender of any Senior Note for
registration of transfer at the office or agency maintained pursuant to Section
2.03 hereof, the Company shall issue and execute and the Trustee shall
authenticate Senior Notes at the Registrar's request. Any exchange or transfer
shall be without any service charge to the Noteholder, except that the Company
may require payment by the Noteholder of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to Section
2.09, 3.06, 4.08, 4.22 or 8.05 hereof. The Trustee shall not be required to
register transfers of Senior Notes or to exchange Notes for a period of 15 days
before selection of any Senior Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Senior Notes called or being
called for redemption in whole or in part, except the unredeemed portion of any
Senior Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the Holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
Each Holder of a Senior Note agrees to indemnify the Company
and the Trustee against any liability that may result from the transfer,
exchange or assignment of such Holder's Senior Note in violation of any
provision of this Indenture and/or applicable U.S. Federal or state securities
law.
Except as expressly provided herein, neither the Trustee nor
the Registrar shall have any duty to monitor the Company's compliance with or
have any responsibility with respect to the Company's compliance with any
Federal or state securities laws.
<PAGE> 34
Section 2.7. Replacement Senior Notes.
If a mutilated Senior Note is surrendered to the Registrar or
Trustee or if the Holder of a Senior Note presents evidence to the satisfaction
of the Company and the Trustee that the Senior Note has been lost, destroyed or
wrongfully taken and of the ownership thereof, the Company shall issue and the
Trustee shall authenticate a replacement Senior Note if the Holder of such
Senior Note furnishes to the Company and the Trustee evidence reasonably
acceptable to them of the ownership and destruction, loss or theft of such
Senior Note. An indemnity bond may be required by the Company or the Trustee
that is sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Senior Note is replaced. The Company and the Trustee each may charge for its
expenses (including reasonable attorneys' fees and expenses) in replacing a
Senior Note. Every replacement Senior Note is an additional obligation of the
Company.
Section 2.8. Outstanding Senior Notes.
Senior Notes outstanding at any time are all Senior Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, and those described in this Section 2.08 as not
outstanding.
If a Senior Note is replaced pursuant to Section 2.07, it
ceases to be outstanding until the Company and the Trustee receive proof
satisfactory to each of them that the replaced Senior Note is held by a bona
fide purchaser in whose hands such obligation is a legal, valid and binding
obligation of the Company.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and all accrued
interest with respect to Senior Notes payable on that date and is not prohibited
from paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Senior Notes cease to be outstanding
and interest on them ceases to accrue.
Subject to Section 11.06, a Senior Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Senior Note.
Section 2.9. Temporary Senior Notes.
Until definitive Senior Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Senior Notes.
Temporary Senior Notes shall be substantially in the form, and shall carry all
rights, benefits and privileges, of definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes.
Without unreasonable delay, the
<PAGE> 35
Company shall prepare and the Trustee shall authenticate definitive Senior Notes
in exchange for temporary Senior Notes presented to it.
Section 2.10. Cancellation.
The Company at any time may deliver Senior Notes to the
Trustee for cancellation. The Registrar and the Paying Agent shall forward to
the Trustee any Senior Notes surrendered to them for transfer, exchange or
payment. The Trustee shall cancel and retain or, upon written request of the
Company, may destroy (subject to the record-retention requirements of the
Exchange Act) or return to the Company in accordance with its normal practice,
all Senior Notes surrendered for transfer, exchange, payment or cancellation and
if such Senior Notes are destroyed, deliver a certificate of destruction to the
Company unless the Company instructs the Trustee in writing to deliver the
Senior Notes to the Company. Subject to Section 2.07 hereof, the Company may not
issue new Senior Notes to replace Senior Notes in respect of which it has
previously paid all principal, premium and interest accrued thereon, or
delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the
Senior Notes, it shall pay the defaulted amounts, plus (to the extent permitted
by law) any interest payable on defaulted amounts pursuant to Section 4.01
hereof, to the persons who are Noteholders on a subsequent special record date.
The Company shall fix the special record date and payment date in a manner
satisfactory to the Trustee and provide the Trustee at least 20 days notice of
the proposed amount of default interest to be paid and the special payment date.
At least 15 days before the special record date, the Company shall mail or cause
to be mailed to each Noteholder at his address as it appears on the Senior Notes
register maintained by the Registrar a notice that states the special record
date, the payment date (which shall be not less than five nor more than ten days
after the special record date), and the amount to be paid. In lieu of the
foregoing procedures, the Company may pay defaulted interest in any other lawful
manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby.
<PAGE> 36
The principal and interest on Physical Notes shall be payable at the office of
the Paying Agent.
Section 2.13. CUSIP Number.
The Company in issuing the Senior Notes may use a "CUSIP"
number (or numbers), and if so, the Trustee shall use the CUSIP number(s) in
notices of redemption or exchange as a convenience to Holders, provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Senior Notes,
and that reliance may be placed only on the other identification numbers printed
on the Senior Notes. The Company will promptly notify in writing the Trustee of
any such CUSIP number used by the Company in connection with the Senior Notes
and any change in such CUSIP number.
Section 2.14. Wire Payments to Holders.
Notwithstanding any provisions of this Indenture and the
Senior Notes to the contrary, at the request of a Holder, all payments with
respect to any of the Senior Notes, may be made by the Paying Agent upon receipt
from the Company of immediately available funds prior to 11:30 a.m., New York
City time, directly to the Holder of such Senior Note (whether by federal funds,
wire transfer or otherwise), provided, however, that no such federal funds, wire
transfer or other such direct payment shall be made to any Holder under this
Section 2.14 unless such Holder has delivered written instructions to the
Trustee prior to the relevant record date for such payment requesting that such
payment will be so made and designating the bank account to which such payments
shall be so made and in the case of payments of principal, surrenders the Senior
Note to the Trustee in exchange for a Senior Note or Senior Notes aggregating
the same principal amount as the unredeemed principal amount of the Senior Notes
surrendered. The Trustee shall be entitled to rely on the last instruction
delivered by the Holder pursuant to this Section 2.14 unless a new instruction
is delivered prior to the relevant record date for a payment date. The Company
will indemnify and hold the Trustee harmless against any loss, liability or
expense (including attorneys' fees and expenses) resulting from any act or
omission to act on the part of the Company or any such Holder in connection with
any such agreement or which the Paying Agent may incur as a result of making any
payment in accordance with any such agreement.
Section 2.15. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit B.
<PAGE> 37
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Note, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Senior Note.
(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.16, bear the legend regarding transfer restrictions applicable
to the Physical Notes set forth in Exhibit A.
<PAGE> 38
(f) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture, the Senior Notes or the Guarantees.
Section 2.16. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Senior Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Senior
Note constituting a Restricted Security, whether or not such Senior Note bears
the Private Placement Legend, if (x) the requested transfer is after October 31,
1999 or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in the
form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person
(including a QIB), the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto; provided that, in the
case of a transfer of a Senior Note not bearing a Private Placement Legend, the
Registrar has received an Officers' Certificate from the Company authorizing
such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x) the
certificate, if any, required by paragraph (i) above and (y) instructions given
in accordance with the Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Senior Note
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Senior Note stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A
<PAGE> 39
to a transferee who has signed the certification provided for on the form of
Senior Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Senior Note for its own account or an account
with respect to which it exercises sole investment discretion and that it and
any such account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Notes which after transfer are
to be evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depository's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Senior Notes not bearing the Private Placement Legend, the
Registrar shall deliver Senior Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Senior Notes that
bear the Private Placement Legend unless (i) the circumstances contemplated by
paragraph (a)(i)(x) of this Section 2.16 exist, (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (iii) such Senior Note has been sold or exchanged pursuant to
an effective registration statement under the Securities Act and the Registrar
has received an Officers' Certificate from the Company to such effect.
(d) General. By its acceptance of any Senior Note bearing the
Private Placement Legend, each Holder of such a Senior Note acknowledges the
restrictions on transfer of such Senior Note set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Senior Note
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable notice to the Registrar.
<PAGE> 40
ARTICLE 3.
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Senior Notes pursuant to
Section 3.07 hereof, (i) at least 60 days prior to the Redemption Date in the
case of a partial redemption, (ii) at least 45 days prior to the Redemption Date
in the case of a total redemption or (iii) during such other period as the
Trustee may agree to in writing, the Company shall notify the Trustee in writing
of the Redemption Date, the principal amount of Senior Notes to be redeemed and
the redemption price, and deliver to the Trustee an Officers' Certificate
stating that such redemption will comply with the conditions contained in
Section 3.07 hereof, as appropriate.
Section 3.2. Selection by Trustee of Senior Notes to Be Redeemed.
In the event that fewer than all of the Senior Notes are to
be redeemed, the Trustee shall select the Senior Notes to be redeemed, if the
Senior Notes are listed on a national securities exchange, in accordance with
the rules of such exchange or, if the Senior Notes are not so listed, on either
a pro rata basis or by lot, or such other method as it shall deem fair and
equitable. The Trustee shall promptly notify the Company of the Senior Notes
selected for redemption and, in the case of any Senior Notes selected for
partial redemption, the principal amount thereof to be redeemed. The Trustee may
select for redemption portions of the principal of the Senior Notes that have
denominations larger than $1,000. Senior Notes and portions thereof the Trustee
selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000. For
all purposes of this Indenture unless the context otherwise requires, provisions
of this Indenture that apply to Senior Notes called for redemption also apply to
portions of Senior Notes called for redemption.
Section 3.3. Notice of Redemption
At least 30 days, but no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Senior Notes to be redeemed at
his or her last address as the same appears on the registry books maintained by
the Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Senior Notes to be redeemed
(including the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
<PAGE> 41
(2) the redemption price and the amount of accrued interest,
if any, to be paid;
(3) if any Senior Note is being redeemed in part, the portion
of the principal amount of such Senior Note to be redeemed and that, after the
Redemption Date and upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Senior Notes called for redemption ceases to accrue on and
after the Redemption Date and that the only remaining right of the Holders of
such Senior Notes is to receive payment of the Senior Notes redemption price
upon surrender to the Paying Agent of the Senior Notes redeemed;
(7) the paragraph of Section 3.07 hereof pursuant to which
the Senior Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Senior Notes that are
being redeemed.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's sole expense.
Section 3.4. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Senior Notes called for redemption become due and payable on the
Redemption Date and at the redemption price, including any premium, plus
interest accrued to the Redemption Date. Upon surrender to the Paying Agent,
such Senior Notes shall be paid at the redemption price, including any premium,
plus interest accrued to the Redemption Date, provided that if the Redemption
Date is after a regular interest payment record date and on or prior to the
Interest Payment Date, the accrued interest shall be payable to the Holder of
the redeemed Senior Notes registered on the relevant record date, and provided,
further, that if a Redemption Date is a Legal Holiday, payment shall be made on
the next succeeding Business Day and no interest shall accrue for the period
from such Redemption Date to such succeeding Business Day.
<PAGE> 42
Section 3.5. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest on all Senior Notes to be redeemed on that date other than Senior Notes
or portions thereof called for redemption on that date which have been delivered
by the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest on Senior Notes called for
redemption shall have been made available in accordance with the preceding
paragraph and payment thereof is not prohibited pursuant to the terms of this
Indenture, the Senior Notes called for redemption will cease to accrue interest
and the only right of the Holders of such Senior Notes will be to receive
payment of the redemption price of and, subject to the first proviso in Section
3.04, accrued and unpaid interest on such Senior Notes to the Redemption Date.
If any Senior Note called for redemption shall not be so paid, interest will be
paid, from the Redemption Date until such redemption payment is made, on the
unpaid principal of the Senior Note and any interest not paid on such unpaid
principal, in each case, at the rate and in the manner provided in the Senior
Notes.
Section 3.6. Senior Notes Redeemed in Part.
Upon surrender of a Senior Note that is redeemed in part, the
Trustee shall authenticate for a Holder a new Senior Note equal in principal
amount to the unredeemed portion of the Senior Note surrendered.
Section 3.7. Optional Redemption.
(a) The Company may redeem the Senior Notes, in whole or in
part, at any time on or after November 1, 2001 at the following redemption
prices (expressed as a percentage of principal amount), together, in each case,
with accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve-month period beginning on November 1 of each year listed below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Year Percentage
-----------------------------------------------------------------
<S> <C>
2001............................................. 106.125%
-----------------------------------------------------------------
2002............................................. 104.594%
-----------------------------------------------------------------
2003............................................. 103.063%
-----------------------------------------------------------------
2004............................................. 101.531%
-----------------------------------------------------------------
2005 and thereafter.............................. 100.000%
-----------------------------------------------------------------
</TABLE>
<PAGE> 43
(b) Notwithstanding the foregoing, the Company may redeem in
the aggregate up to 25% of the original principal amount of Senior Notes at any
time and from time to time prior to November 1, 1999 at a redemption price equal
to 110% of the aggregate principal amount so redeemed, plus accrued interest to
the Redemption Date, with the Net Proceeds of one or more Public Equity
Offerings; provided that at least $75,000,000 aggregate principal amount of
Senior Notes remains outstanding immediately after the occurrence of any such
redemption pursuant to a Public Equity Offering and that any such redemption
occurs within 60 days following the closing of any such Public Equity Offering.
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Senior Notes.
The Company shall pay the principal of and interest
(including all Additional Interest as provided in the Registration Rights
Agreement, which shall be deemed to be included in the term "interest" for
purposes of this Indenture and the Senior Notes) on the Senior Notes on the
dates and in the manner provided in the Senior Notes and this Indenture. An
installment of principal or interest shall be considered paid on the date it is
due if the Trustee or Paying Agent holds on that date money designated for and
sufficient to pay such installment.
The Company shall pay interest on overdue principal
(including post-petition interest in a proceeding under any Bankruptcy Law) and
overdue interest, to the extent lawful, at the rate equal to .5% per annum; and
the per annum interest rate of such additional interest will increase by an
additional .25% per annum for each subsequent 90-day period during which such
overdue principal and installments of interest remain unpaid, up to a maximum
additional interest rate of 2.0% per annum.
Section 4.2. Reports.
(a) The Company will file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements, so long as the SEC will accept such filings on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been or is required to so file such documents. The Company (at its own expense)
shall also in any event within 15 days after each Required Filing Date (i)
transmit by mail to all Holders, at their addresses appearing in the register of
Senior Notes maintained by the Registrar and (ii) file with the Trustee within
15 days after the Required Filing Date, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company files with the SEC pursuant to Section 13 or 15(d) of the Exchange Act
or
<PAGE> 44
would be required to file with the SEC if it were subject to Section 13 or 15(d)
of the Exchange Act. Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a). Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
(b) The Company will, upon request, provide to any Holder of
Senior Notes or any prospective transferee of any such Holder any information
concerning the Company (including financial statements) necessary in order to
permit such Holder to sell or transfer Senior Notes in compliance with Rule 144A
under the Securities Act; provided, however, that the Company shall not be
required to furnish such information in connection with any request made on or
after the date which is three years from the later of (i) the date such Senior
Note (or any predecessor Senior Note) was acquired from the Company or (ii) the
date such Senior Note (or any predecessor Senior Note) was last acquired from an
"affiliate" of the Company within the meaning of Rule 144 under the Securities
Act.
Section 4.3. Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, or plead (as a
defense or otherwise) or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury law or other law which
would prohibit or forgive the Company or such Guarantor, as the case may be,
from paying all or any portion of the principal of, premium, if any, and/or
interest on the Senior Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Guarantor hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
Section 4.4. Compliance Certificate.
(a) The Company and each Guarantor shall deliver to the
Trustee, within 120 days after the end of each fiscal year and on or before 50
days after the end of the first, second and third quarters of each fiscal year,
an Officers' Certificate (one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of the Company or such Guarantor, as the case may be) stating that a review of
the activities of the Company or such Guarantor, as the case may be, during such
fiscal year or fiscal quarter, as the case
<PAGE> 45
may be, has been made under the supervision of the signing Officers with a view
to determining whether the Company or such Guarantor, as the case may be, has
kept, observed, performed and fulfilled its obligations under this Indenture,
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge the Company or such Guarantor, as the case may
be, has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all or such Defaults
or Events of Default of which he or she may have knowledge and what action the
Company or such Guarantor, as the case may be, is taking or proposes to take
with respect thereto).
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to Section
4.02 above shall be accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would lead them
to believe that the Company has violated any provisions of this Article 4 or
Article 5 of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly for any failure to obtain
knowledge of any such violation.
(c) The Company and each Guarantor will, so long as any of
the Senior Notes are outstanding, deliver to the Trustee, forthwith upon any
Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the
Company or such Guarantor, as the case may be, is taking or proposes to take
with respect thereto.
Section 4.5. Taxes.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon it or its Subsidiaries' or
Unrestricted Subsidiaries' income, profits or property and (b) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon their property; provided, however, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate negotiations or proceedings and for which disputed
amounts adequate reserves (in the good faith judgment of the Officers of the
Company) have been made.
<PAGE> 46
Section 4.6. Limitation on Additional Indebtedness.
The Company and the Guarantors will not, and will not permit
any of their Subsidiaries to, directly or indirectly, incur (as defined herein)
any Indebtedness (including Acquired Indebtedness) other than Permitted
Indebtedness; provided, however, that the Company may incur Indebtedness
(including Acquired Indebtedness) if (a) after giving effect on a pro forma
basis to the incurrence of such Indebtedness and to the extent set forth in the
definition of Consolidated Fixed Charge Coverage Ratio the receipt and
application of the proceeds thereof, the Company's Consolidated Fixed Charge
Coverage Ratio would be greater than (i) 2.0 to 1 if such Indebtedness is to be
incurred on or before December 31, 1997 and (ii) 2.25 to 1 if such Indebtedness
is to be incurred after December 31, 1997; and (b) no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence of
the incurrence of such Indebtedness.
The Company and the Guarantors will not, directly or
indirectly, incur any Indebtedness that by its terms (or by the terms of any
agreement governing such Indebtedness) is expressly made subordinate to any
other Indebtedness of the Company or any guarantor unless such Indebtedness is
also expressly by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to the same extent and in the same manner to the
Senior Notes; provided, however, that no Indebtedness of the Company shall be
deemed to be subordinated to any other Indebtedness of the Company solely
because such other Indebtedness is secured.
Section 4.7. Limitation on Restricted Payments.
The Company and the Guarantors will not, and will not permit
any of their Subsidiaries to, directly or indirectly, make, any Restricted
Payment unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.06 hereof; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made after the
Issue Date through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated Net
Income (or in the event such Consolidated Net Income shall be a deficit, minus
100% of such deficit) during the Base Period, (2) 100% of the aggregate Net
Proceeds, including the fair market value of securities or other property
received by the Company from the issue or sale, during the Base Period, of
Equity Interests (other than Disqualified Equity
<PAGE> 47
Interests or Equity Interests of the Company issued to any Subsidiary of the
Company) of the Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Equity Interests (other than
Disqualified Equity Interests) of the Company which has been so converted or
exercised or exchanged, as the case may be, and (3) $1,000,000. For purposes of
determining under this clause (c) the amount expended for Restricted Payments,
cash distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its fair market value.
The provisions of this Section 4.07 shall not prohibit (i)
the agreement or commitment to make any payment or distribution permitted under
this Indenture or the payment or distribution so agreed or committed to be made
as long as such payment or distribution is made on the date of such agreement or
commitment or within 60 days thereof, provided, however, that on the date of
such agreement or commitment such payment would comply with the foregoing
provisions, it being understood that the agreement or commitment to make such
payment or distribution shall constitute Permitted Indebtedness, (ii) the
retirement of any Equity Interests of the Company or Subordinated Indebtedness
of the Company by conversion into, or by or in exchange for, Equity Interests
(other than Disqualified Equity Interests), or out of, the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than Disqualified Equity
Interests); provided, that the Net Proceeds of such Equity Interests so used
shall not be included under clause (2) of paragraph (c) above, (iii) the
redemption or retirement of Subordinated Indebtedness of the Company that is
subordinated to the Senior Notes in exchange for, by conversion into, or out of
the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Senior Notes to at
least the same extent as the Subordinated Indebtedness being redeemed or
retired, (iv) the retirement of any Disqualified Equity Interests by conversion
into, or by exchange for, shares of Disqualified Equity Interests, or out of the
Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of other Disqualified Equity Interests and (v) the purchase of
minority interests from shareholders of Quest Pharmacies, Inc. and subsidiaries
of Sunbelt Therapy Management Services, Inc., an Arizona corporation, and the
purchase of the warrant to purchase shares of the Company's common stock from
Health Partners Funding, L.P. pursuant to agreements outstanding on the Issue
Date or on terms no less favorable to the holders of the Senior Notes, provided,
however, that in the case of the immediately preceding clauses (ii), (iii) and
(v), no Default or Event of Default shall have occurred and be continuing at the
time of such Restricted Payment or would occur as a result thereof.
In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date for purposes of subparagraph (c) above,
amounts expended pursuant to clauses (i), (ii) and (v) of the immediately
preceding paragraph shall be included, but without duplication, in such
calculation.
<PAGE> 48
For purposes of calculating the Net Proceeds received by the
Company from the issuance or sale of its Equity Interests either upon the
conversion of, or in exchange for, Indebtedness of the Company or any
Subsidiary, such amount will be deemed to be an amount equal to the difference
of (a) the sum of (i) the principal amount or accreted value (whichever is less)
of such Indebtedness on the date of such conversion or exchange and (ii) the
additional cash consideration, if any, received by the Company upon such
conversion or exchange, less any payment on account of fractional shares, minus
(b) all expenses incurred in connection with such issuance or sale. In addition,
for purposes of calculating the Net Proceeds received by the Company from the
issuance or sale of its Equity Interests upon the exercise of any options or
warrants of the Company, such amount will be deemed to be an amount equal to the
difference of (a) the additional cash consideration, if any, received by the
Company upon such exercise, minus (b) all expenses incurred in connection with
such issuance or sale.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Company's latest available financial statements, and, where
required, that no Default or Event of Default exists and is continuing and no
Default or Event of Default will occur immediately after giving effect to such
Restricted Payment.
Section 4.8. Limitation on Certain Asset Sales.
The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value thereof (as
reasonably determined for Asset Sales other than eminent domain, condemnation or
similar government proceedings in good faith by its Board of Directors); and
(ii) not less than 75% of the consideration received (which shall not include
any assumed liabilities or obligations) by the Company or the Subsidiary, as the
case may be, from such Asset Sale is in the form of cash or cash equivalents
(i.e., items allowed under "Temporary Cash Investments") provided, that any
Asset Sale or related series of Asset Sales involving securities, property or
assets with an aggregate fair market value of less than $3 million per Asset
Sale or series of related Asset Sales, but in any case not to exceed $10 million
in the aggregate for all transactions in any consecutive 12-month period, shall
be exempt from the provisions of this clause (ii) (but any consideration
received from any such Asset Sales shall be deemed to be Asset Sale Proceeds for
purposes of this paragraph when reduced to cash or cash equivalents), and (iii)
the Asset Sale Proceeds received by the Company or such Subsidiary are applied,
to the extent the Company elects, (A) to repay and permanently reduce
outstanding Permitted Secured Indebtedness and to permanently reduce the
commitments in respect thereof, provided, however, that such repayment and
commitment reduction occurs within 180 days following the receipt of such Asset
<PAGE> 49
Sale Proceeds (the "Reinvestment Date") or (B) to an investment in assets
(including Equity Interests or other securities purchased in connection with the
acquisition of Equity Interests or property of another person) used or useful in
business similar or ancillary to the business of the Company or such Subsidiary
as conducted at the time of such Asset Sale, provided, however, that such
investment occurs or the Company or such Subsidiary enters into contractual
commitments to make such investment, subject only to customary conditions (other
than the obtaining of financing), on or prior to the Reinvestment Date (and
notifies the Trustee of the same in writing) and Asset Sale Proceeds
contractually committed are so applied within 270 days following the receipt of
such Asset Sale Proceeds. Any Asset Sale Proceeds that are not applied as
permitted by clause (iii) of the preceding sentence shall constitute "Excess
Proceeds." If at any time the aggregate amount of Excess Proceeds exceeds $5
million, the Company shall offer (an "Excess Proceeds Offer") to purchase from
all holders of Senior Notes, pursuant to procedures set forth in this Indenture,
the maximum principal amount of Senior Notes that may be purchased with such
Excess Proceeds at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued interest, if any, to the date of the purchase. To
the extent that the aggregate amount of Senior Notes tendered pursuant to such
Excess Proceeds Offer is less than the amount of Excess Proceeds, the Company
may use such portion of the Excess Proceeds that is not used to purchase Senior
Notes so tendered for general corporate purposes not inconsistent with the
Senior Notes or this Indenture. If the aggregate principal amount of Senior
Notes tendered pursuant to such Excess Proceeds Offer is more than the amount of
the Excess Proceeds, the Senior Notes tendered will be repurchased on a pro rata
basis or by such other method as the Trustee shall deem fair and appropriate.
Upon the completion of any Excess Proceeds Offer and the closing of any
repurchase of Senior Notes tendered pursuant to such Excess Proceeds Offer, the
amount of Excess Proceeds shall be deemed to be zero.
If the Company is required to make an Excess Proceeds Offer,
the Company shall mail, within 30 days following the Reinvestment Date, a notice
to the holders of the Senior Notes stating, among other things: (1) that such
holders have the right to require the Company to apply the Excess Proceeds to
repurchase such Senior Notes at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase; (2) the purchase date, which shall be no earlier than 30 days and
not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Company, that each holder of Senior Notes must
follow in order to have such Senior Notes repurchased; and (4) the calculations
used in determining the amount of Excess Proceeds to be applied to the
repurchase of such Senior Notes.
In the event of the transfer of substantially all (but not
all) of the assets of the Company or any Subsidiary of the Company or
substantially all (but not all) of the assets of any division or line of
business of the Company or any Subsidiary of the Company as an entirety to a
Person in a transaction or series of related transactions
<PAGE> 50
permitted under Section 5.01 hereof, the successor corporation shall be deemed
to have sold the assets of the Company, the Subsidiary or the division or line
of business, as the case may be, not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such assets of the Company, the Subsidiary or the division or line of
business, as the case may be, deemed to be sold shall be deemed to be Asset Sale
Proceeds for purposes of this covenant.
Any Excess Proceeds Offer will be made in substantially the
same manner as a Change of Control Offer. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations to the extent such laws and regulations are applicable to an
Excess Proceeds Offer.
Section 4.9. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (including any Affiliate in which the Company or any
Subsidiary thereof owns a minority interest) or holder of 10% or more of the
Company's Equity Interests (each such transaction, an "Affiliate Transaction")
or extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the Issue Date unless (i) such Affiliate
Transaction is solely between or among the Company and its Wholly-Owned
Subsidiaries; (ii) such Affiliate Transaction is solely between or among
Wholly-Owned Subsidiaries of the Company; (iii) such Affiliate Transaction is
for reasonable fees and compensation paid to, and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Subsidiary thereof as reasonably determined in good faith by the Board of
Directors (when required as described below) or senior management of the Company
or of such Subsidiary having no interest in such Affiliate Transaction; or (iv)
the terms of such Affiliate Transaction are fair and reasonable to the Company
or such Subsidiary, as the case may be, and the terms of such Affiliate
Transaction are at least as favorable as the terms which could be obtained by
the Company or such Subsidiary, as the case may be, in a comparable transaction
made on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction involving an amount or having a value in excess of $1 million in any
one year which is not permitted under clause (i) or (ii) above, the Company or
such Subsidiary, as the case may be, must obtain a resolution of its Board of
Directors certifying that such Affiliate Transaction complies with clause (iii)
or (iv) above, as the case may be. In transactions with a value in excess of $3
million which are not permitted under clause (i) or (ii) above, the Company or
such Subsidiary, as the case may be, must obtain a written opinion as to
<PAGE> 51
the fairness of such a transaction, from a financial point of view, from an
Independent Financial Advisor.
(b) The foregoing provisions will not apply to (i) the
payment of reasonable annual compensation to directors or executive officers of
the Company, (ii) dividends on Equity Interests made in compliance with Section
4.07 hereof, (iii) purchase in the ordinary course of business of, supplies,
services and the like from the Company or any Subsidiary; and (iv) the continued
performance of transactions with Affiliates disclosed in the Offering
Memorandum.
Section 4.10. Limitations on Liens.
The Company will not, and will not permit any of its
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Subsidiary or any shares of stock or debt of any
Subsidiary which owns property or assets, now owned or hereafter acquired, or
any income or profits therefrom, unless (i) if such Lien secures Indebtedness
which is pari passu with the Senior Notes, then the Senior Notes are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien or (ii) if such Lien secures
Subordinated Indebtedness, any such Lien shall be subordinated to a Lien on such
property or asset or shares of stock or debt granted to the Holders of the
Senior Notes to the same extent as such subordinated Indebtedness is
subordinated to the Senior Notes.
Section 4.11. Limitations on Investments.
The Company will not, and will not permit any of its
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.07 hereof.
Section 4.12. Limitation on Creation of Subsidiaries.
The Company shall not create or acquire, nor permit any of
its Subsidiaries to create or acquire, any Subsidiary other than (i) an
Unrestricted Subsidiary; or (ii) a Subsidiary that, at the time it has either
assets or shareholder's equity in excess of $5,000, executes a guarantee, in the
form attached as Exhibit E to this Indenture and reasonably satisfactory in form
and substance to the Trustee (and with such documentation relating thereto as
the Trustee shall require, including, without limitation, a supplement or
amendment to this Indenture and an Opinion of Counsel as to the enforceability
of such Guarantee).
<PAGE> 52
Section 4.13. Limitation on Indebtedness of Subsidiaries.
The Company and the Guarantors will not permit any of their
Subsidiaries to incur any Indebtedness except (i) Indebtedness to and held by
the Company or a Wholly-Owned Subsidiary of the Company or a Guarantor,
provided, however, that any subsequent issuance or transfer of any Equity
Interest that results in such Subsidiary ceasing to be a Wholly-Owned Subsidiary
of the Company or a Guarantor or any transfer of such Indebtedness to any Person
other than the Company or a Guarantor shall be deemed to be the incurrence of
such Indebtedness by the Company, (ii) Permitted Secured Indebtedness, (iii)
Acquired Indebtedness, provided, however, that such Acquired Indebtedness was
not incurred in connection with, or in anticipation of, such Person becoming a
Subsidiary, and (iv) Indebtedness incurred by a Guarantor which the Company
would be permitted to incur in compliance with the restrictions under Section
4.06 hereof.
Section 4.14. Limitation on Subsidiaries and Unrestricted Subsidiaries.
(a) The Company may by written notice to the Trustee designate any
Subsidiary (including a newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary, provided, however, that (i) no Default or Event of
Default shall have occurred and be continuing or would arise therefrom, (ii)
such designation is at that time permitted under Section 4.07 hereof and (iii)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.06 hereof. For purposes of Section 4.07 hereof:
(i) an "Investment" shall be deemed to have been made at the
time any Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to the Company's percentage Equity Interest in such Subsidiary)
equal to the net worth of such Subsidiary at the time that such Subsidiary is
designated as an Unrestricted Subsidiary;
(ii) at any date the aggregate of all Restricted Payments made as
Investments since the Issue Date shall exclude and be reduced by an amount
(proportionate to the Company's percentage Equity Interest in such Subsidiary)
equal to the net worth of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Subsidiary, not to exceed, in the case
of any such redesignation of an Unrestricted Subsidiary as a Subsidiary, the
amount of Investments previously made by the Company and its Subsidiaries in
such Unrestricted Subsidiary (in each case of clauses (a)(i) and (a)(ii) hereof,
"net worth" shall be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation); and
(iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer.
<PAGE> 53
(b) Notwithstanding clause (a) above, the Board of Directors of the
Company may not designate any Subsidiary of the Company to be an Unrestricted
Subsidiary if, after such designation:
(i) the Company or any Subsidiary provides credit support for, or
a guarantee of, any Indebtedness or other obligation (contingent or otherwise)
of such Subsidiary (including any understanding, agreement or instrument
evidencing such Indebtedness or obligation) or is otherwise subject to recourse
or obligated thereunder or therefor;
(ii) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Subsidiary of the Company to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity;
(iii) such Subsidiary owns any Equity Interests in, or owns or
holds any Lien on any property of, any Subsidiary which is not a Subsidiary of
the Subsidiary to be so designated;
(iv) such Subsidiary has any contract, arrangement, agreement or
understanding with the Company, or any Subsidiary of the Company, whether
written or oral, other than a transaction having terms no less favorable to the
Company or such Subsidiary of the Company than those which might be obtained at
the time from persons who are not Affiliates of the Company; or
(v) the Company or any Subsidiary of the Company has any
obligation to subscribe for any Equity Interest in such Subsidiary or to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve specified levels of operating results.
Section 4.15. Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any of its Subsidiaries to (a) pay dividends or make any other
distributions in cash or otherwise to the Company or any Subsidiary on its
Equity Interests, (b) pay any Indebtedness owed to the Company or any
Subsidiary, (c) make loans or advances to the Company or any Subsidiary thereof,
(d) transfer any of its properties or assets to the Company or any Subsidiary
thereof (other than customary restrictions on transfer of property subject to a
Permitted Lien under the term of the agreements creating such Permitted Lien
(other than a Lien on cash not constituting proceeds of non-cash property
subject
<PAGE> 54
to a Permitted Lien) which would not materially adversely affect the Company's
ability to satisfy its obligations under the Senior Notes), or (e) guarantee any
Indebtedness of the Company or any Subsidiary of the Company, except, in each
case, for such encumbrances or restrictions existing under or contemplated by
reason of (i) the Senior Notes or this Indenture, (ii) any restrictions existing
under or contemplated by agreements evidencing any Permitted Secured
Indebtedness, (iii) any restrictions which are in existence on the Issue Date or
which exist with respect to a Person that becomes a Subsidiary on or after the
Issue Date, which are in existence at the time such Person becomes a Subsidiary
of the Company (but not created in connection with or contemplation of such
Person becoming a Subsidiary of the Company and which encumbrance or restriction
is not applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired) and any
agreement that refinances or replaces the same, provided, however, that the
terms and conditions of any such restrictions are not materially less favorable
in the aggregate to the holders of the Senior Notes than those under or pursuant
to the agreement being replaced or the agreement evidencing the Indebtedness
refinanced or replaced and (iv) customary non-assignment provisions in any
contract or licensing agreement entered into by the Company or any Subsidiary of
the Company in the ordinary course of business or in any lease governing any
leasehold interest of the Company or a Subsidiary.
Section 4.16. Restriction on Sale and Issuance of Subsidiary Equity Interests.
The Company and its Subsidiaries will not issue or sell, and will
not permit any of their Subsidiaries to issue or sell, any Equity Interests of
any Subsidiary to any person other than the Company or a Wholly-Owned Subsidiary
of the Company, except for Common Equity Interests with no preferences or
special rights or privileges and with no redemption or prepayment provisions.
Section 4.17. Limitation on Sale and Lease-Back Transactions.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold and (ii) immediately prior to and after giving
effect to the Attributable Indebtedness in respect of such Sale and Lease-Back
Transaction, the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.06 hereof.
Section 4.18. Line of Business.
The Company will not, and will not permit any of its Subsidiaries
to, engage in any business other than the provision of healthcare and health
fitness services, including without limitation, the ownership, operation or
management of healthcare facilities, the provision of services or supplies to
the healthcare business,
<PAGE> 55
providing care and/or housing for the elderly (including independent living,
assisted living or home healthcare), managed care or any other business
determined by the Company's Board of Directors, in good faith, to be reasonably
related to the foregoing.
Section 4.19. Limitation on Status as Investment Company.
Neither the Company nor any of its Subsidiaries shall take any
action or suffer to exist any condition that would require the Company or any of
its Subsidiaries to register as an "investment company" (as that term is defined
in the Investment Company Act of 1940, as amended), or otherwise become subject
to regulation as an investment company.
Section 4.20. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Senior Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Senior Notes unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Senior Notes which so consent,
waive or agree to amend within any time period set forth in the solicitation
documents relating to such consent, waiver or agreement.
Section 4.21. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, and the corporate, partnership or other existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.22. Change of Control.
(a) Within 30 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "Change of Control Offer") the outstanding Senior Notes
at a purchase price equal to 101% of the principal amount thereof plus any
accrued and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter
<PAGE> 56
defined) (such applicable purchase price being hereinafter referred to as the
"Change of Control Purchase Price") in accordance with the procedures set forth
herein.
(b) Within 30 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Senior Notes, at the address appearing in the
register maintained by the Registrar of the Senior Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant
hereto and that all Senior Notes tendered will be accepted for payment,
and otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the
date such notice is mailed (the "Change of Control Payment Date"));
(3) that any Senior Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Senior Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Senior
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Senior Notes to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Senior Notes delivered for
purchase, and a statement that such Holder is withdrawing its election to
have such Senior Notes purchased;
(7) that Holders whose Senior Notes are being purchased only
in part will be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered, provided that each
Senior Note purchased and each such new Senior Note issued shall be in an
original principal amount in denominations of $1,000 and integral
multiples thereof;
<PAGE> 57
(8) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
(c) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all Senior Notes or portions thereof
or beneficial interests under a Global Note properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Senior Notes or portions thereof or beneficial
interests, so tendered and (iii) deliver or cause to be delivered to the Trustee
Senior Notes so accepted together with an Officers' Certificate stating the
Senior Notes or portions thereof tendered to the Company. The Paying Agent shall
promptly (1) mail to each holder of Senior Notes so accepted and (2) cause to be
credited to the respective accounts of the Holders under a Global Note of
beneficial interests so accepted payment in an amount equal to the Change in
Control Purchase Price for such Senior Notes, and the Company shall execute and
issue, and the Trustee shall promptly authenticate and mail to such holder, a
new Senior Note equal in principal amount to any unpurchased portion of the
Senior Notes surrendered and shall issue a Global Note equal in principal amount
to any unpurchased portion of beneficial interest so surrendered; provided,
however, that each such new Senior Note shall be issued in an original principal
amount in denominations of $1,000 and integral multiples thereof.
(d) If any Permitted Secured Indebtedness is outstanding, at the
time of the occurrence of a Change of Control, prior to the mailing of the
notice to holders described in the preceding paragraphs, but in any event within
30 days following any Change of Control, the Company covenants to (i) repay in
full all obligations and terminate all commitments under such Permitted Secured
Indebtedness or offer to repay in full all obligations and terminate all
commitments under such Permitted Secured Indebtedness of each lender who has
accepted such offer or (ii) obtain the requisite consent under such Permitted
Secured Indebtedness to permit the repurchase of the Senior Notes as described
above. The Company must first comply with the covenant described in the
preceding sentence before it shall be required to purchase Senior Notes in the
event of a Change of Control, provided, however, that the Company's failure to
comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (iii) under Section 6.01 hereof.
(e) If the Company or any Subsidiary thereof has issued any
outstanding (i) Subordinated Indebtedness or (ii) Preferred Equity Interests,
and the Company or such Subsidiary is required to make a Change of Control Offer
or to make a distribution with respect to such Subordinated Indebtedness or
Preferred Equity Interests in the event of a change of control, the Company and
such Subsidiary shall not consummate any such offer or distribution with respect
to such Subordinated Indebtedness or Preferred Equity Interests until such time
as the Company shall have paid the Change of Control Purchase Price in full to
the holders of Senior Notes that
<PAGE> 58
have accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to holders of the Senior Notes.
(f) The Company will not issue Subordinated Indebtedness or
Preferred Equity Interests with change of control provisions requiring the
payment of such Subordinated Indebtedness or Preferred Equity Interests prior to
the payment of the Senior Notes in the event of a Change in Control hereunder.
(g) In the event that a Change of Control occurs and the Holders of
Senior Notes exercise their right to require the Company to purchase Senior
Notes, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1
under the Exchange Act at that time, the Company will comply with the
requirements of Rule 14e-1 as then in effect with respect to such repurchase.
Section 4.23. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York an office or agency where Senior Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Senior Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency; provided, however, that no such designation or rescission shall relieve
the Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes.
The Company hereby initially designates the Corporate Trust Agency
of the Trustee as such office of the Company.
Section 4.24. Maintenance of Properties and Insurance; Books and Records;
Compliance with Laws.
(a) The Company shall, and shall cause its Subsidiaries to, at all
times, cause all material properties used or useful to the conduct of their
business be maintained and kept in good condition, repair and working order
(reasonable wear
<PAGE> 59
and tear excepted) and supplied with all equipment deemed necessary in the good
faith judgment of the Officers of the Company and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
provided, however, that the Company or any Subsidiary shall not be prevented
hereby from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is
in the good faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, as the case may be, desirable in the conduct of the
business of the Company or such Subsidiary, as the case may be, and is not
adverse in any material respect to the Holders.
(b) The Company and each of its Subsidiaries shall provide or cause
to be provided, for itself and each of their respective Subsidiaries, insurance
(including appropriate self-insurance) that is adequate and appropriate for the
conduct of the business of the Company and such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary for businesses similarly
situated in the industry.
(c) The Company shall and shall cause each of its subsidiaries to
keep proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the Company
and each Subsidiary of the Company, in accordance with GAAP consistently applied
to the Company and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which they are subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
Section 4.25. Further Assurance to the Trustee.
The Company shall, upon request of the Trustee, execute and deliver
such further instruments and do such further acts as may reasonably be necessary
or proper to carry out more effectively the provisions of this Indenture.
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.1. Merger, Consolidation or Sale of Assets.
(a) The Company will not and will not permit any of its
Subsidiaries to consolidate with, merge with or into, or sell, assign, lease,
convey, transfer or otherwise dispose of (a "transfer") all or substantially all
of its assets (as an entirety
<PAGE> 60
or substantially as an entirety in one transaction or a series of related
transactions), to any Person unless: (i) the Company or such Subsidiary, as the
case may be, shall be the continuing Person, or the Person (if other than the
Company or such Subsidiary) formed by such consolidation or into which the
Company or such Subsidiary, as the case may be, is merged or to which the
properties and assets of the Company or such Subsidiary, as the case may be, are
transferred shall be a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or such Subsidiary, as the case may be, under the Senior Notes and this
Indenture, and the obligations under this Indenture shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00 additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.06
hereof; and (iv) immediately thereafter, the Company, such Subsidiary or the
other surviving entity, as the case may be, shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company or such
Subsidiary, as the case may be, immediately prior to such transaction.
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.01, the Company shall deliver or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.01 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
Section 5.2. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Senior Notes.
<PAGE> 61
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
(1) there is a default in the payment of any principal of, or
premium, if any, on the Senior Notes when the same becomes due and payable;
(2) default for 30 days in the payment of any interest on the
Senior Notes after such interest becomes due and payable;
(3) the Company fails to comply with any of the terms or provisions
of Sections 4.08, 4.22 or 5.01 hereof;
(4) the Company defaults in the observance or performance of any
other provision in the Senior Notes or this Indenture for 30 days after written
notice from the Trustee or the holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding;
(5) there is a failure to pay when due principal, interest or
premium in an aggregate amount of $3 million or more with respect to any
Indebtedness of the Company or any Subsidiary thereof, or the acceleration prior
to its express maturity of any such Indebtedness aggregating $3 million or more;
(6) a court of competent jurisdiction enters a final judgment or
judgments which can no longer be appealed for the payment of money in excess of
$3 million (which are not paid or covered by third party insurance by
financially sound insurers that have not disclaimed or threatened to disclaim
coverage) against the Company or any Subsidiary thereof and such judgment
remains undischarged for a period of 60 consecutive days during which a stay of
enforcement of such judgment shall not be in effect;
(7) the Company or any Subsidiary pursuant to or within the meaning
of any Bankruptcy Law;
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
<PAGE> 62
(D) makes a general assignment for the benefit of its
creditors or shall admit in writing its inability to pay its debt, or
(E) generally is not paying its debts as they become due; or
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of the property of the Company or any Subsidiary,
or
(C) orders the liquidation of the Company or any Subsidiary,
and, in each case, the order or decree remains unstayed and in effect for 60
consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors as in effect from time to time.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee
shall not be charged with knowledge of any Default or Event of Default unless
written notice thereof shall have been given to a Trust Officer at the Corporate
Trust Office by the Company or any other Person.
Section. Acceleration.
If an Event of Default (other than an Event of Default arising
under Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company or the Holders of not less than
25% in aggregate principal amount of the Senior Notes then outstanding by
written notice to the Company and the Trustee may declare to be immediately due
and payable the entire principal amount of all the Senior Notes then outstanding
plus premium, if any, and accrued interest to the date of acceleration;
provided, however, that after such acceleration but before a judgment or decree
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Senior Notes may rescind and
annul such acceleration if all existing Events of Default, other than nonpayment
of accelerated principal, premium, if any, or interest, have been cured or
waived as provided in this Indenture and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
<PAGE> 63
In case an Event of Default specified in Section 6.01(6) or (7)
with respect to the Company occurs, the principal, premium, if any, and interest
amount with respect to all of the Senior Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or the Holders of the Senior Notes.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Senior Notes or
to enforce the performance of any provision of the Senior Notes or this
Indenture and may take any necessary action requested of it as Trustee to
settle, compromise, adjust or otherwise conclude any proceedings to which it is
a party.
The Trustee may maintain a proceeding even if it does not possess
any of the Senior Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.4. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a
majority in principal amount of the Senior Notes then outstanding have the right
to waive any existing Default or Event of Default or compliance with any
provision of this Indenture or the Senior Notes. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto.
Section 6.5. Control by Majority.
The Holders of a majority in principal amount of the Senior Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall determine that the proceedings so directed may
involve it in personal liability unless the Trustee has asked for and received
indemnification reasonably satisfactory to it against any loss, liability or
expense
<PAGE> 64
caused by its following such direction; provided that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.
Section 6.6. Limitation on Suits.
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Senior
Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of
the Senior Notes then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer, and if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Senior Note to receive payment of principal of, or premium, if
any, and interest of the Senior Note on or after the respective due dates
expressed in the Senior Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company or the Guarantors (or any other obligor on the Senior Notes) for the
whole
<PAGE> 65
amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate then borne by the Senior Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, including all sums due and owing to the Trustee pursuant
to Section 7.07.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company or the
Guarantors (or any other obligor upon the Senior Notes), their respective
creditors or property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same after deduction of its reasonable charges and expenses to
the extent that any such charges and expenses are not paid out of the estate in
any such proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan or
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Senior Notes for
principal, premium, if any, and interest as to each, ratably, without preference
or priority of any kind, according to the amounts due and payable on the Senior
Notes; and
THIRD: to the Company or, to the extent the Trustee collects any amount
from any Guarantor, to such Guarantor.
<PAGE> 66
The Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section 6.10. The Trustee shall give the Company
prior notice of any such record date and payment date; provided, however, that
the failure to give any such notice shall not affect the establishment of such
record date or payment date or any payment to Noteholders pursuant to this
Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Senior Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7.
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
<PAGE> 67
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture but,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) In the absence of bad faith on its part, the Trustee shall
not be liable for any error of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 and 6.05 hereof.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity satisfactory to
it against such risk or liability is not reasonably assured to it.
(e) Whether or not therein expressly so provided, paragraphs (a),
(b), (c), (d), (f) and (g) of this Section 7.01 shall govern every provision of
this Indenture that in any way relates to the Trustee.
(f) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity reasonably satisfactory to it
against any loss, liability, expense or fee.
(g) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
<PAGE> 68
Section 7.2. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document reasonably believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall conform
to the provisions of Section 11.05 hereof. The Trustee shall be protected and
shall not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent (other than the negligence or
willful misconduct of an agent who is an employee of the Trustee) appointed by
it with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers; provided that the Trustee's conduct does not
constitute negligence or bad faith.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, shall be
subject to Sections 7.10 and 7.11 hereof.
Section 7.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Senior Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Senior Notes or any money paid to
the Company
<PAGE> 69
pursuant to the terms of this Indenture and it shall not be responsible for any
statement in the Senior Notes or any document used in connection with the sale
of the Senior Notes other than its certificate of authentication.
Section 7.5. Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of principal
or premium, if any, or interest on the Senior Notes, or that resulted from the
failure of the Company to comply with Sections 4.08 or 5.01, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines it to be in the best interests of the holders of the Senior
Notes to do so.
Section 7.6. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after May 15 of
any year, commencing the May 15 following the date of this Indenture, the
Trustee shall mail to each Noteholder a brief report dated as of such May 15
that complies with TIA Section 313(a); provided that no such report need be
transmitted if no such events listed in TIA Section 313(a) have occurred within
such period. The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
A copy of each report at the time of its mailing to Noteholders
shall be filed with the SEC and each stock exchange on which the Senior Notes
are listed. The Company shall promptly notify the Trustee when the Senior Notes
are listed on any stock exchange and the Trustee shall comply with TIA Section
313(d).
Section 7.7. Compensation and Indemnity.
The Company and the Guarantors (on a joint and several basis) shall
pay to the Trustee from time to time such reasonable compensation as shall be
agreed in writing between the Company and the Trustee for its services hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust). The Company and the
Guarantors (on a joint and several basis) shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or made
by it in connection with its duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Guarantors (on a joint and several basis) shall
indemnify each of the Trustee and any predecessor Trustee for, and hold it
harmless against, any and all loss, damage, claim, liability, reasonable expense
(including but not limited to reasonable attorneys' fees and expenses) or taxes
(other than taxes
<PAGE> 70
based on the income of the Trustee) incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder (including, without limitation, settlement costs). The Trustee shall
notify the Company and the Guarantors in writing promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by the
Trustee to so notify the Company and the Guarantors shall not relieve the
Company or the Guarantors of their obligations hereunder.
Notwithstanding the foregoing, the Company and the Guarantors need
not reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Company and the Guarantors in this Section 7.07,
the Trustee shall have a lien prior to the Senior Notes on all money or property
held or collected by the Trustee in its capacity as such, except such money or
property held in trust to pay principal of and interest on particular Senior
Notes. The obligations of the Company and the Guarantors under this Section 7.07
to compensate and indemnify the Trustee and each predecessor Trustee and to pay
or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of the Company
and each of the Guarantors and shall survive the satisfaction and discharge of
this Indenture, including the termination or rejection hereof in any bankruptcy
proceeding to the extent permitted by law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company and the
Guarantors in writing, such resignation to become effective upon the appointment
of a successor Trustee. The Holders of a majority in principal amount of the
outstanding Senior Notes may remove the Trustee by notifying the removed Trustee
in writing and may appoint a successor Trustee with the Company's written
consent which consent shall not be unreasonably withheld. The Company may remove
the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
<PAGE> 71
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 25% in principal amount of the outstanding Senior Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Consolidation, Merger or Conversion.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation or national banking association, subject to Section 7.10 hereof, the
successor corporation or national banking association without any further act
shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1);
provided that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities, or conflicts
of interest or participation in other securities, of the Company or the
Guarantors are outstanding if the requirements for exclusion set forth in TIA
Section 310(b)(1) are met.
<PAGE> 72
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
Section 7.12. Paying Agents.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment
of principal of, or premium, if any, or interest on, the Senior Notes (whether
such sums have been paid to it by the Company or by any obligor on the Senior
Notes) in trust for the benefit of Holders of the Senior Notes or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all sums
so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Company (or by any obligor on the Senior
Notes) in the payment of any installment of the principal of, premium, if any,
or interest on, the Senior Notes when the same shall be due and payable.
ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.1. Without Consent of Holders
The Company and/or one or more Guarantors and the Trustee may
modify, waive, amend or supplement this Indenture or the Senior Notes without
notice to or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(3) to comply with any requirements of the SEC under the TIA;
<PAGE> 73
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not materially and adversely affect the rights of any
Noteholder;
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Senior Notes.
The Trustee is hereby authorized to join with the Company and the
Guarantors, if any, in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.2. With Consent of Holders.
The Company and/or one or more Guarantors and the Trustee may
modify, amend, waive or supplement this Indenture or the Senior Notes with the
written consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Senior Notes without notice to any
Noteholder. The Holders of not less than a majority in aggregate principal
amount of the outstanding Senior Notes may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Senior
Notes. Subject to Section 8.04, without the consent of each Noteholder affected,
however, an amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may not:
(1) reduce the amount of Senior Notes whose Holders must consent to
an amendment, modification, supplement or waiver to this Indenture or the Senior
Notes;
(2) reduce the rate of or change the time for payment of interest
on any Senior Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Senior Note;
(4) make any Senior Note payable in money other than that stated in
the Senior Note or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the Senior
Notes or reduce the premium payable upon any redemption of the Senior Notes, or
change the time before which no such redemption may be made;
(6) waive a default in the payment of the principal of, or interest
on, or redemption payment with respect to any Senior Note;
<PAGE> 74
(7) subordinate in right of payment, or otherwise subordinate, the
Senior Notes or the Guarantees to any other Indebtedness or obligation of the
Company or the Guarantors;
(8) amend, alter, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate an Excess Proceeds Offer or waive any Default in
the performance of any such offers or modify any of the provisions or
definitions with respect to any such offers;
(9) take any other action otherwise prohibited by this indenture to
be taken without the consent of each Holder affected thereby; or
(10) modify this Section 8.02, Section 4.20, Section 6.04 or 6.07.
After a modification, amendment, supplement or waiver under this
Section 8.02 becomes effective, the Company shall mail to the Holders a notice
briefly describing the modification, amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, modification,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.3. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Senior
Notes shall comply with the TIA as then in effect.
Section 8.4. Revocation and Effect of Consents.
Until a modification, amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Senior Note is a continuing
consent conclusive and binding upon such Holder and every subsequent Holder of
the same Senior Note or portion thereof, and of any Senior Note issued upon the
transfer thereof or in exchange therefor or in place thereof, even if notation
of the consent is not made on any such Senior Note. Any such Holder or
subsequent Holder, however, may revoke the consent as to his Senior Note or
portion of a Senior Note, if the Trustee receives the notice of revocation
before the date the modification, amendment, supplement, waiver or other action
becomes effective. Notwithstanding the foregoing, nothing in this paragraph
shall impair the right of any Holder under TIA Section 316(b).
<PAGE> 75
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
modification, amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date unless the consent of the requisite
number of Holders has been obtained.
After a modification, amendment, supplement, waiver or other action
becomes effective, it shall bind every Noteholder.
Section 8.5. Notation on or Exchange of Senior Notes.
If a modification, amendment, supplement or waiver changes the
terms of a Senior Note, the Trustee may request the Holder of the Senior Note to
deliver it to the Trustee. In such case, the Trustee shall place an appropriate
notation on the Senior Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Senior Note shall issue and the Trustee shall authenticate a
new security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Senior Note shall not affect the validity and effect of
such modification, amendment, supplement or waiver.
Section 8.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any modification, amendment, supplement or
waiver authorized pursuant to this Article 8 if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver, the Trustee shall be entitled to receive and, subject to Section 7.01
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and such supplemental
indenture constitutes the legal, valid and binding obligation of the Company and
the Guarantors enforceable against each of them in accordance with its terms
(subject to customary exceptions). The Company or any Guarantor may not sign a
modification, amendment or supplement until the Board of Directors of the
Company or such Guarantor, as appropriate, approves it.
<PAGE> 76
ARTICLE 9.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.1. Discharge of Indenture.
The Company and the Guarantors, if any, may terminate their
obligations under the Senior Notes, the Guarantees, if any, and this Indenture,
except the obligations referred to in the last paragraph of this Section 9.01,
if there shall have been cancelled by the Trustee or delivered to the Trustee
for cancellation all Senior Notes theretofore authenticated and delivered (other
than any Senior Notes that are asserted to have been destroyed, lost or stolen
and that shall have been replaced as provided in Section 2.07 hereof) and the
Company has paid all sums payable by it hereunder or deposited all required sums
with the Trustee.
After such delivery the Trustee upon request shall acknowledge in
writing the discharge of the Company's and the Guarantors' obligations under the
Senior Notes, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company in Sections 2.07, 7.07, 9.05, 9.06 and 9.08
hereof shall survive.
Section 9.2. Legal Defeasance.
The Company may at its option, by Board Resolution, be discharged
from its obligations with respect to the Senior Notes and the Guarantors, if
any, discharged from their obligations under the Guarantees, if any, on the date
the conditions set forth in Section 9.04 below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Senior Notes and to have satisfied all its other obligations
under such Senior Notes and this Indenture insofar as such Senior Notes are
concerned (and the Trustee, at the expense of the Company, shall, subject to
Section 9.06 hereof, execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Senior Notes to receive
solely from the trust funds described in Section 9.04 hereof and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Senior Notes when such payments are due, (B) the
Company's obligations with respect to such Senior Notes under Sections 2.03,
2.04, 2.05, 2.06, 2.07, 2.08 and 4.23 hereof, (C) the rights, powers, trusts,
duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof) and (D) this
Article 9. Subject to compliance with this Article 9, the Company may exercise
its
<PAGE> 77
option under this Section 9.02 with respect to the Senior Notes notwithstanding
the prior exercise of its option under Section 9.03 below with respect to the
Senior Notes.
Section 9.3. Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution, the
Company and the Guarantors, if any, shall be released from their respective
obligations under Sections 4.02 through 4.04 hereof, inclusive, Sections 4.06
through 4.18 hereof, inclusive, Sections 4.20 through 4.22 hereof, inclusive,
Section 4.25 and clause (a)(iii) of Section 5.01 hereof with respect to the
outstanding Senior Notes on and after the date the conditions set forth in
Section 9.04 hereof are satisfied (hereinafter, "Covenant Defeasance") and the
Senior Notes shall thereafter be deemed to not be outstanding for purposes of
any direction, waiver, consent, declaration or act of the Holders (and the
consequences thereof) in connection with such covenants but shall continue to be
outstanding for all other purposes hereunder. For this purpose, such Covenant
Defeasance means that the Company and the Guarantors, if any, may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Senior Notes shall be
unaffected thereby.
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section
9.02 or Section 9.03 hereof to the outstanding Senior Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article 9 applicable to it) as funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Senior Notes, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the principal
of, premium, if any, and accrued interest on the outstanding Senior Notes at the
maturity date of such principal, premium, if any, or interest, or on dates for
payment
<PAGE> 78
and redemption of such principal, premium, if any, and interest selected in
accordance with the terms of this Indenture and of the Senior Notes;
(2) no Event of Default or Default with respect to the Senior Notes
shall have occurred and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period ending on the 91st day
after the date of such deposit or, if longer, ending on the day following the
expiration of the longest preference period under any Bankruptcy Law applicable
to the Company in respect of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute default under any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended;
(5) in the case of an election under Section 9.02 above, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that or (ii) there has been a change in
any applicable Federal income tax law with the effect that, and such opinion
shall confirm that, the Holders of the outstanding Senior Notes or persons in
their positions will not recognize income, gain or loss for Federal income tax
purposes solely as a result of such Legal Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(6) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Senior Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (a) all conditions
precedent provided for relating to either the Legal Defeasance under Section
9.02 above or the Covenant Defeasance under Section 9.03 hereof (as the case may
be) have been complied with and (b) if any other Indebtedness of the Company
shall then be
<PAGE> 79
outstanding, such legal defeasance or covenant defeasance will not violate the
provisions of the agreements or instruments evidencing such Indebtedness; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others.
Section 9.5. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Senior Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Senior Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Holders of such Senior Notes, of all sums due and
to become due thereon in respect of principal, premium, if any, and accrued
interest, but such money need not be segregated from other funds except to the
extent required by law. The Trustee shall be under no duty to invest such money
or U.S. Government Obligations.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 9.04 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Senior Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.6. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company and any Guarantor under this
Indenture, the Senior Notes and the Guarantees, if any, shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 9 until
such time as the Trustee or
<PAGE> 80
Paying Agent is permitted to apply all such money or U.S. Government Obligations
in accordance with Section 9.01 hereof; provided, however, that if the Company
or any Guarantors have made any payment of principal of, premium, if any, or
accrued interest on any Senior Notes because of the reinstatement of their
obligations, the Company or such Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
Section 9.7. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.04 hereof, to the
Company (or, if such moneys had been deposited by any Guarantors, to such
Guarantors), and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.8. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Company or any Guarantors in trust for the payment of the principal
of, or premium, if any, or interest on any Senior Note that are not applied but
remain unclaimed by the Holder of such Senior Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Senior Note
shall have respectively become due and payable shall be repaid to the Company
(or, if appropriate, the Guarantors) upon Company Request, or if such moneys are
then held by the Company or any Guarantors in trust, such moneys shall be
released from such trust; and the Holder of such Senior Note entitled to receive
such payment shall thereafter, as an unsecured general creditor, look only to
the Company and the Guarantors, if any, for the payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that the Trustee or any such Paying
Agent, before being required to make any such repayment, may, at the expense of
the Company and the Guarantors, if any, either mail to each Noteholder affected,
at the address shown in the register of the Senior Notes maintained by the
Registrar pursuant to Section 2.03 hereof, or cause to be published once a week
for two successive weeks, in a newspaper published in the English language,
customarily published each Business Day and of general circulation in The City
of New York, New York, a notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Company. After payment to the Company or the
Guarantors, if any, or the release of any money held in trust by the Company or
any Guarantors, as the case may be, Noteholders entitled to the money must look
only to the Company and any Guarantors for payment as general creditors unless
applicable abandoned property law designates another person.
<PAGE> 81
ARTICLE 10.
GUARANTEE OF SENIOR NOTES
Section 10.1. Guarantee.
Subject to the provisions of this Article 10, each Guarantor hereby
jointly and severally unconditionally and irrevocably guarantee to each Holder
and to the Trustee, on behalf of the Holders, (i) the due and punctual payment
of the principal of, and premium, if any, and interest (including Additional
Interest) on each Senior Note, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal of, and premium, if any, and
interest on the Senior Notes, to the extent lawful, and the due and punctual
performance of all other Obligations of the Company to the Holders or the
Trustee all in accordance with the terms of such Senior Note and this Indenture,
and (ii) in the case of any extension of time of payment or renewal of any
Senior Notes or any of such other Obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, at stated maturity, by acceleration or otherwise. Each Guarantor, by
execution of the Guarantee, agrees that its obligations thereunder and hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, any invalidity, irregularity or unenforceability of any such Senior Note or
this Indenture, any failure to enforce the provisions of any such Senior Note or
this Indenture, any waiver, modification or indulgence granted to the Company
with respect thereto by the Holder of such Senior Note or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor.
Each Guarantor, by execution of the Guarantee, waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to any such Senior Note or
the Indebtedness evidenced thereby and all demands whatsoever, and covenants
that the Guarantee will not be discharged as to any such Senior Note except by
payment in full of the principal thereof, premium if any, and interest thereon
and as provided in Section 9.01 hereof. If any Holder or the Trustee is required
by any court or otherwise to return to the Company or any Guarantor or any
Custodian, trustee, liquidator or other similar official acting in relation to
either the Company or any Guarantor, any amount paid by either the Company or
any Guarantor to the Holder or Trustee, each Guarantor's Guarantee, to the
extent therefor discharged, shall be reinstated in full force and effect. Each
Guarantor, by execution of the Guarantee, further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the Obligations guaranteed by the Guarantee may be
accelerated as provided in Article 6 hereof for the purposes of the Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration
<PAGE> 82
in respect of the Obligations guaranteed thereby, and (ii) in the event of any
declaration of acceleration of such Obligations as provided in Article 6 hereof,
such Obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of the Guarantee. In addition, without
limiting the foregoing provisions, upon the effectiveness of an acceleration
under Article 6 hereof, the Trustee shall promptly make a demand for payment on
the Senior Notes under the Guarantee provided for in this Article 10 and not
discharged. Failure to make such demand shall not affect the validity or
enforceability of the Guarantee upon any Guarantor.
A Guarantee shall not be valid or become obligatory for any purpose
with respect to a Senior Note unless the certificate of authentication on such
Senior Note shall have been signed by or on behalf of the Trustee.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorney's fees) incurred by the Trustee as any Holder in
enforcing any rights under this section.
Section 10.2. Execution and Delivery of Guarantees.
To evidence the Guarantee set forth in this Article 10, each
Guarantor shall execute a Guarantee in the form of Exhibit E hereto and hereby
agrees that a notation of such Guarantee shall be placed on each Senior Note
authenticated and made available for delivery by the Trustee and that this
Guarantee shall be executed on behalf of each Guarantor by the manual or
facsimile signature of an Officer of each Guarantor.
Each Guarantor hereby agrees that the Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Senior Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the Guarantee no
longer holds that office at the time the Trustee authenticates the Senior Note
on which the Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
Section 10.3. Limitation of Guarantee.
The obligations of each Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor
<PAGE> 83
under its Guarantee or pursuant to its contribution obligations under this
Indenture, result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under Federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
Section 10.4. Release of Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially all of its assets
or the Company and its Subsidiaries have sold all of the Equity Interests of the
Guarantor owned by them, in each case in a transaction in compliance with
Sections 4.08 and 5.01 hereof to the extent applicable; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Company or another
Guarantor in a transaction in compliance with Section 5.01 hereof;
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.5. Additional Guarantors.
The Company covenants and agrees that it will cause any Person
which becomes obligated to guarantee the Notes, pursuant to the terms of Section
4.12 hereof, to execute a guarantee satisfactory in form and substance to the
Trustee pursuant to which such Subsidiary shall guarantee the obligations of the
Company under the Senior Notes and this Indenture in accordance with this
Article 10 with the same effect and to the same extent as if such Person had
been named herein as a Guarantor.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
<PAGE> 84
Section 11.2. Notices.
Any notice or communication shall be given in writing and delivered
in person, sent by facsimile, delivered by commercial courier service or mailed
by first-class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor:
Unison HealthCare Corporation
7272 E. Indian School Road, Suite 214
Scottsdale, AZ 85251
Attention: Chief Financial Officer
Fax Number: (602) 481-6479
Copy to:
Quarles & Brady
One Camelback Building, Suite 400
One East Camelback Road
Phoenix, AZ 85012
Attention: P. Robert Moya, Esq.
Fax Number: (602) 230-5598
If to the Trustee:
First Bank National Association
c/o First Trust National Association
180 East 5th Street
St. Paul, MN 55101
Attention: Richard H. Prokosch
Fax Number: (612) 244-0711
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Company, any Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar. If a notice or communication to a Holder is mailed in the
manner provided above, it shall be deemed duly given on the date so deposited in
the mail, whether or not the addressee receives it.
<PAGE> 85
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
In case, by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 11.3. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Guarantors, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
Section 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company shall furnish
to the Trustee at the request of the Trustee:
(1) an Officers' Certificate (which shall include the statements
set forth in Section 11.05 below) in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with;
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 11.05 below) in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant satisfactory to the Trustee that complies with TIA
Section 314(c).
Section 11.5. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
<PAGE> 86
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 11.6. When Treasury Senior Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Senior Notes have concurred in any direction, waiver or
consent, Senior Notes owned by the Company, any Guarantor or any other obligor
on the Senior Notes or by any Affiliate of any of them shall be disregarded as
though they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Senior Notes which the Trustee actually knows are so owned
shall be so disregarded. Senior Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Senior Notes and
that the pledgee is not the Company, a Guarantor or any other obligor upon the
Senior Notes or any Affiliate of any of them.
Section 11.7. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or meetings of
Holders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 11.8. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 11.9. Governing Law.
THIS INDENTURE AND THE SENIOR NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF
<PAGE> 87
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE OR THE SENIOR NOTES.
Section 11.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.11. No Recourse Against Others.
No recourse for the payment of the principal of or premium, if any,
or interest on any of the Senior Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company or any Guarantor in this Indenture or in
any supplemental indenture, or in any of the Senior Notes, or because of the
creation of any Indebtedness represented thereby, shall be had against any
stockholder, officer, director, partner, affiliate, beneficiary or employee, as
such, past, present or future, of the Company or of any successor corporation or
against the property or assets of any such stockholder, officer, employee,
partner, affiliate, beneficiary or director, either directly or through the
Company or any Guarantor, or any successor corporation thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Senior Notes are solely obligations of the Company and the
Guarantors, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any stockholder, officer, employee, partner, affiliate,
beneficiary or director of the Company or any Guarantor, or any successor
corporation thereof, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or the Senior Notes or implied therefrom, and that
any and all such personal liability of, and any and all claims against every
stockholder, officer, employee, partner, affiliate, beneficiary and director,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issuance of the
Senior Notes. It is understood that this limitation on recourse is made
expressly for the benefit of any such shareholder, employee, officer, partner,
affiliate, beneficiary or director and may be enforced by any one or all of
them.
Section 11.12. Successors.
All agreements of the Company and the Guarantors in this Indenture
and the Senior Notes shall bind their respective successors. All agreements of
the
<PAGE> 88
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
Section 11.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15. Separability.
Each provision of this Indenture shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Indenture or the Senior Notes shall be invalid,
illegal or
<PAGE> 89
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Jerry M. Walker
----------------------------------
Name: Jerry M. Walker
Title: President
ATTEST:
/s/ Phillip R. Rollins
- -----------------------------
Name: Phillip R. Rollins
Title: EVP/COO
<PAGE> 90
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By: /s/ R. Prokosch
--------------------------------------
Name: Richard H. Prokosch
Title: Trust Officer
ATTEST:
/s/ Christina Hatfield
- -----------------------------
Name: Christina Hatfield
Title: Assistant Secretary
<PAGE> 91
<TABLE>
<S> <C>
SUNQUEST SPC, INC. CHRISTOPHER NURSING
an Arizona corporation CENTER, INC.
BRITWILL HEALTHCARE a Colorado corporation
COMPANY AMBERWOOD COURT, INC.
a Delaware corporation a Colorado corporation
BRITWILL INVESTMENTS - I, INC. THE ARBORS HEALTH CARE
a Delaware corporation CENTER, INC.
BRITWILL INVESTMENTS - II, INC. an Arizona corporation
a Delaware corporation LOS ARCOS, INC.
BRITWILL FUNDING a Colorado corporation
CORPORATION PUEBLO NORTE, INC.
a Delaware corporation a Colorado corporation
EMORY CARE CENTER, INC. RIO VERDE NURSING CENTER,
a Texas corporation INC.
MEMPHIS CLINICAL a Colorado corporation
LABORATORY, INC. SIGNATURE MANAGEMENT
a Tennessee corporation GROUP, INC.
AMERICAN PROFESSIONAL a Colorado corporation
HOLDINGS, INC. CORNERSTONE CARE, INC.
an Utah corporation a Colorado corporation
AMPRO MEDICAL SERVICES, INC. ARKANSAS, INC.
a Texas corporation a Colorado corporation
GAMMA LABORATORIES, INC. DOUGLAS MANOR, INC.
a Missouri corporation a Colorado corporation
SIGNATURE HEALTH CARE SAFFORD CARE, INC.
CORPORATION a Colorado corporation
a Delaware corporation REHABWEST, INC.
BROOKSHIRE HOUSE, INC. a Colorado corporation
a Colorado corporation
</TABLE>
/S/ Jerry M. Walker
-------------------------------------
Jerry M. Walker
President for the above subsidiaries of
Unison HealthCare Corporation
<PAGE> 92
<TABLE>
<S> <C>
QUEST PHARMACIES, INC. DECATUR SPORTS FIT &
an Arizona corporation WELLNESS
CENTER, INC.
/s/ Phillip R. Rollins an Alabama corporation
- ---------------------------------------- THERAPY HEALTH SYSTEMS, INC.
Phillip R. Rollins a Mississippi corporation
Vice President for the above subsidiary HENDERSON & ASSOCIATES
of Unison HealthCare Corporation REHABILITATION, INC.
an Alabama corporation
ATTEST: SUNBELT THERAPY MANAGEMENT
SERVICES, INC.
/s/ Paul J. Contris an Alabama corporation
- ----------------------------------------
Paul J. Contris
Vice President /s/ Phillip R. Rollins
----------------------------------------
Phillip R. Rollins
SUNBELT THERAPY MANAGEMENT Secretary for the above subsidiaries of
SERVICES, INC. Unison HealthCare Corporation
an Arizona corporation
ATTEST:
/s/ Phillip R. Rollins /s/ Paul G. Henderson
- ---------------------------------------- ----------------------------------------
Phillip R. Rollins Paul G. Henderson
Secretary for the above subsidiary of President
Unison HealthCare Corporation
ATTEST:
/s/ Paul G. Henderson
- ----------------------------------------
Paul G. Henderson
President
</TABLE>
<PAGE> 93
SCHEDULE 1
<TABLE>
<S> <C>
SUNQUEST SPC, INC. LOS ARCOS, INC.
an Arizona corporation a Colorado corporation
BRITWILL HEALTHCARE PUEBLO NORTE, INC.
COMPANY a Colorado corporation
a Delaware corporation RIO VERDE NURSING CENTER,
BRITWILL INVESTMENTS - I, INC. INC.
a Delaware corporation a Colorado corporation
BRITWILL INVESTMENTS - II, INC. SIGNATURE MANAGEMENT
a Delaware corporation GROUP, INC.
BRITWILL FUNDING a Colorado corporation
CORPORATION CORNERSTONE CARE, INC.
a Delaware corporation a Colorado corporation
EMORY CARE CENTER, INC. ARKANSAS, INC.
a Texas corporation a Colorado corporation
MEMPHIS CLINICAL DOUGLAS MANOR, INC.
LABORATORY, INC. a Colorado corporation
a Tennessee corporation SAFFORD CARE, INC.
AMERICAN PROFESSIONAL a Colorado corporation
HOLDINGS, INC. REHABWEST, INC.
an Utah corporation a Colorado corporation
AMPRO MEDICAL SERVICES, INC. QUEST PHARMACIES, INC.
a Texas corporation an Arizona corporation
GAMMA LABORATORIES, INC. SUNBELT THERAPY MANAGEMENT
a Missouri corporation SERVICES, INC.
SIGNATURE HEALTH CARE an Arizona corporation
CORPORATION DECATUR SPORTS FIT &
a Delaware corporation WELLNESS
BROOKSHIRE HOUSE, INC. CENTER, INC.
a Colorado corporation an Alabama corporation
CHRISTOPHER NURSING THERAPY HEALTH SYSTEMS, INC.
CENTER, INC. a Mississippi corporation
a Colorado corporation HENDERSON & ASSOCIATES
AMBERWOOD COURT, INC. REHABILITATION, INC.
a Colorado corporation an Alabama corporation
THE ARBORS HEALTH CARE SUNBELT THERAPY MANAGEMENT
CENTER, INC. SERVICES, INC.
an Arizona corporation an Alabama corporation
</TABLE>
<PAGE> 94
EXHIBIT A
FORM OF NOTE
(FACE OF NOTE)
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE EXEMPTION PROVIDED BY
RULE 144A UNDER THE SECURITIES ACT MAY BE AVAILABLE TO PERMIT SALE OR TRANSFER
OF THIS NOTE TO "QUALIFIED INSTITUTIONAL BUYERS" (WITHIN THE MEANING OF RULE
144A) WITHOUT REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT PRIOR
TO THE DATE WHICH THREE YEARS AFTER THE LATER OF THE ISSUE DATE AND THE LAST
DATE THAT THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE
(OR ANY PREDECESSOR THERETO), THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED FROM, ONLY (a) TO THE COMPANY, (b) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (c) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT
THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (d)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 502 UNDER THE SECURITIES ACT FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (e) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE OF THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT OR (f) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR
THE TRUSTEE'S RIGHT TO RECEIVE PRIOR TO TRANSFER UNDER CLAUSE (f) THE LEGAL
OPINIONS AND PRIOR TO TRANSFER UNDER CLAUSE (d) THE CERTIFICATES, IN EACH CASE
AS
A-1
<PAGE> 95
REQUIRED BY THE INDENTURE (FORMS OF WHICH ARE EXHIBITS TO THE INDENTURE, AND
SUBJECT, IN ANY EVENT, TO THE COMPLETION AND DELIVERY TO THE TRUSTEE OF THE
CERTIFICATE OF TRANSFER APPEARING ON THE REVERSE OF THIS NOTE AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
A-2
<PAGE> 96
CUSIP NUMBER 909196-AA-5
UNISON HEALTHCARE CORPORATION
12-1/4% SENIOR NOTE DUE 2006
Unison HealthCare Corporation, a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to ________________________ or registered assigns the principal
sum of ___________________ Dollars, on November 1, 2006.
Interest Payment Dates: May 1 and November 1, commencing May 1, 1997
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Senior Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Senior Note to be
signed manually or by facsimile by its duly authorized officers.
UNISON HEALTHCARE CORPORATION
By: _________________________________
By: _________________________________
Certificate of Authentication:
This is one of the 12-1/4% Senior
Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
FIRST BANK NATIONAL ASSOCIATION, as Trustee
By: ___________________________________
Authorized Signatory
A-3
<PAGE> 97
(REVERSE SIDE)
UNISON HEALTHCARE CORPORATION
12-1/4% SENIOR NOTE DUE 2006
1. INTEREST.
Unison HealthCare Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on May 1 and November 1 of each year (each an "Interest Payment
Date"), commencing on May 1, 1997, at the rate of 12-1/4% per annum. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Senior Notes. Under certain circumstances, holders of
the Senior Notes are entitled to receive additional interest. See paragraph 8
herein.
The Company shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to .5% per annum; and the per annum interest rate of such additional interest
will increase by an additional .25% per annum for each subsequent 90-day period
during which such overdue principal and installments of interest remain unpaid,
up to a maximum additional interest rate of 2.0% per annum.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the April 15 or
October 15 preceding the Interest Payment Date (whether or not such day is a
Business Day). The Holder must surrender this Note to a Paying Agent to collect
principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts; provided, however, that the
Company may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to the Holder's registered address.
Notwithstanding the foregoing, all payments with respect to the Senior Notes,
the Holders of which have given wire transfer instructions to the Paying Agent
on or before the relevant record date, shall be made by wire transfer of
immediately available funds to the accounts specified by such Holders.
A-4
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3. PAYING AGENT AND REGISTRAR.
Initially, First Bank National Association (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders of the Senior Notes. Neither the Company
nor any of its Subsidiaries or Affiliates may act as Paying Agent but may act as
registrar or co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Senior Note under an Indenture dated as of
October 31, 1996 (the "Indenture") by and between the Company and the Trustee.
The terms of this Senior Note include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. This
Senior Note is subject to all such terms, and the Holder of this Senior Note is
referred to the Indenture and said Trust Indenture Act for a statement of them.
All capitalized terms in this Senior Note, unless otherwise defined, have the
meanings assigned to them by the Indenture.
The Senior Notes are general unsecured senior obligations of the
Company limited to up to $100,000,000 aggregate principal amount. The Indenture
imposes certain restrictions on, among other things, (i) the incurrence of
additional indebtedness; (ii) certain restricted payments, including the payment
of dividends on the redemption of equity interests by the Company; (iii) the
issuance of equity interests in subsidiaries; (iv) the creation of liens; (v)
restrictions on the ability of subsidiaries to pay dividends, make certain
payments and transfer property to the Company; (vi) transactions with
affiliates; (vii) the transfer or sale of assets; and (viii) the Company's
ability to consolidate or merge with or into, or to transfer all or
substantially all of its assets to, another person.
5. OPTIONAL REDEMPTION.
The Company may redeem the Senior Notes, in whole or in part, at
any time on or after November 1, 2001 at the redemption prices set forth in
Section 3.07 of the Indenture, together, in each case, with accrued and unpaid
interest to the redemption date.
In addition, the Company may redeem Senior Notes out of the net
proceeds of one or more Public Equity Offerings at the redemption price, in the
amount and under the terms set forth in the Indenture.
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6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least
30 days but not more than 60 days prior to the redemption date to each Holder of
Senior Notes to be redeemed at its registered address as it shall appear on the
register of the Senior Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Senior Notes or portions
thereof called for redemption unless the Company shall fail to redeem any such
Senior Note.
7. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Senior Notes in accordance with the procedures set
forth in the Indenture. The Company is also required to make an offer to
purchase Senior Notes upon occurrence of a Change of Control in accordance with
procedures set forth in the Indenture.
8. REGISTRATION RIGHTS.
Pursuant to the Senior Note Registration Rights Agreement by and
among the Company, the Guarantors party thereto and CIBC Wood Gundy Securities
Corp., Cruttenden Roth Incorporated and Wheat, First Securities, Inc. as initial
purchasers of the Senior Notes, the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Senior Note shall have the
right to exchange this Senior Note for Senior Notes of a separate series issued
under the Indenture (or a trust indenture substantially identical to the
Indenture in accordance with the terms of the Senior Note Registration Rights
Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Senior Notes.
The Holders shall be entitled to receive certain additional interest payments in
the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Senior Note
Registration Rights Agreement.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Senior Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Holder may register
the transfer or exchange of Senior Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Senior Note selected for redemption or register the transfer
of or exchange any Senior Note for a period of 15 days before a selection of
Senior Notes to
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be redeemed or any Senior Note after it is called for redemption in whole or in
part, except the unredeemed portion of any Senior Note being redeemed in part.
10. PERSONS DEEMED OWNERS.
The registered Holder of this Senior Note may be treated as the
owner of it for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Senior Note remains unclaimed for two years, the Trustee or Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Senior Notes
may be modified, amended or supplemented by the Company, the Guarantors and the
Trustee with the consent of the Holders of at least a majority in principal
amount of the Senior Notes then outstanding and any existing default or
compliance with any provision may be waived in a particular instance with the
consent of the Holders of a majority in principal amount of the Senior Notes
then outstanding. Without the consent of Holders, the Company, the Guarantors
and the Trustee may amend the Indenture or the Senior Notes or supplement the
Indenture for certain specified purposes including providing for uncertificated
Senior Notes in addition to certificated Senior Notes, and curing any ambiguity,
defect or inconsistency, or making any other change that does not materially and
adversely affect the rights of any Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Senior Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(7) or (8) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
by notice to the Company, or the
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Holders of not less than 25% in aggregate principal amount of the Senior Notes
then outstanding by written notice to the Company and the Trustee, may declare
to be immediately due and payable the entire principal amount of all the Senior
Notes then outstanding plus accrued but unpaid interest to the date of
acceleration and such amounts shall become immediately due and payable. In case
an Event of Default specified in Section 6.01(7) or (8) of the Indenture with
respect to the Company occurs, such principal amount, together with premium, if
any, and interest with respect to all of the Senior Notes, shall be due and
payable immediately without any declaration or other act on the part of the
Trustee or the Holders of the Notes. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal,
premium, if any, or interest) if it determines that withholding notice is in
their interests.
15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, any Guarantor or their Affiliates, and may otherwise deal with the
Company, any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee, partner, affiliate, beneficiary or stockholder, as such, of the
Company or any Guarantor shall not have any liability for any obligations of the
Company or any Guarantor under the Notes or the Indenture or for any claim based
on, in respect or by reason of, such obligations or their creation. The Holder
of this Senior Note by accepting this Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Senior Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Senior Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
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19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Senior Notes and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders of the Senior
Notes. No representation is made as to the accuracy of such numbers either as
printed on the Senior Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THE INDENTURE AND THE SENIOR NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SENIOR NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A SENIOR NOTE UPON
WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE
TO: UNISON HEALTHCARE CORPORATION, 7272 E. Indian School Road, Suite 214,
Scottsdale, AZ 85251, Attention: Chief Financial Officer.
21. AUTHENTICATION
This Senior Note shall not be valid until the Trustee manually
signs the Certificate of Authentication on the other side of this Senior Note.
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ASSIGNMENT
I or we assign and transfer this Senior Note to:
(Insert assignee's social security or tax I.D. number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
_______________________________________________________________________________
_______________________________________________________________________________
Agent to transfer this Senior Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[_] (a) this Senior Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[_] (b) this Senior Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Senior Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Senior Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: _______________________
Your Signature: _________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ____________________________________________________
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<PAGE> 104
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Senior Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________________
________________________________________
NOTICE: To be executed by an executive officer
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Senior Note
purchased by the Company pursuant to Section 4.08 or Section 4.22 of the
Indenture, check the appropriate box:
[_] Section 4.08 [_] Section 4.22
If you want to have only part of the Senior Note purchased by the
Company pursuant to Section 4.08 or Section 4.22 of the Indenture, state the
amount you elect to have purchased:
$_____________________
(multiple of $1,000)
Date: _______________
Your Signature: ______________________________________
(Sign exactly as your name appears on the face of this Note)
_______________________________
Signature Guaranteed
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<PAGE> 106
[FORM OF NOTATION ON SENIOR NOTE RELATING TO GUARANTEE]
GUARANTEE
Each guarantor (each a "Guarantor" and collectively the
"Guarantors" including any successor Person under the Indenture) has
unconditionally guaranteed, jointly and severally, to the extent set forth in
the Indenture and subject to the provisions of the Indenture, (a) the due and
punctual payment of the principal of and interest on the Senior Notes, whether
at maturity, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal, and, to the extent permitted by law, interest,
and the due and punctual performance of all other obligations of the Company to
the Noteholders or the Trustee all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of payment
or renewal of any Senior Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
[NAMES OF GUARANTORS]
By:____________________________________
Name:
Title:
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<PAGE> 107
EXHIBIT B
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Security authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC")
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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<PAGE> 108
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[Date]
First Bank National Association
c/o First Trust National Association
180 East 5th Street, Second Floor
St. Paul, Minnesota 55101
Attention: Richard H. Prokosch
Re: Unison HealthCare Corporation (the "Company")
12-1/4% Senior Notes
due 2006 (the "Senior Notes")
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Senior Notes, we confirm that:
1. We understand that any subsequent transfer of the Senior Notes
is subject to certain restrictions and conditions set forth in the Indenture
dated as of October 31, 1996 relating to the Senior Notes and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Senior Notes except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Senior Notes have not been registered
under the Securities Act, and that the Senior Notes may not be offered, sold,
pledged or otherwise transferred except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell or otherwise transfer such
securities prior to the date which is three years after the later of the Issue
Date and the last date that the Company or any affiliate of the Company was the
owner of such Senior Notes (or any predecessor thereto) only (a) to the Company,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) for so long as the securities are eligible for resale
pursuant to Rule 144A, to a person it reasonably believes is a QIB that
purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) to an
Institutional Accredited Investor that is purchasing for its own account or for
the
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<PAGE> 109
account of such an Institutional Accredited Investor, (e) pursuant to offers and
sales that occur outside of the United States within the meaning of Regulation S
under the Securities Act or (f) pursuant to any other available exemption from
the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control. If any resale or other transfer of any Senior Note is proposed
to be made pursuant to clause (d) above while these transfer restrictions are in
force, the transferor shall deliver a letter from the transferee to the Company
and the Trustee, which shall provide, among other things, that the transferee is
an Institutional Accredited Investor and that it is acquiring such securities
for investment purposes and not for distribution in violation of the Securities
Act. We further agree to provide to any person purchasing any of the Senior
Notes from us a notice advising such purchaser that resales of the Senior Notes
are restricted as stated herein.
3. We understand that, on any proposed resale of any Senior Notes,
we will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Senior Notes purchased by us will bear a legend to
the foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Senior
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
5. We are acquiring the Senior Notes purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_____________________________________
Authorized Signature
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<PAGE> 110
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[Date]
First Bank National Association
c/o First Trust National Association
180 East 5th Street, Second Floor
St. Paul, Minnesota 55101
Attention: Richard H. Prokosch
Re: Unison HealthCare Corporation (the "Company")
12-1/4% Senior Notes due 2006
(the "Senior Notes")
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Senior Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Senior Notes was not made to a U.S. person or
to a person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
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<PAGE> 111
(5) we have advised the transferee of the transfer restrictions
applicable to the Senior Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________________
Authorized Signature
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<PAGE> 112
EXHIBIT E
FORM OF GUARANTEE
The undersigned (each a "Guarantor" and collectively the
"Guarantors") hereby unconditionally and irrevocably guarantees, jointly and
severally with all other guarantors under the Indenture dated as of October 31,
1996 by and between Unison HealthCare Corporation, a Delaware corporation, and
First Bank National Association, as trustee (as amended, restated or
supplemented from time to time, the "Indenture"), to the extent set forth in the
Indenture and subject to the provisions of the Indenture, (a) the due and
punctual payment of the principal of and interest on the Senior Notes, whether
at maturity, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal, and, to the extent permitted by law, interest,
and the due and punctual performance of all other obligations of the Company to
the Noteholders or the Trustee all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of payment
or renewal of any Senior Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
[NAMES OF GUARANTORS]
By:______________________________________
Name:
Title:
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<PAGE> 1
Exhibit 4.3.1
SUPPLEMENT NO. 1 dated as of February 1, 1997 (the "First Supplement") to
the INDENTURE, dated as of October 31, 1996 (the "Original Indenture"), among
UNISON HEALTHCARE CORPORATION, a Delaware corporation, as Issuer (the
"Company"), the GUARANTORS listed on Schedule 1 thereto and FIRST BANK NATIONAL
ASSOCIATION, as Trustee (the "Trustee"). The Original Indenture as supplemented
hereby is referred to as the "Indenture" herein.
The purpose of this First Supplement is to add CEDAR CARE, INC., an
Indiana corporation ("Cedar Care"), SHERWOOD HEALTHCARE CORP., an Indiana
corporation ("Sherwood") and BRITWILL INDIANA PARTNERSHIP, an Arizona general
partnership (the "Partnership") whose partners are Cedar Care, Sherwood and
BritWill Investments-I, Inc., a Delaware corporation ("BII") as Guarantors under
the Indenture. Each of them has become an indirect subsidiary of the Company.
1. Revision of Schedule 1. Schedule 1 is hereby amended to add Cedar Care,
Sherwood and the Partnership as Guarantors under the Indenture.
2. Revision of Sections 5.1 and 5.2. Cedar Care, Sherwood and BII are
authorized to contribute all of their nursing home assets, leases and subleases
to the Partnership and the Partnership is authorized to assume all of their
related liabilities, all as permitted by Sections 4.9(a)(ii), 4.11 and 4.12 of
the Indenture. Insofar as Sections 5.1 and 5.2 of the Indenture may be deemed
ambiguous or inconsistent with the foregoing, such sections are hereby amended
to the extent necessary to permit the foregoing transactions. Notwithstanding
such contributions, Cedar Care, Sherwood and BII shall not be relieved of their
obligations under the Indenture and Senior Notes. The Partnership shall also
have all obligations of a Guarantor under the Indenture and the Senior Notes.
3. Authority. This First Supplement is adopted pursuant to Section 8.1(4)
of the Indenture.
IN WITNESS WHEREOF, the parties have caused this First Supplement to be
duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Jerry M. Walker
-------------------------------
Jerry M. Walker
President
ATTEST:
/s/ Phillip R. Rollins
- ------------------------------------
Phillip R. Rollins
Executive Vice President
and Chief Operating Officer
<PAGE> 2
CEDAR CARE, INC., an Indiana corporation,
SHERWOOD HEALTHCARE CORP., an Indiana
corporation, BRITWILL INVESTMENTS-I, INC., a
Delaware corporation, separately and as
partners of BRITWILL INDIANA PARTNERSHIP, an
Arizona general partnership
By: /s/ Jerry M. Walker
----------------------------------------
Jerry M. Walker
President for the above subsidiaries of
Unison Healthcare Corporation
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By: /s/ Richard H. Prokosch
----------------------------------------
Richard H. Prokosch
Trust Officer
-2-
<PAGE> 1
Exhibit 4.4
EXECUTION COPY
SENIOR NOTE REGISTRATION RIGHTS AGREEMENT
Dated as of October 31, 1996
by and among
UNISON HEALTHCARE CORPORATION,
THE GUARANTORS
and
CIBC WOOD GUNDY SECURITIES CORP.,
CRUTTENDEN ROTH INCORPORATED and
WHEAT, FIRST SECURITIES, INC.
as Initial Purchasers
<PAGE> 2
SENIOR NOTE REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
October 31, 1996, by and among UNISON HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), THE GUARANTORS (as defined herein) and CIBC WOOD
GUNDY SECURITIES CORP., CRUTTENDEN ROTH INCORPORATED and WHEAT, FIRST
SECURITIES, INC., as initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of October 28, 1996, by and among the Company, the
Guarantors and the Initial Purchasers (the "Purchase Agreement") relating to the
sale by the Company and the Guarantors to the Initial Purchasers of $100,000,000
aggregate principal amount of 12 1/4% Senior Notes due 2006 of the Company,
unconditionally guaranteed by each of the Guarantors (the "Senior Notes"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company and the Guarantors have agreed to provide the registration rights set
forth in this Agreement for the benefit of the Initial Purchasers and all
subsequent holders of Registrable Notes. The execution and delivery of this
Agreement is a condition to the Initial Purchasers' obligation to purchase the
Senior Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
Advice: See Section 5.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, a
federally-recognized holiday or a day on which banking institutions are not
required to be open in the State of New York.
Closing: See the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 135th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
<PAGE> 3
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 45th day after the Issue Date.
Guarantee: Individually a guarantee, or collectively any and all
guarantees, as the context may require, of the obligations of the Company with
respect to the Senior Notes by each Guarantor pursuant to the Indenture.
Guarantor: Each subsidiary of the Company that guarantees the
obligations of the Company pursuant to the Indenture.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of October 31, 1996, by and between
the Company and First Bank National Association, as trustee, pursuant to which
the Senior Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the original Senior Notes are sold to the
Initial Purchasers pursuant to the Purchase Agreement.
Lien: See the Indenture.
NASD: See Section 5(t).
Senior Notes: See the introductory paragraphs to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
<PAGE> 4
Person: An individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this Agreement.
Records: See Section 5(o).
Registrable Notes: The Senior Notes upon original issuance of the
Senior Notes and at all times subsequent thereto and, if issued, the Private
Exchange Notes, until in the case of any such Senior Notes or any such Private
Exchange Notes, as the case may be, (i) a Registration Statement covering such
Senior Notes or such Private Exchange Notes, as the case may be, has been
declared effective by the SEC and such Senior Notes or such Private Exchange
Notes, as the case may be, have been disposed of in accordance with such
effective Registration Statement, (ii) such Senior Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Senior Note, such Senior Note has been exchanged for an
Exchange Note or Exchange Notes pursuant to an Exchange Offer, or (iv) such
Senior Notes or such Private Exchange Notes, as the case may be, cease to be
outstanding.
Registration Default: See Section 4(a).
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
<PAGE> 5
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c)
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter(s) for reoffering to
the public.
2. Exchange Offer
(a) The Company and the Guarantors agree to use their best efforts to
file with the SEC as soon as practicable after the Closing, but in no event
later than the Filing Date, an offer to exchange (the "Exchange Offer") any and
all of the Registrable Notes for a like aggregate principal amount of debt
securities of the Company and like unconditional Guarantee by each of the
Guarantors which are identical to the Senior Notes (including such like
unconditional Guarantee, the "Exchange Notes") (and which are entitled to the
benefits of the Indenture or
<PAGE> 6
a trust indenture which is substantially identical to the Indenture (other than
such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA), except that the Exchange Notes shall have been
registered pursuant to an effective Registration Statement under the Securities
Act and will not contain terms or bear any legends regarding transfer
restrictions. The Exchange Offer will be registered under the Securities Act on
an appropriate form (the "Exchange Registration Statement") and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Company and the Guarantors agree to use their best efforts to (x) cause the
Exchange Registration Statement to become effective under the Securities Act on
or before the Effectiveness Date; (y) keep the Exchange Offer open for at least
30 days (or longer if required by applicable law) after the date that notice of
the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer
on or prior to the 31st day following the date on which the Exchange
Registration Statement is declared effective (or, if not a Business Day, on the
next Business Day thereafter). Each Holder who participates in the Exchange
Offer will be required to represent that any Exchange Notes received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, and that such Holder is not an affiliate of the Company within the
meaning of Rule 405 promulgated under the Securities Act or if it is such an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable. Each Participating
Broker-Dealer (as defined below) that moves Exchange Notes in the Exchange Offer
will be required to acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. Upon consummation of the Exchange Offer
in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, mutatis mutandis, solely with respect to Registrable Notes
that are Private Exchange Notes and Exchange Notes held by Participating
Broker-Dealers (as defined below), and the Company shall have no further
obligation to register Registrable Notes (other than Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers) pursuant to Section 3 of
this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution' section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating
<PAGE> 7
Broker-Dealers may resell the Exchange Notes. The Prospectus contained in the
Exchange Registration Statement will also contain such additional information as
is required to permit resale of the Exchange Notes by Participating
Broker-Dealers.
The Company and the Guarantors shall use their best efforts to keep the
Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Notes, provided that such period
shall not exceed 180 days (or such longer period if extended pursuant to the
last paragraph of Section 5) after the date of the consummation of the Exchange
Offer (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any of the Initial
Purchasers holds any Senior Notes acquired by it and having, or which are
reasonably likely to be determined to have, the status as an unsold allotment in
the initial distribution, the Company and the Guarantors upon the request of the
Initial Purchasers shall, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to the Initial Purchasers, in exchange
(the "Private Exchange") for the Senior Notes held by such Initial Purchasers, a
like principal amount of debt securities of the Company and like unconditional
Guarantee by each of the Guarantors that are identical in all material respects
to the Exchange Notes (including such like unconditional Guarantee, the "Private
Exchange Notes") (and which are issued pursuant to the same indenture as the
Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and any Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Senior Notes surrendered in exchange therefor or (ii)
if the Senior Notes are surrendered for exchange on a date in a period which
includes the record date for an interest payment date to occur on or after the
date of such exchange and as to which interest will be paid, the date of such
interest payment date or (B), if no interest has been paid on the Senior Notes,
from the Issue Date.
In connection with the Exchange Offer, the Company and the Guarantors
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open.
<PAGE> 8
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company and the Guarantors shall:
(i) accept for exchange all Senior Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Senior Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Senior Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Senior Notes of such Holder so accepted
for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical to the Indenture,
which in either event will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Senior Notes will vote and consent
together on all matters as one class and that neither the Exchange Notes, the
Private Exchange Notes nor the Senior Notes will have the right to vote or
consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Company, the Guarantors or Holders of at least a majority in aggregate principal
amount of the Registrable Notes reasonably determine in good faith that (i) the
Exchange Notes would not, upon receipt, be tradeable by such Holders which are
not affiliates (within the meaning of the Securities Act) of the Company without
restriction under the Securities Act and without restrictions under applicable
state securities laws, (ii) the interests of the Holders under this Agreement
would be adversely affected by the consummation of the Exchange Offer or (iii)
after conferring with counsel, the SEC is unlikely to permit the consummation of
the Exchange Offer prior to the Effectiveness Date, (2) within 10 days after the
consummation of the Private Exchange, any holder of the Private Exchange Notes
so requests, (3) the Exchange Offer is not consummated within 165 days of the
Issue Date, (4) because of any change in law or applicable interpretations
thereof by the Commission's staff, the Company or any of the Guarantors
determines that it is not permitted to effect the Exchange Offer as contemplated
by this Section 2, (5) any applicable laws or applicable interpretations do not
permit any Holder (including an Initial Purchaser) to participate in such
Exchange Offer, or (6) any Holder that participates in the Exchange Offer (other
than a Participating Broker-Dealer) does not receive freely tradeable Exchange
Notes in exchange for Senior Notes (such non-freely tradeable Exchange Notes
shall continue to be considered Registrable Notes hereunder), then the Company
and the Guarantors shall promptly deliver to the affected Holders and the
Trustee written notice thereof (the "Shelf Notice") and shall file an Initial
Shelf Registration pursuant to Section 3. Following the delivery of a Shelf
Notice to the Holders of Registrable Notes (in the circumstances
<PAGE> 9
contemplated by clauses (1) and (3) of the preceding sentence), the Company and
the Guarantors shall not have any further obligation to conduct the Exchange
Offer or the Private Exchange under this Section 2.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Company and the Guarantors shall,
as promptly as practicable, prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Registrable Notes (the "Initial Shelf Registration"). If the
Company and the Guarantors shall have not yet filed an Exchange Registration
Statement, the Company and the Guarantors shall use their best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date. In
any other instance, the Company and the Guarantors shall file with the SEC the
Initial Shelf Registration within 30 days of the delivery of the Shelf Notice.
The Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by such Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Company and the Guarantors shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below). The
Company and the Guarantors shall use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the 60th day after filing the same and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is three
years from the date on which such Initial Shelf Registration is declared
effective (subject to extension pursuant to the last paragraph of Section 5
hereof) (the "Effective Period"), or such shorter period ending when (i) all
Registrable Notes covered by the Initial Shelf Registration have been sold in
the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes has
been declared effective under the Securities Act.
(b) Subsequent Shelf Registration. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (prior to the sale of all of the securities
registered thereunder), the Company and the Guarantors shall use their best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company and the Guarantors shall use their best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective during the Effectiveness Period. As used herein the term
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
<PAGE> 10
(c) Supplements and Amendments. The Company and the Guarantors shall
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. AdditionaL Interest
(a) The Company, the Guarantors and the Initial Purchasers agree that
the Holders of Registrable Notes will suffer damages if the Company and the
Guarantors fail to fulfill their obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Company agrees to pay additional interest on the
Senior Notes ("Additional Interest") under the circumstances set forth below:
If (i) (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration is filed within 45 days after the
Issue Date or (B) notwithstanding that the Company has
consummated or will consummate an Exchange Offer, the Company
is required to file an Initial Shelf Registration and such
Initial Shelf Registration is not filed on or prior to the
date required by Section 3(a) hereof;
(ii) (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration is declared effective within 135
days after the Issue Date or (B) notwithstanding that the
Company has consummated or will consummate an Exchange Offer,
the Company is required to file an Initial Shelf Registration
and such Initial Shelf Registration is not declared effective
by the SEC on or prior to the 60th day following the date such
Initial Shelf Registration was filed; or
(iii) either (A) the Company has not exchanged the Exchange
Notes for all Senior Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to 31 days after
the date on which the Exchange Registration Statement is
declared effective under the Securities Act (or, if not a
Business Day, on the next Business Day thereafter) or (B) the
Exchange Registration Statement ceases to be effective at any
time prior to the time that the Exchange Offer is consummated
or (C) if applicable, the Shelf Registration has been declared
effective and such Shelf Registration ceases to be effective
at any time prior to the earlier of the disposition of the
Senior Notes covered by the Initial Shelf Registration or the
third anniversary of its effective date:
(each such event referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Senior
Notes will be the immediate assessment and accrual (commencing on the date of
the Registration Default) of Additional Interest as follows: (x) the per annum
interest rate on the Senior Notes will increase by 50 basis points; and (y) the
per annum interest rate will increase by an additional 25 basis points for each
subsequent
<PAGE> 11
90-day period during which the Registration Default remains uncured, up to a
maximum additional interest rate of 200 basis points per annum in excess of the
interest rate set forth on the cover page of the &W Offering Memorandum relating
to the Senior Notes, provided that (1) upon the filing of the Exchange
Registration Statement and/or the Initial Shelf Registration (in the case of (i)
above), (2) upon the effectiveness of the Exchange Registration Statement and/or
an Initial Shelf Registration (in the case of (ii) above) or (3) upon the
exchange of Exchange Notes for all Senior Notes tendered (in the case of (iii)
(A) above), or upon the effectiveness of the Exchange Registration Statement
which had ceased to remain effective (in the case of (iii) (B) above), or upon
the effectiveness of the Shelf Registration which had ceased to remain effective
(in the case of (iii) (C) above), Additional Interest on the Senior Notes as a
result of such clause (i), (ii) or (iii) (or the relevant subclause thereof), as
the case may be, shall cease to accrue and the interest rate on the Senior Notes
will revert to the interest rate originally home by the Senior Notes unless and
until a subsequent Registration Default shall occur.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each May 1 and November 1 (to the Holders of
record on the April 15 and October 15 immediately preceding such dates),
commencing with the first such date occurring after any such Additional Interest
commences to accrue by depositing with the Trustee, in trust for the benefit of
such Holders, immediately available funds in sums sufficient to pay such
Additional Interest. The amount of Additional Interest with respect to each
Senior Note will be determined by multiplying the applicable Additional Interest
rate by the principal amount of such Senior Note, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
5. Registration Procedures
In connection with the registration of any Registrable Notes pursuant
to Section 2 or 3 hereof, the Company and the Guarantors shall effect such
registrations to permit the sale of such Registrable Notes in accordance with
the intended method or methods of disposition thereof, and pursuant thereto the
Company and Guarantors shall:
(a) Prepare and file with the SEC, on or prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and to use their best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein, provided that, if (1)
such filing is pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall, if requested, furnish
<PAGE> 12
to and afford the Holders of the Registrable Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters), if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(at least 10 business days prior to such filing). Neither the Company nor any of
the Guarantors shall file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document, if the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement, or such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriter(s), if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period, as
the case may be; cause the related Prospectus to be supplemented by any
prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to them with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus; the
Company shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes any
action that would result in selling Holders of the Registrable Notes covered
thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being
able to sell such Registrable Notes or such Exchange Notes during that period
unless such action is required by applicable law or unless the Company complies
with this Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling Holders of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriter(s), if any, promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any prospectus
supplement or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto, when the
same has become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one confined copy of such
Registration Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the
<PAGE> 13
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a Prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by Section
5(n) below cease to be true and correct, (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in, or amendments or supplements to,
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter(s), if any, or the Holders of a majority
in aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment thereto such information as the managing
underwriter(s), if any, or such Holders reasonably request to be included
therein, (ii) make all required filings of such Prospectus supplement or such
post-effective amendment thereto as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment thereto and (iii) supplement or make
amendments to such Registration Statement.
<PAGE> 14
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes and to
each such Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel, and the
managing underwriter or underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of preliminary Prospectus)
and each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section 5, the Company and the Guarantors hereby consent
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the managing underwriter or underwriters
or agents, if any, and dealers (if any), in connection with the offering and
sale of the Registrable Notes covered by or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes or Exchange Notes for offer and sale
under the securities Or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters, if any, reasonably request in writing, provided
that where Exchange Notes held by Participating Broker-Dealers or Registrable
Notes are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
5(h); keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange Notes
held by Participating Broker-Dealers or the Registrable
<PAGE> 15
Notes covered by the applicable Registration Statement; provided that the
Company shall not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold, which certificates shall
not bear any restrictive legends and shall be in a form eligible for deposit
with The Depository Trust Company; and enable such Registrable Notes to be in
such denominations and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request and which are consistent
with the terms of the indenture under which the Registrable Notes are issued.
j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the managing underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable prepare and
(subject to Section 5(a) above) file with the SEC, at the expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be rated
with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement or the Exchange Notes, as the case may be, or the
managing underwriter or underwriters, if any.
<PAGE> 16
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the Registrable Notes in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Notes.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, assist the underwriters in connection with
marketing of the Registrable Notes to potential investors and enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Senior Notes and take all such other actions as are
reasonably requested by the managing underwriter(s), if any, in order to
expedite or facilitate the registration or the disposition of such Registrable
Notes, and in such connection, (i) make such representations and warranties to
the managing underwriter or underwriters on behalf of any underwriters, with
respect to the business of the Company and its subsidiaries, the Guarantors, the
Guarantee and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings of
debt securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the managing underwriter or underwriters covering the matters customarily
covered in opinions requested in underwritten offerings of debt securities and
such other matters as may be reasonably requested by underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the managing underwriter or underwriters on behalf of
any underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities and such other matters as reasonably
requested by the managing underwriter or underwriters; (iv) furnish such other
closing documents and certificates as may be reasonably requested by the
underwriters; and (v) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer, as the
<PAGE> 17
case may be, the managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the Company, the
Guarantors and their respective subsidiaries (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company, the Guarantors and their respective subsidiaries to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Registration
Statement or the first Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such indenture
and the Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section I l(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company and the Guarantors after the effective date of a Registration Statement,
which statements shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company and the Guarantors, in a form
customary for underwritten offerings of debt securities similar to the Senior
Notes, addressed to the Trustee for the benefit of all Holders of Registrable
Notes participating in the Exchange Offer or the Private Exchange, as the case
may be, and which includes an opinion that (i) the Company has duly authorized,
executed and delivered the Exchange Notes and Private Exchange Notes and the
related indenture and (ii) each of the Exchange Notes or the Private Exchange
Notes, as the case may be, and related indenture constitute a legal, valid and
binding obligation of the Company and each of the Guarantors, enforceable
against the Company and each of the Guarantors in accordance with its respective
terms (with customary exceptions).
<PAGE> 18
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Re le Notes by Holders to the Company (or to such other
Person as directed by the Company) in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be, the Company shall mark, or cause to
be marked, on such Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; and, in no event shall such Registrable Notes be marked as paid
or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any, participating in
the disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD").
(u) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Notes covered by a Registration Statement
contemplated hereby.
The Company and the Guarantors may require each seller of Registrable
Notes or Participating Broker-Dealer as to which any registration is being
effected to furnish to the Company and the Guarantors such information regarding
such seller or Participating Broker-Dealer and the distribution of such
Registrable Notes or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, as the Company and the Guarantors may, from
time to time, reasonably request. The Company and the Guarantors may exclude
from such registration the Registrable Notes of any seller or Participating
Broker-Dealer who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice, the Applicable Period and the Effective Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Holder or Participating Broker-Dealer, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
<PAGE> 19
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company and the Guarantors shall be borne by the
Company and the Guarantors whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to flags required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the Holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h), in the case of
Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer
during the Applicable Period)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Notes or Exchange
Notes in a form eligible for deposit with The Depository Trust Company and of
printing Prospectuses if the printing of Prospectuses is reasonably requested by
the managing underwriter or underwriters, if any, or, in respect of Registrable
Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate principal amount of
the Registrable Notes included in any Registration Statement or of such Exchange
Notes, as the case may be), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and the Guarantors and
fees and disbursements of special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Company or any
Guarantor desires such insurance, (viii) fees and expenses of the Trustee, (ix)
fees and expenses of all other Persons retained by the Company or any Guarantor,
(x) internal expenses of the Company and the Guarantors (including, without
limitation, all salaries and expenses of officers and employees of the Company
and the Guarantors performing legal or accounting duties), (xi) the expense of
any annual audit, (xii) the fees and expenses incurred in connection with any
listing of the securities to be registered on any securities exchange if the
Company elects to list any such securities and (xiii) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Company
and the Guarantors shall reimburse the Holders of the Registrable Notes being
registered in such registration for the reasonable fees and disbursements (which
fees and disbursements shall not in any event exceed $25,000), of not more than
one counsel (in addition to appropriate local counsel) chosen by the Holders of
a majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket
<PAGE> 20
expenses of the Holders of Registrable Notes incurred in connection with the
registration of the Registrable Notes. Neither the Company nor the Guarantors
shall have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities.
7. Indemnification
(a) The Company and the Guarantors, jointly and severally agree and
covenant to indemnify and hold harmless each Holder of Registrable Notes and
each Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the officers, directors, employees, affiliates and agents of each such
person, and each person, if any, who controls any such person within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, expenses,
damages and liabilities (including, without limitation, the investigative, legal
and other expenses reasonably incurred in connection with and any amount paid in
settlement of any suit, investigation, appearance, action or proceeding (between
any parties to this agreement or between any party to this agreement and any
third party or otherwise) or any claim asserted) (collectively "Losses") caused
by, arising out of or based upon any untrue statement or alleged untrue
statement of a fact contained in any Registration Statement or Prospectus (as
amended or supplemented if the Company and the Guarantors shall have furnished
any amendments or supplements thereto), any preliminary Prospectus or any
document filed with the SEC or any state securities authorities, or caused by,
arising out of or based upon any omission or alleged omission to state therein a
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such Losses are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant or underwriter furnished
to the Company and the Guarantors in writing by such Participant or underwriter
expressly for use therein. Any expenses for which a Participant is entitled to
indemnification hereunder shall be reimbursed by the Company and the Guarantors
as they are incurred by the Participant.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, their
directors, officers, employees, affiliates and agents and each person who
controls any such person within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company and the Guarantors to each Participant, but only with reference
to information relating to such Participant furnished to the Company in writing
by such Participant expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto, or any preliminary Prospectus.
The liability of any Participant under this paragraph (b) shall in no event
exceed the proceeds received by such Participant from sales of Registrable Notes
giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such
<PAGE> 21
person (the "Indemnified Person") shall promptly notify the person or persons
against whom such indemnity may be sought (the "Indemnifying Person") in writing
provided, however, that the failure so to notify the Indemnifying Person shall
not relieve the Indemnifying Person from any obligation or liability except to
the extent that the Indemnifying Person have been prejudiced materially by such
failure. The Indemnifying Person shall have the right, exercisable by giving
written notice to an Indemnified Person promptly after the receipt of written
notice from such Indemnified Person of such Proceeding, to assume, at the
Indemnifying Person's expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such Indemnified Person; provided, however, that an
Indemnified Person or Persons (if more than one such Indemnified Person is named
in any Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person or Persons
unless: (1) the Indemnifying Person agrees to pay such fees and expenses; or (2)
the Indemnifying Person fails promptly to assume the defense of such Proceeding
or fail to employ counsel reasonably satisfactory to such Indemnified Person or
Persons; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Person and the Indemnifying
Person or an Affiliate of the Indemnifying Person and such Indemnified Person,
and the Indemnified Person shall have been advised by counsel that there may be
one or more legal defenses available to such Indemnified Person that are
different from or additional to those available to the Indemnifying Person, in
which case, if such Indemnified Person notifies the Indemnifying Person in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Person, the Indemnifying Person shall not have the right to assume
the defense thereof with respect to the Indemnified Person and such counsel
shall be at the expense of the Indemnifying Person, it being understood,
however, that the Indemnifying Person shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified
Person or Persons, or for fees and expenses that are not reasonable. No
Indemnified Person or Persons will settle any Proceeding without the consent of
the Indemnifying Person or Persons (but such consent shall not be unreasonably
withheld). No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
Proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability or claims that are the subject of such Proceeding.
(d) If for any reason the indemnification provided for in paragraphs
(a) and (b) of this Section 7 is unavailable to an Indemnified Person or
insufficient to hold it entirely harmless in respect of any Losses referred to
therein, then each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of the Company and
the Guarantors on the one hand and the Participants on the other in connection
with the statements
<PAGE> 22
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company and the Guarantors on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Guarantors or by the Participants and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the Losses referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes exceeds the amount of any damages
that such Participant has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section II (f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available other information of a
like nature until no longer necessary to permit sales pursuant to Rule 144 or
Rule 144A. The Company further covenants that so long as any Registrable Notes
remain outstanding to make available to any Holder of Registrable Notes in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under: the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC.
<PAGE> 23
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company or any Guarantor
of any of its obligations under this Agreement, other than the occurrence of an
event which requires payment of Additional Interest, each Holder of Registrable
Notes, in addition to being entitled to exercise all rights provided herein, in
the Indenture or, in the case of the Initial Purchasers, in the Purchase
Agreement or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantor agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) Enforcement. The Trustee shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. The Company and the Guarantors do not
have, as of the date hereof, and the Company and the Guarantors shall not, after
the date of this Agreement, enter into any agreement with respect to any of its
securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. Neither the Company nor any of the Guarantors has entered and will not
enter into any agreement with respect to any of its securities which, will grant
to any Person piggyback rights with respect to a Registration Statement.
(d) Adjustments Affecting Registrable Notes. The Company and the
Guarantors shall not, directly or indirectly, take any action with respect to
the Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
<PAGE> 24
(e) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company and the Guarantors have obtained the written consent
of Holders of at least a majority of the then outstanding aggregate principal
amount of Registrable Notes. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold by such Holders pursuant to
such Registration Statement, provided that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company or any Guarantor, Unison Healthcare
Corporation, 7272 East Indian School Road, Suite 214 Scottsdale, AZ, 85251,
Attention: Chief Financial Officer, with a copy to Quarles & Brady, One East
Camelback Road, Suite 400, Phoenix, AZ 85012, Attention: P. Robert Moya.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Notes.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE> 25
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalid, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) Registrable Notes Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be deemed outstanding for such purpose and shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Jerry M. Walker
-------------------------------------
Name: Jerry M. Walker
Title: President and C.E.O.
<PAGE> 26
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ John J. Navin
-------------------------------------
Name: John J. Navin
Title: Director
CRUTTENDEN ROTH INCORPORATED
By: /s/ Edward J. Hall
-------------------------------------
Name: Edward J. Hall
Title: Chief Financial Officer
WHEAT, FIRST SECURITIES, INC.
By: /s/ Robert G. Wilson
-------------------------------------
Name:
Title:
QUEST PHARMACIES, INC.
an Arizona corporation
/s/ Phillip R. Rollins
----------------------------------------
Phillip R. Rollins
Vice President for the above subsidiary
of Unison HealthCare Corporation
<PAGE> 27
SUNBELT THERAPY MANAGEMENT
SERVICES, INC.
an Arizona corporation
/s/ Phillip R. Rollins
----------------------------------------
Phillip R. Rollins
Secretary for the above subsidiary of
Unison HealthCare Corporation
DECATUR SPORTS FIT & WELLNESS
CENTER, INC.
an Alabama corporation
THERAPY HEALTH SYSTEMS, INC.
a Mississippi corporation
HENDERSON & ASSOCIATES
REHABILITATION, INC.
an Alabama corporation
SUNBELT THERAPY MANAGEMENT
SERVICES, INC.
an Alabama corporation
/s/ Phillip R. Rollins
----------------------------------------
Phillip R. Rollins
Secretary for the above subsidiaries of
Unison HealthCare Corporation
<PAGE> 28
<TABLE>
<CAPTION>
<S> <C>
SUNQUEST SPC, INC. CHRISTOPHER NURSING
an Arizona corporation CENTER, INC.
BRITWILL HEALTHCARE COMPANY a Colorado corporation
a Delaware corporation AMBERWOOD COURT, INC.
BRITWILL INVESTMENTS - I, INC. a Colorado corporation
a Delaware corporation THE ARBORS HEALTH CARE
BRITWILL INVESTMENTS - 11, INC. CENTER, INC.
a Delaware corporation an Arizona corporation
BRITWILL FUNDING CORPORATION LOS ARCOS, INC.
a Delaware corporation a Colorado corporation
EMORY CARE CENTER, INC. PUEBLO NORTE, INC.
a Texas corporation a Colorado corporation
MEMPHIS CLINICAL RIO VERDE NURSING CENTER, INC.
LABORATORY, INC. a Colorado corporation
a Tennessee corporation SIGNATURE MANAGEMENT
AMERICAN PROFESSIONAL GROUP, INC.
HOLDINGS, INC. a Colorado corporation
an Utah corporation CORNERSTONE CARE, INC.
AMPRO MEDICAL SERVICES, INC. a Colorado corporation
a Texas corporation ARKANSAS, INC.
GAMMA LABORATORIES, INC. a Colorado corporation
a Missouri corporation DOUGLAS MANOR, INC.
SIGNATURE HEALTH CARE a Colorado corporation
CORPORATION SAFFORD CARE, INC.
a Delaware corporation a Colorado corporation
BROOKSHIRE HOUSE, INC. REHABWEST, INC.
a Colorado corporation a Colorado corporation
</TABLE>
/s/ Jerry M. Walker
---------------------------------------------
Jerry M. Walker
President for the above subsidiaries of
Unison HealthCare Corporation
<PAGE> 1
Exhibit 10.15
UNISON HEALTHCARE CORPORATION
1995 STOCK OPTION PLAN
(AS REVISED OCTOBER 30, 1996)
1. PURPOSE
The purposes of the Amended and Restated 1995 Stock Option Plan
("Plan") of Unison HealthCare Corporation, a Delaware corporation, are to
attract and retain the best available employees and directors of Unison
HealthCare Corporation or any parent or subsidiary or affiliate of Unison
HealthCare Corporation which now exists or hereafter is organized or acquired by
or acquires Unison HealthCare Corporation (collectively or individually as the
context requires the "Company") as well as appropriate third parties who can
provide valuable services to the Company, to provide additional incentive to
such persons and to promote the success of the business of the Company. This
Plan is intended to comply with Rule 16b-3 under Section 16 of the Securities
Exchange Act of 1934, as amended or any successor rule ("Rule 16b-3"), and the
Plan shall be construed, interpreted and administered to comply with Rule 16b- 3
and Section 162(m) of the Code.
2. DEFINITIONS
(a) "Affiliate" means any corporation, partnership, joint venture or
other entity, domestic or foreign, in which the Company, either directly or
through another affiliate or affiliates, has a 50% or more ownership interest.
(b) "Affiliated Group" means the group consisting of the Company and
any entity that is an "affiliate," a "parent" or a "subsidiary" of the Company.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Compensation or Stock Option Committee of the
Board (as designated by the Board), if such a committee has been appointed.
(e) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(f) "Incentive Stock Options" means options intended to qualify as
incentive stock options under Section 422 of the Code, or any successor
provision.
(g) "ISO Group" means the group consisting of the Company and any
corporation that is a "parent" or a "subsidiary" of the Company.
(h) "Nonemployee Director" shall have the meaning assigned in Section
4(a)(ii) hereof.
<PAGE> 2
(i) "Nonqualified Stock Options" means options that are not intended to
qualify for favorable income tax treatment under Sections 421 through 424 of the
Code.
(j) "Parent" means a corporation that is a "parent" of the Company
within the meaning of Code Section 424(e).
(k) "Section 16" means Section 16 of the Securities Exchange Act of
1934, as amended.
(l) "Subsidiary" means a corporation that is a "subsidiary" of the
Company within the meaning of Code Section 424(f).
3. INCENTIVE AND NONQUALIFIED STOCK OPTIONS
Two types of options (referred to herein as "options," without
distinction between such two types) may be granted under the Plan: Incentive
Stock Options and Nonqualified Stock Options.
4. ELIGIBILITY AND ADMINISTRATION
(a) Eligibility. The following individuals shall be eligible to receive
grants pursuant to the Plan as follows:
(i) Any employee (including any officer or director who is an
employee) of the Company or any ISO Group member shall be eligible to receive
either Incentive Stock Options or Nonqualified Stock Options under the Plan. An
employee may receive more than one option under the Plan.
(ii) Any director who is not an employee of the Company or any
Affiliated Group member (a "Nonemployee Director") shall be eligible to receive
only Nonqualified Stock Options.
(iii) Any other individual whose participation the Board or the
Committee determines is in the best interests of the Company shall be eligible
to receive Nonqualified Stock Options.
(b) Administration. The Plan may be administered by the Board or by a
Committee appointed by the Board which is constituted so to permit the Plan to
comply under Rule 16b-3.
(i) The Company shall indemnify and hold harmless each director
and Committee member for any action or determination made in good faith with
respect to the Plan or any option.
2
<PAGE> 3
(ii) The Board or the Committee shall have full and final
authority to waive, in whole or in part, any limitations, restrictions or
conditions previously imposed on any option. Determinations by the Committee or
the Board shall be final and conclusive upon all parties.
(iii) The Board or Committee may delegate to the President of the
Company the authority to make grants of Incentive Stock Options to employees of
the Company; provided that no grants may be made by the President pursuant to
any such delegation to persons reporting pursuant to Section 16a of the
Securities Exchange Act of 1934; involving Nonqualified Stock Options; or
outside of prescribed ranges determined by the Compensation Committee or the
Board prior to any such grants by the President.
5. SHARES SUBJECT TO OPTIONS
The stock available for grant of options under the Plan shall be shares
of the Company's authorized but unissued or reacquired voting common stock. The
aggregate number of shares that may be issued pursuant to exercise of options
granted under the Plan shall be 800,000 shares. If any outstanding option grant
under the Plan for any reason expires or is terminated, the shares of common
stock allocable to the unexercised portion of the option grant shall again be
available for options under the Plan as if no options had been granted with
respect to such shares. No individual may be granted options covering more than
100,000 shares in any calendar year.
6. TERMS AND CONDITION OF OPTIONS
Option grants under the Plan shall be evidenced by agreements in such
form and containing such provisions as are consistent with the Plan as the Board
or the Committee shall from time to time approve. Each agreement shall specify
whether the option(s) granted thereby are Incentive Stock Options or
Nonqualified Stock Options. Such agreements may incorporate all or any of the
terms hereof by reference and shall comply with and be subject to the following
terms and conditions:
(a) Shares Granted. Each option grant agreement shall specify the
number of Incentive Stock Options and/or Nonqualified Stock Options being
granted; one option shall be deemed granted for each share of stock. In
addition, each option grant agreement shall specify the exercisability and/or
vesting schedule of such options, if any.
(b) Purchase Price. The purchase price for a share subject to (i) a
Nonqualified Stock Option may be any amount determined in good faith by the
Committee, and (ii) an Incentive Stock Option shall not be less than 100% of the
fair market value of the share on the date the option is granted, provided,
however, the option price of an Incentive Stock Option shall not be less than
110% of the fair market value of such share on the date the option is granted to
an individual then owning (after the application of the family and other
attribution rules of Section 424(d) or any successor rule of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
any ISO Group member. For purposes
3
<PAGE> 4
of the Plan, "fair market value" at any date shall be (i) the reported closing
price of such stock on the New York Stock Exchange or other established stock
exchange or Nasdaq National Market on such date, or if no sale of such stock
shall have been made on that date, on the preceding date on which there was such
a sale, (ii) if such stock is not then listed on an exchange or the Nasdaq
National Market, the last trade price per share for such stock in the
over-the-counter market as quoted on Nasdaq or the pink sheets or successor
publication of the National Quotation Bureau on such date, or (iii) if such
stock is not then listed or quoted as referenced above, an amount determined in
good faith by the Board or the Committee.
(c) Termination. Unless otherwise provided herein or in a specific
option grant agreement which may provide for accelerated vesting and/or longer
or shorter periods of exercisability, no option shall be exercisable after the
expiration of the earliest of
(i) in the case of an Incentive Stock Option:
(1) 10 years from the date the option is granted, or five
years from the date the option is granted to an individual owning
(after the application of the family and other attribution rules of
Section 424(d) of the Code) at the time such option was granted, more
than 10% of the total combined voting power of all classes of stock of
the Company or any ISO Group member,
(2) three months after the date the optionee ceases to perform
services for the Company or any ISO Group member, if such cessation is
for any reason other than death, disability (within the meaning of Code
Section 22[e][3]), or cause,
(3) one year after the date the optionee ceases to perform
services for the Company or any ISO Group member, if such cessation is
by reason of death or disability (within the meaning of Code Section
22[e][3]), or
(4) the date the optionee ceases to perform services for the
Company or any ISO Group member, if such cessation is for cause, as
determined by the Board or the Committee in its sole discretion;
(ii) in the case of a Nonqualified Stock Option;
(1) 10 years from the date the option is granted,
(2) two years after the date the optionee ceases to perform
services for the Company or any Affiliated Group member, if such
cessation is for any reason other than death, permanent disability,
retirement or cause,
(3) three years after the date the optionee ceases to perform
services for the Company or any Affiliated Group member, if such
cessation is by reason of death, permanent disability or retirement, or
4
<PAGE> 5
(4) the date the optionee ceases to perform services for the
Company or any Affiliated Group member, if such cessation is for cause,
as determined by the Board or the Committee in its sole discretion;
provided, that, unless otherwise provided in a specific option grant agreement,
an option shall only be exercisable for the periods above following the date an
optionee ceases to perform services to the extent the option was exercisable on
the date of such cessation.
(d) Method of Payment. The purchase price for any share purchased
pursuant to the exercise of an option granted under the Plan shall be paid in
full upon exercise of the option by any of the following methods, (i) by cash,
(ii) by check, or (iii) to the extent permitted under the particular grant
agreement, by transferring to the Company shares of stock of the Company at
their fair market value as of the date of exercise of the option as determined
in accordance with paragraph 6(b), provided that the optionee held the shares of
stock for at least six months. Notwithstanding the foregoing, the Company may
arrange for or cooperate in permitting broker-assisted cashless exercise
procedures. The Company may also extend and maintain, or arrange for the
extension and maintenance of, credit to an optionee to finance the optionee's
purchase of shares pursuant to the exercise of options, on such terms as may be
approved by the Board or the Committee, subject to applicable regulations of the
Federal Reserve Board and any other applicable laws or regulations in effect at
the time such credit is extended.
(e) Exercise. Except for options which have been transferred pursuant
to paragraph 6(f), no option shall be exercisable during the lifetime of an
optionee by any person other than the optionee, his or her guardian or legal
representative. The Board or the Committee shall have the power to set the time
or times within which each option shall be exercisable and to accelerate the
time or times of exercise; provided, however, except as provided in paragraph
12, no options may be exercised prior to the later of the expiration of six
months from the date of grant thereof or shareholder approval, unless otherwise
provided by the Board or Committee. To the extent that an optionee has the right
to exercise one or more options and purchase shares pursuant thereto, the
option(s) may be exercised from time to time by written notice to the Company
stating the number of shares being purchased and accompanied by payment in full
of the purchase price for such shares. Any certificate for shares of outstanding
stock used to pay the purchase price shall be accompanied by a stock power duly
endorsed in blank by the registered owner of the certificate (with the signature
thereon guaranteed). If the certificate tendered by the optionee in such payment
covers more shares than are required for such payment, the certificate shall
also be accompanied by instructions from the optionee to the Company's transfer
agent with respect to the disposition of the balance of the shares covered
thereby.
(f) Nontransferability. No option shall be transferable by an optionee
otherwise than by will or the laws of descent and distribution, provided that
the Committee in its discretion may grant options that are transferable, without
payment of consideration, to immediate family members of the optionee or to
trusts or partnerships for such family members; the Committee may also amend
outstanding options to provide for such transferability.
5
<PAGE> 6
(g) ISO $100,000 Limit. If required by applicable tax rules regarding a
particular grant, to the extent that the aggregate fair market value (determined
as of the date an Incentive Stock Option is granted) of the shares with respect
to which an Incentive Stock Option grant under this Plan (when aggregated, if
appropriate, with shares subject to other Incentive Stock Option grants made
before said grant under this Plan or another plan maintained by the Company or
any ISO Group member) is exercisable for the first time by an optionee during
any calendar year exceeds $100,000 (or such other limit as is prescribed by the
Code), such option grant shall be treated as a grant of Nonqualified Stock
Options pursuant to Code Section 422(d).
(h) Investment Representation. Unless the shares of stock covered by
the Plan have been registered with the Securities and Exchange Commission
pursuant to Section 5 of the Securities Act of 1933, as amended, each optionee
by accepting an option grant represents and agrees, for himself or herself and
his or her transferees by will or the laws of descent and distribution, that all
shares of stock purchased upon the exercise of the option grant will be acquired
for investment and not for resale or distribution. Upon such exercise of any
portion of any option grant, the person entitled to exercise the same shall upon
request of the Company furnish evidence satisfactory to the Company (including a
written and signed representation) to the effect that the shares of stock are
being acquired in good faith for investment and not for resale or distribution.
Furthermore, the Company may if it deems appropriate affix a legend to
certificates representing shares of stock purchased upon exercise of options
indicating that such shares have not been registered with the Securities and
Exchange Commission and may so notify its transfer agent.
(i) Rights of Optionee. An optionee or transferee holding an option
grant shall have no rights as a shareholder of the Company with respect to any
shares covered by any option grant until the date one or more of the options
granted thereunder have been properly exercised and the purchase price for such
shares has been paid in full. No adjustment shall be made for dividends
(ordinary or extraordinary, whether cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such share certificate is issued, except as provided for in paragraph 6(k).
Nothing in the Plan or in any option grant agreement shall confer upon any
optionee any right to continue performing services for the Company or any
Affiliated Group member, or interfere in any way with any right of the Company
or any Affiliated Group member to terminate the optionee's services at any time.
(j) Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of an option. The value of any fractional
share subject to an option grant shall be paid in cash in connection with an
exercise that results in all full shares subject to the grant having been
exercised.
(k) Reorganizations, Etc. Subject to paragraph 9 hereof, if the
outstanding shares of stock of the class then subject to this Plan are increased
or decreased, or are changed into or exchanged for a different number or kind of
shares or securities, as a result of one or more reorganizations, stock splits,
reverse stock splits, stock dividends, spin-offs, other distributions of assets
to shareholders, appropriate adjustments shall be made in the number and/or type
of
6
<PAGE> 7
shares or securities for which options may thereafter be granted under this Plan
and for which options then outstanding under this Plan may thereafter be
exercised. Any such adjustments in outstanding options shall be made without
changing the aggregate exercise price applicable to the unexercised portions of
such options.
(l) Option Modification. Subject to the terms and conditions and within
the limitations of the Plan, the Board or the Committee may modify, extend or
renew outstanding options granted under the Plan, accept the surrender of
outstanding options (to the extent not theretofore exercised), reduce the
exercise price of outstanding options, or authorize the granting of new options
in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification of an option (either directly or
through modification of the Plan) shall, without the consent of the optionee,
alter or impair any rights of the optionee under the option.
(m) Grants to Foreign Optionees. The Board or the Committee in order to
fulfill the Plan purposes and without amending the Plan may modify grants to
participants who are foreign nationals or performing services for the Company or
an Affiliated Group member outside the United States to recognize differences in
local law, tax policy or custom.
(n) Other Terms. Each option grant agreement may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board or the Committee, such as without limitation
discretionary performance standards, tax withholding provisions, or other
forfeiture provisions regarding competition and confidential information.
7. TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time terminate or amend the Plan; provided, that
shareholder approval shall be obtained of any action for which shareholder
approval is required in order to comply with Rule 16b-3, the Code or other
applicable laws or regulatory requirements within such time periods prescribed.
8. SHAREHOLDER APPROVAL AND TERM OF THE PLAN
The Plan shall be effective as of July 10, 1995, the date as of which
it was adopted by the Board, subject to ratification by the shareholders of the
Company within (each of) the time period(s) prescribed under Rule 16b-3, the
Code, and any other applicable laws or regulatory requirements, and shall
continue thereafter until terminated by the Board. Unless sooner terminated by
the Board, in its sole discretion, the Plan will expire on July 10, 2005 solely
with respect to the granting of Incentive Stock Options or such later date as
may be permitted by the Code for Incentive Stock Options, provided that options
outstanding upon termination or expiration of the Plan shall remain in effect
until they have been exercised or have expired or been forfeited.
7
<PAGE> 8
9. MERGER, CONSOLIDATION OR REORGANIZATION
In the event of a merger, consolidation or reorganization with another
corporation in which the Company is not the surviving corporation, the Board,
the Committee (subject to the approval of the Board) or the board of directors
of any corporation assuming the obligations of the Company hereunder shall take
action regarding each outstanding and unexercised option pursuant to either
clause (a) or (b) below:
(a) Appropriate provision may be made for the protection of such option
by the substitution on an equitable basis of appropriate shares of the surviving
corporation, provided that the excess of the aggregate fair market value (as
defined in paragraph 6[b]) of the shares subject to such option immediately
before such substitution over the exercise price thereof is not more than the
excess of the aggregate fair market value of the substituted shares made subject
to option immediately after such substitution over the exercise price thereof;
or
(b) Appropriate provision may be made for the cancellation of such
option. In such event, the Company, or the corporation assuming the obligations
of the Company hereunder, shall pay the optionee an amount of cash (less normal
withholding taxes) equal to the excess of the highest fair market value (as
defined in paragraph 6[b]) per share of the Common Stock during the 60-day
period immediately preceding the merger, consolidation or reorganization over
the option exercise price, multiplied by the number of shares subject to such
options (whether or not then exercisable).
10. DISSOLUTION OR LIQUIDATION
Anything contained herein to the contrary notwithstanding, on the
effective date of any dissolution or liquidation of the Company, the holder of
each then outstanding option (whether or not then exercisable) shall receive the
cash amount described in paragraph 9(b) hereof and such option shall be
cancelled.
11. WITHHOLDING TAXES
(a) General Rule. Pursuant to applicable federal and state laws, the
Company is or may be required to collect withholding taxes upon the exercise of
an option. The Company may require, as a condition to the exercise of an option
or the issuance of a stock certificate, that the optionee concurrently pay to
the Company (either in cash or, at the request of optionee but in the discretion
of the Board or the Committee and subject to such rules and regulations as the
Board or the Committee may adopt from time to time, in shares of Common Stock of
the Company) the entire amount or a portion of any taxes which the Company is
required to withhold by reason of such exercise, in such amount as the Committee
or the Board in its discretion may determine.
(b) Withholding from Shares to be Issued. In lieu of part or all of any
such payment, the optionee may elect, subject to such rules and regulations as
the Board or the Committee may
8
<PAGE> 9
adopt from time to time, or the Company may require that the Company withhold
from the shares to be issued that number of shares having a fair market value
(as defined in paragraph 6[b]) equal to the amount which the Company is required
to withhold.
(c) Special Rule for Insiders. Any such request or election (to satisfy
a withholding obligation using shares) by an individual who is subject to the
provisions of Section 16 shall be made in accordance with the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
12. AUTOMATIC GRANTS TO CERTAIN DIRECTORS
(a) Initial Grant. Each Nonemployee Director on the effective date of
this Plan as set forth in paragraph 8 (July 10, 1995) shall be granted options
to acquire 9,246 shares of the Company's Common Stock, except that the Chairman
of the Board shall receive 10,496 shares of the Company's Common Stock.
(b) Additional Grants. On September 6, 1996, and immediately after each
annual meeting of shareholders, beginning with the 1997 annual meeting, each
person who is a Nonemployee Director at such time shall automatically be granted
options to acquire 15,000 shares of the Company's Common Stock (a "Subsequent
Grant") subject to the terms of paragraph 12(c), provided that if the Chairman
of the Board is a Nonemployee Director on the date of any Subsequent Grant, he
or she shall also receive options to acquire an additional 2,500 shares of the
Company's Common Stock.
(c) Terms of Options. Notwithstanding anything in paragraph 6(c) to the
contrary, options granted pursuant to this paragraph 12 shall have a 10-year
term, provided that any option held by a director who is removed from the Board
for cause shall expire on the date of such removal. The options granted pursuant
to this paragraph 12 shall become exercisable at the following times: (i) 50% of
the options shall become exercisable on the first anniversary of the effective
date of the grant; and (ii) 50% shall become exercisable on the second
anniversary of the effective date of grant. The exercise price of all options
granted pursuant to this paragraph 12 shall be the fair market value of the
Company's Common Stock on the date of grant.
(d) Limitation on Amendment. This paragraph 12 shall not be amended
more than once every six months other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.
9
<PAGE> 1
Exhibit 10.32.1
October 31, 1996
Essel Bailey, Esq.
President and CEO
Omega Healthcare Investors, Inc.
Ann Arbor, Michigan
Dear Essel:
In consideration of the waiver by Omega, in the form annexed hereto as Exhibit A
(the "Waiver") in connection with the issuance by Unison of $100 million of
12.25% Senior Notes due 2006 ("the Notes"), Unison agrees as follows:
1. Unison will restructure its lease financial covenants with Omega. Unison
agrees that in the event that satisfactory covenants are not reached on or
before December 31, 1996, the letter of credit agreed to in the following
paragraph 2 shall be deposited as a permanent additional security deposit
securing the leases and other obligations. Both Unison and Omega agree to work
in good faith to reach an agreement prior to December 31, 1996.
2. Unison shall deposit cash or a letter of credit acceptable to Omega
simultaneous with the closing of the sale of the Notes in the amount of $2
million to secure each and every one of Unison's guaranty obligations to Omega
on behalf of each and any one or more of Unison's direct or indirect
subsidiaries (a "Unison Company"), including, without limitation, BritWill
HealthCare Company, BritWill Investments-I, Inc., BritWill Investments-II, Inc.,
and Britwill Investments-Texas, Ltd. (the "Britwill Companies"). This deposit
shall be (i) released to Unison when the new financial covenants are finalized,
or (ii) in the event that the financial covenants are not finalized by December
31, 1996, the deposit shall be applied as set forth in paragraph 1.
3. Unison shall, simultaneous with the closing on the sale of the Notes, pay to
Omega $250,000.
4. On or before ninety (90) days from the date of the of the closing of the sale
of the Notes, Unison Omega and Bruce H. Whitehead ("Whitehead") shall cause the
six long term care facilities presently owned by BritWill Texas on which Omega
has mortgages outstanding to be converted to direct leases between Omega as
lessor and Unison as lessee.
5. Upon the completion of the financial covenants restructuring and the
conversion of the BritWill Texas facilities, Unison agrees the existing terms of
each facility lease will be extended to not less than ten years from the date of
restructuring.
6. Unison agrees that the financial covenant restructuring will include
amendments, if necessary, to assure that the existing leases, including those to
be established in connection with the conversion of the BritWill Texas
facilities, will each have security deposits equal to
<PAGE> 2
Essel Bailey, Esq.
October 31, 1996
Page 2
not less than six months of rent. Omega shall also be granted a right of first
refusal on acquisitions by any Unison Company meeting standards to be agreed
upon. Unison agrees to pay the legal fees and expenses incurred by Omega in
connection with the matters agreed to in this letter.
Please execute this letter in the space provided below to indicate your
agreement to these terms. By Omega's execution of this letter and the Waiver,
Unison and Whitehead, individually and on behalf of Whitehead Family Investment,
Ltd., affirm and ratify that its guarantees of any of its obligations to Omega,
as modified or amended hereby, remain in full force and effect. By signing this
letter, each of the Britwill Companies agree that their obligations as
guarantor, mortgagee or lessee continue in full force and effect, except as
expressly waived in the Waiver.
Sincerely,
/s/ Jerry M. Walker
President and CEO
Unison HealthCare Corporation
Agreed,
Bruce H. Whitehead
Guarantor
/s/ Bruce H. Whitehead
- ----------------------------------
Agreed,
Omega Healthcare Investors, Inc.
/s/ F. Scott Kellman
- ----------------------------------
By: F. Scott Kellman, EVP
<PAGE> 1
Exhibit 10.92
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Agreement") is made and entered into as of
this 1st day of July, 1996, by and between WESTMINISTER HEALTHCARE, INC., a
Texas corporation ("Lessor"), and BRITWILL INVESTMENTS - II, INC., a Delaware
corporation ("Lessee").
RECITALS
WHEREAS, Lessor is the owner of the Demised Premises (as hereinafter
defined);
WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease
from Lessor, the Demised Premises;
NOW, THEREFORE, for and in consideration of the mutual covenants,
conditions and agreements set forth herein, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. LEASED PROPERTY.
Upon the terms, covenants and conditions hereinafter set forth, Lessor
hereby leases to Lessee, and Lessee hereby leases from Lessor, all property
constituting a part of, or used in the operation of, that certain 138-bed
nursing home facility commonly known as Homestead of McKinney, located at 1801
Pearson Avenue, McKinney, Texas (the "Demised Premises"). The Demised Premises
includes all of the following property (the "Property"):
All of that parcel of land (the "Land") described on
Exhibit "A" attached hereto and incorporated herein by reference;
(a) All buildings, structures and other improvements
(collectively, the "Improvements") now or hereafter located upon the
Land, including the building or buildings comprising the nursing home
facility presently located thereon;
(b) All of the following items of personal property, fixtures
and equipment used in conjunction with such Land and Improvements,
(collectively, the "Personal Property") now or hereafter installed in
or about the Land and the Improvements and owned or leased by Lessor,
more particularly described in Exhibit "A-1" attached hereto and
incorporated herein by reference.
<PAGE> 2
2. TERM.
This Agreement shall be for an initial term of 20 years (the "Initial
Term") commencing on July 1, 1996 (the "Commencement Date"), with two 10-year
renewal options (the "Additional Terms"), which Lessee may exercise by notice to
Lessor at any time prior to 90 days before the expiration of the immediately
preceding Term, provided that Lessee is not in default at the time of such
exercise and this Agreement has not otherwise been terminated or extended in
accordance with the provisions hereof. The rental rate during any renewal
periods shall be based upon a fair market rental as agreed upon by the parties
at the time of the extension. Each year from the commencement date or any
anniversary date thereof through the date immediately preceding the next
anniversary date thereof shall be a "Lease Year." This Agreement shall terminate
automatically upon transfer of ownership of the Demised Premises to Lessee
pursuant to Section 45 or 46 below. In such event, rent and any other
obligations hereunder shall be prorated through the date of such transfer of
ownership.
3. RENT.
Lessee shall pay to Lessor monthly rent for the Demised Premises as
follows:
(a) Initial Rent. For the first Lease Year, Lessee shall pay
rent of $47,500 per month.
(b) Rent Increases. The rent shall increase on the first day
of each subsequent Lease Year by an amount equal to the immediately
preceding rental amount multiplied by the total of all percentage
increases in the applicable daily bed rate, if any, approved by the
Medicaid agency for the state in which the Demised Premises is located
during the Lease Year just ended; provided that in no event shall the
rent ever (i) increase by an amount of more than 6% in any Lease Year,
or (ii) decrease. If information regarding Medicaid bed rate percentage
increases is not available, the parties shall in good faith seek to
utilize a comparable index or otherwise negotiate to obtain a fair
rental rate.
(c) Payment of Rent. Rent for each calendar month shall be
paid on or before the 15th day of such calendar month. Rent shall be
made to Lessor at the address specified in the Notices section below,
or at such other place as Lessor may from time to time direct. If the
Commencement Date falls on other than the first day of the month, rent
for the partial month shall be prorated and shall be paid on or before
the later of (i) the Commencement Date, or (ii) the 15th day of the
calendar month within which the Commencement Date falls.
4. SECURITY DEPOSIT. Lessee shall deposit with Lessor the sum of
$47,500 as security for the full and faithful performance of every provision of
this Agreement to be performed by Lessee, which sum shall be delivered on or
before the
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<PAGE> 3
Commencement Date. If Lessee has committed an Event of Default (as hereinafter
defined), including but not limited to the provisions relating to the payment or
rent or any other sum required hereunder, Lessor may apply the security deposit
to fund the amount in question, or to compensate Lessor for any other loss, cost
or damage which Lessor may suffer by reason of Lessee's default. If any portion
of said deposit is used or applied, Lessee shall, within 30 days after written
demand therefor, deposit cash with Lessor in an amount sufficient to restore the
security deposit to its original amount and Lessee's failure to do so shall be a
breach of this Agreement. If Lessee shall fully and faithfully perform every
provision to be performed by it, the security deposit or any balance thereof
shall be repaid to the Lessee within 10 days after the expiration of this Lease.
5. PURCHASE OF INVENTORY AND SUPPLIES.
Lessee will purchase for all cash Lessor's inventory and supplies on
hand in the Demised Premises as of the Commencement Date for 70% of the actual
cost as documented by invoices and other evidence of cost. The amount of
inventory and supplies shall not be materially in excess of the amount
customarily retained at the Demised Premises. Lessee and Lessor shall conduct
the inventory jointly on a date to be determined by mutual consent prior to the
Commencement Date.
6. TREATMENT OF ACCOUNTS.
The ownership of accounts receivable and payment of accounts payable
for services rendered prior to the Commencement Date shall remain with Lessor.
Lessee, however, agrees to use its good faith efforts to collect Lessor's
pre-Commencement Date accounts receivable and to pay Lessor's pre-Commencement
Date accounts payable (from the proceeds of Lessor's receivables and not from
Lessee's own funds). Lessee shall be entitled to retain 5% of all of Lessor's
pre-Commencement Date accounts receivable which are collected by Lessee as
compensation for this service.
7. TREATMENT OF EMPLOYEES.
Up to, but not exceeding, the first 120 days after the Commencement
Date (the "Transition Period"), Lesser shall remain the employer of all
employees of Lessor involved in the day-to-day operations of the Demised
Premises immediately prior to the Commencement Date, although such employees
shall report directly to Lessor. Lessee shall reimburse Lessor for the salary,
payroll tax and benefit expenses related to employment of the above-referenced
employees during the Transition Period; provided, that Lessee shall not be
obligated to reimburse for any increases in salaries or benefits, granted
without Lessee's consent, over the most recent amounts for those items disclosed
to and approved by Lessee prior to the Commencement Date. Lessor shall not, as
employer during the Transition Period, take any action with respect to the
employees that would in any way impair Lessee's quiet enjoyment of, or its
ability to operate, the Demised Premises. No later than the 120th day following
the Commencement Date, Lessor shall terminate the employment of and cooperate
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<PAGE> 4
with Lessee to provide for the transfer of employment to Lessee as a successor
employer of those employees of Lessor involved in the day-to-day operations of
the Demised Premises that are offered employment by Lessee, with such employment
by Lessee to be on substantially the same terms and conditions of employment as
existed between Lessor and such employees immediately prior to the expiration of
the Transition Period. Unless otherwise required by applicable law, employee
vacation, holiday, sick pay, retirement and severance benefits, and payroll
taxes shall not be prorated at the end of the Transition Period. Instead, Lessor
shall pay all such items directly on or prior to the end of the Transition
Period and provide satisfactory proof of payment to Lessee.
8. RECORDS. Lessee shall maintain adequate and customary books and
records in connection with its use and occupancy, management and operation of
the Demised Premises and any business thereon and all revenues and other sales
earned in connection with its business conducted at the Demised Premises. Lessee
agrees that such books and records shall be available for review by Lessor at
reasonable times and upon reasonable notice. Lessee shall provide Lessor with
copies of its quarterly operating statements, profit and loss statements and
annual financial statements within 15 days after such statements are available
to Lessee.
9. NET LEASE. This Agreement is intended to be a net lease in that it
is the intention of the parties hereto that all expenses and charges related to
the ownership and operation of the Demised Premises, whether for upkeep,
maintenance, insurance, taxes, utilities, federal, state and municipal
requirements and other charges of a like nature or type or otherwise shall be
paid by Lessee.
10. TAXES AND ASSESSMENTS.
(a) Obligation to Pay Taxes and Assessments. Lessee agrees to
pay before delinquency any and all real and personal property taxes and
assessments levied or assessed against the Demised Premises during the
term of this Agreement and any other taxes, assessments, or fees levied
or assessed against the Demised Premises as a substitute for or in
addition to real and personal property taxes. At the commencement and
end of the term of this Agreement, such taxes and assessments shall be
prorated. Lessee further agrees to pay before delinquency any and all
taxes or assessments levied or assessed against the rents required to
be paid hereunder or imposed upon the lease documents, including,
without limitation, any recording charges. Lessee shall promptly pay
when due any and all federal, state and local taxes including without
limitation unemployment and sales taxes, levied or assessed with
respect to any services or products furnished, used or licensed
pursuant to this Agreement and all accounts or other indebtedness of
every kind incurred by Lessee in the operation of the Demised Premises.
(b) Lessee's Right to Protest. Lessee shall have the right to
protest the amount or payment of any real or personal property taxes or
assessments
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<PAGE> 5
which it is required to pay pursuant to this Agreement; provided that
Lessee adequately protects Lessor's interest in the Demised Premises by
bonding or otherwise. Lessee agrees that it shall hold Lessor harmless
and defend Lessor from any and all claims, losses or damages resulting
from prosecution of such protest by Lessee.
11. INSURANCE.
(a) General and Liability. During the Initial Term and any
Additional Term of this Agreement, Lessee shall at all times keep the
Demised Premises insured with the kinds and amounts of insurance
described below. The policies must name Lessor as an additional
insured. Losses shall be payable to Lessor and Lessee as provided in
Subsection (d) of this Section. In addition, the policies shall name as
an additional insured any mortgagee by way of a standard form of
mortgagee's loss payable endorsement. Any loss adjustment shall require
the written consent of Lessor, Lessee, and each mortgagee. Evidence of
insurance shall be deposited with Lessor and, if requested, with any
mortgagee(s). Lessee shall furnish Lessor with a copy of such insurance
coverage, or with a certificate of the company issuing such insurance
certifying that the same is in full force and effect. Lessee shall
timely renew any and all policies required by this Section and furnish
evidence of such renewal and the payment of policy premiums at least 30
days prior to the expiration of such policy. The policies on the
Demised Premises shall insure against the following risks:
(i) Loss or damage by fire and such other risks as
may be included in extended coverage insurance, including but
not limited to loss or damage from leakage of any sprinkler
system now or hereafter installed in the Demised Premises or
on the Premises, in amounts sufficient to prevent Lessor or
Lessee from becoming a coinsurer within the terms of the
applicable policies and in any event in an amount not less
than 100% of the then full replacement value thereof (as
defined below in Subsection (b) of this Section);
(ii) Loss or damage by explosion of steam boilers,
pressure vessels or similar apparatus, now or hereafter
installed in the Demised Premises, in such limits with respect
to any one accident as may be reasonably agreed by Lessor and
Lessee from time to time;
(iii) Claims for personal injury or property damage
under a policy of general public liability insurance with
amounts not less than $1,000,000 per claim in respect of
bodily injury, $4,000,000 aggregate per claim and $300,000 for
property damage;
(iv) Claims arising out of medical malpractice in an
amount not less than $1,000,000 for each person and for each
occurrence;
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<PAGE> 6
(v) Such other hazards and in such amounts as may be
customary for comparable properties in the area and is
reasonably available;
(vi) Loss of rental under a rental value insurance
policy covering a risk of loss during the six months of
reconstruction resulting from the occurrence of any of the
hazards described in subsections (i) and (ii) of this
Subsection (a) of this Section in an amount sufficient to
prevent Lessor from becoming a coinsurer; and
(vii) Lessee agrees to procure and maintain
throughout the term of this Agreement Worker's Compensation
insurance in such amounts as may be required by applicable
state laws or regulations.
(b) Replacement Cost. The term "full replacement value" of
improvements as used herein, shall mean the actual replacement cost
thereof, from time to time, less exclusions provided in the normal fire
insurance policy.
(c) Additional Insurance. In addition to the insurance
described above, Lessee shall maintain such additional insurance as may
be reasonably required, from time to time, by any mortgagee.
(d) Insurance Proceeds. Upon any damage to the Improvements,
any insurance proceeds payable as a result of such damage (other than
business interruption insurance proceeds), shall be paid to Lessor and
held by Lessor in trust and shall be made available for reconstruction
or repair, as the case may be, and shall be paid out by Lessor, from
time to time, for the reasonable costs of such work. Any excess
proceeds of insurance remaining after the completion of the restoration
or reconstruction of the Demised Premises shall be retained by Lessor
and shall be credited against future rental payments due from Lessee
under this Agreement. All salvage resulting from any such loss covered
by insurance shall belong to Lessor.
(e) Damage or Destruction. If, during the Term of this
Agreement, the Demised Premises are totally or partially destroyed from
a risk covered by the insurance described in Subsection (a) of this
Section, Lessor shall, as soon as practicable, restore the Demised
Premises to substantially the same condition as existed immediately
before the destruction. If the costs of the restoration exceed the
amount of proceeds received by Lessor from the insurance required under
Subsection (a) of this Section, Lessee shall be solely responsible for
paying the difference between the amount of insurance proceeds and such
cost of restoration.
(f) Restoration of Lessee's Property. If Lessor is required to
restore the Demised Premises as provided in Subsection (e) of this
Section, Lessor shall not be required to restore alterations made by
Lessee, Lessee's improvements,
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<PAGE> 7
trade fixtures or personal property, such excluded items being the sole
responsibility of Lessee to restore.
(g) Abatement of Rent. During the period required for repair
and restoration, payments of rent provided for in Section 3 shall not
be abated until after the exhaustion of business interruption insurance
as provided for in Subsection (a)(vi) of this Section. After the
exhaustion of business interruption insurance, payments of rent
provided in Section 3 shall be abated in the manner and to the extent
that is fair, just and equitable to both Lessee and Lessor, taking into
consideration, among other relevant factors, the number of useable beds
affected by damage or destruction.
(h) Blanket Coverage. Notwithstanding anything to the contrary
contained in this Section, Lessee's obligation to carry the insurance
provided for herein may be brought within the coverage of a so-called
blanket policy carried and maintained by Lessee; provided, however,
that the coverage afforded Lessor will not be reduced or diminished or
otherwise be different from that which would exist under a separate
policy meeting all other requirements of this Agreement.
(i) Endorsement and Rating. Lessee shall make timely delivery
of policies and certificates of all required insurance to Lessor, each
of which shall (i) contain a clause of endorsement to the effect that
it may not be terminated or materially amended except after 30 days'
written notice to Lessor and Lessee, and (ii) be written by a company
having a rating of not less than A+ in the current issue of "Best's
Insurance Guide" or a company acceptable to Lessor. All insurance shall
comply with and be subject to any underlying mortgage requirements.
(j) Waiver of Subrogation. Lessor and Lessee expressly waive
any and all rights and claims as against each other for losses and
damages to the extent that such losses and damages are required to be
covered by insurance, provided that such waiver is not prohibited by
the terms of the applicable insurance policies.
12. INDEMNIFICATION. Lessee agrees to indemnify Lessor against and hold
Lessor harmless from any and all liabilities, claims, suits, demands, causes of
action, losses, damages, costs and expenses, including attorneys' fees, arising
from or in any manner connected with the operation of the business by Lessee,
the performance of the terms and conditions of this Lease and any acts or
omissions of Lessee in connection with any of the matters contemplated by this
transaction. Lessor agrees to indemnify Lessee against and hold Lessee harmless
from any and all liabilities, claims, suits, demands, causes of action, damages,
costs and expenses, including attorneys' fees, arising from or in any manner
connected with Lessor's performance of the terms and conditions of this Lease.
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<PAGE> 8
13. USE OF DEMISED PREMISES. The Demised Premises shall be used for the
purpose of operating a health care facility, nursing home, or such other
activities, uses and purposes as are consistent with the use of the Demised
Premises as a certified and licensed nursing home.
14. MAINTENANCE AND REPAIRS. At all times during the term of this
Agreement and any renewals thereof, Lessee shall maintain the entire Demised
Premises in good condition and repair, ordinary wear and tear excepted. All
maintenance and repair work undertaken by Lessee shall be done in a workmanlike
manner, leaving the Demised Premises free of liens for labor and material. At
the termination of this Agreement, an inspection shall be performed as to
condition of paint, carpets, appliances, plumbing, and other interior fixtures,
improvements, and finishes etc., together with an inspection report as to the
exterior of each building and its surrounding grounds. It is the intent of the
parties hereto that the Demised Premises be maintained at all times and returned
upon the termination or expiration of this Agreement in a condition equal to
that at the time of execution of this Agreement, reasonable wear and tear
excepted. In the event that the parties cannot agree to the condition upon
termination of this Agreement, then the matter shall be submitted to arbitration
as provided for hereinbelow.
15. CONSTRUCTION OF IMPROVEMENTS TO EXISTING FACILITY. Lessee shall
have the right, without the consent of Lessor, to make nonstructural repairs,
improvements, alterations and installations to the Demised Premises in an amount
of less than $10,000 for each occurrence. All other repairs, improvements,
alterations and installations shall require the consent of Lessor, which shall
not be unreasonably withheld. Lessee shall make and construct all such repairs,
improvements, alterations and installations in accordance with all laws, rules
and regulations of applicable governing bodies and agencies, and shall
diligently complete such construction once the same has commenced. Lessor shall
have no responsibility for said construction or any costs, loss or damage
suffered by Lessee in connection therewith. All improvements constructed by
Lessee upon the Demised Premises shall, upon termination of this Agreement,
belong to Lessor. Lessee shall save and hold Lessor harmless and the Demised
Premises harmless from any and all liability of any kind on account of such work
or improvement while this Agreement remains in effect. Lessor shall have the
right at any time to post the Demised Premises with such notices as may be
required to protect Lessor's interest in the Demised Premises from mechanics'
liens or other liens of a similar nature.
16. PERSONAL PROPERTY.
(a) Lessee acknowledges that the Personal Property is the
property of Lessor and that Lessee has only the right to the exclusive
possession and use of the said property as provided herein. Lessee
shall keep all of the Personal Property in as good working order and
condition as it is in on the date of commencement of this Agreement,
and at the expiration of this Agreement shall return and deliver all
such Personal Property to Lessor in as good order
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<PAGE> 9
and condition as when received hereunder, reasonable wear and tear and
damage by Acts of God or insurable peril excepted; provided, that
Lessee agrees, if necessary for the proper operation of the Demised
Premises, or to comply with or maintain all pertinent licensure,
certification, insurance policy or other legal requirements and
otherwise in accordance with customary practice in the industry, that
Lessee shall replace all items of Personal Property which may be
damaged or destroyed through no fault or neglect of Lessor or which may
become worn out or obsolete during the Term of this Agreement (i.e.,
the "New Personal Property"), and such New Personal Property and
replacements thereof shall be the property of and owned by Lessor. Upon
expiration or termination of this Agreement, all Personal Property and
New Personal Property shall become the property of Lessor, if not
already owned by Lessor, and Lessee shall execute all documents and
take any actions reasonably necessary to evidence such ownership.
(b) If Lessee expends more than $5,000 in the aggregate to
replace any of the Personal Property during the last five years of the
Initial Term (and this Agreement is not renewed for an Additional
Term), Lessor, at its option, shall either (i) pay to Lessee Lessee's
depreciated book value (using a five-year straight-line method) for
such New Personal Property within 30 days of Lessee's surrender of the
Demised Premises, or (ii) allow Lessee to retain ownership of such New
Personal Property, in which event, Lessee may claim and remove the same
from the Demised Premises within a reasonable time thereafter.
17. UTILITIES. Lessee shall be responsible for and shall pay for all
utilities, including, without limitation, electricity, gas, water, garbage and
telephone, and any other services which may be used or furnished to or for
Lessee incident to the use and occupancy of the Demised Premises.
18. LAWS AND REGULATIONS; LICENSING REQUIREMENTS. Lessee shall at its
sole cost and expense comply with all laws, statutes, ordinances and regulations
of all governmental agencies having jurisdiction over the Demised Premises. The
judgment of any court of competent jurisdiction, or the admission of Lessee in
any action or proceeding against Lessee, that Lessee has violated any such
ordinance, statue, law or regulation applicable to the Demised Premises in the
use and occupancy thereof by Lessor shall be conclusive of such fact as between
Lessor and Lessee. In addition to the foregoing, Lessee shall, at its own cost
and expense, promptly do and provide or perform each and every requirement of
any state or federal licensing or certification authority having jurisdiction
over the Demised Premises as a health care facility or nursing home.
19. WASTE AND NUISANCE. Lessee shall not commit, or allow to be
committed, any waste upon the Demised Premises, or any public or private
nuisance. Lessee shall not use, nor allow the Demised Premises to be used for
any improper, immoral,
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<PAGE> 10
unlawful or objectionable purpose or take any actions which would impair the
reputation of the Demised Premises or Lessor.
20. DEFAULT BY LESSEE.
(a) Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default":
(i) If Lessee fails to pay any installment of rent as
required by this Agreement, and such failure continues for 5
days after written notice of such failure from Lessor to
Lessee; or
(ii) If Lessee fails to perform any other covenants
or conditions on its part agreed to be performed and such
failure to perform other covenants shall continue for 30 days
after written notice (or such longer period of time, not to
exceed 120 days, as may be reasonably required to cure a
matter which Lessee is proceeding diligently to cure but, due
to its nature, cannot reasonably be remedied within 30 days)
of such failure from Lessor to Lessee; or
(iii) If a petition or proceeding under the federal
Bankruptcy Act or any amendment thereto is filed or commenced
by or against Lessee and said proceedings shall not be
dismissed within 60 days following commencement thereof; or
(iv) If Lessee is adjudged insolvent or makes an
assignment for the benefit of its creditors; or
(v) If a receiver is appointed in any proceeding or
action to which Lessee is a party with authority to take
possession or control of the Demised Premises or the business
conducted thereon by Lessee and such receiver is not
discharged within a period of 60 days after his appointment;
or
(vi) If any material license or certification of
Lessee necessary for the operation of the Demised Premises as
a nursing home facility is revoked or suspended (but not
including decertification for Medicare) and Lessee does not
obtain reinstatement of the license within 60 days thereafter.
(b) Remedies Available to Lessor. If an Event of Default shall
occur, Lessor shall have the right, at its election:
(i) To reenter the Demised Premises. In conjunction
with such reentry, Lessor may elect either to (A) terminate
this Agreement, or (B)
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<PAGE> 11
repossess the Demised Premises without terminating this
Agreement, in which event the obligations of Lessee to pay
rent for the balance of the lease term then in effect (but
excluding any Additional Term(s) not yet exercised) shall
remain. Lessor may reenter and repossess the Demised Premises
in the manner contemplated herein without being guilty of
trespass.
(ii) To cure Lessee's default at Lessee's cost. Any
sums paid by Lessor in this regard shall be due immediately
from Lessee to Lessor, and shall bear interest at a rate of
10% per annum from the date the sum is paid by Lessor until
Lessor is reimbursed by Lessee. The sum, together with
interest on it, shall be additional rent.
(iii) To sue Lessee for damages for noncompliance
with any covenant, agreement or warranty contained in this
Agreement or for nonpayment of any sum required to be paid by
Lessee to Lessor.
(c) Default by Lessor. Any of the following occurrences,
conditions or acts by Lessor shall constitute a default hereunder: (i)
Lessor's failure to perform any obligation hereunder within 10 days
after receipt of written notice from Lessee to Lessor specifying such
default and demanding the same be cured; or (ii) Lessor's breach of any
representation or warranty hereunder which is not cured within 30 days
after receipt of written notice from Lessee to Lessor specifying such
default and demanding that the same be cured. Upon the occurrence of a
default by Lessor, Lessee shall have any and all remedies available at
law and/or in equity.
21. REMEDIES CUMULATIVE. The remedies conferred by this Agreement upon
Lessor and Lessee are not intended to be exclusive, but are cumulative and in
addition to all remedies otherwise afforded by law.
22. CONDEMNATION. In the event the title or possession of the whole of
the Demised Premises shall be taken by duly constituted authority in
condemnation proceedings under the exercise of the right of eminent domain, this
Agreement shall terminate upon the vesting of title or taking of possession
pursuant thereto, and Lessee shall make all payments required to be made by
Lessee pro rata to the date of such vesting or possession, and Lessee shall be
released from all further payment or rent or other obligations or rights under
this Agreement. In the event of a partial acquisition of said Demised Premises
under condemnation proceedings and both parties agree that it shall not be
practicable or economical for Lessee to retain and operate the remainder in
accordance with the uses and purposes to which the Demised Premises are then
being put, it shall be optional with Lessee to terminate this Agreement and, in
the event Lessee so elects, said termination shall be as provided in the
preceding sentence.
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(a) In the event the parties disagree as to whether it is
practical or economical for Lessee to retain and operate the remainder
in accordance with the uses and purposes to which said premises are
then being put, the matter shall be submitted to resolution and
arbitration as provided for hereinafter.
(b) In the event that title or possession to a portion of the
Demised Premises shall be taken and if Lessee elects to continue to use
and operate the Demised Premises, or if it shall be practical and
economical for Lessee to continue to use and operate the Demised
Premises in accordance with the uses and purposes to which the Demised
Premises are then being put, this Agreement shall not terminate, but
the basic monthly rent after the date of vesting of title or the taking
of possession shall be reduced proportionately as agreed to between the
parties to the extent of the Demised Premises taken in such
proceedings. In the event the parties cannot agree to the reduction,
the matter shall be submitted to arbitration as provided for in Section
37. Termination shall be without prejudice to the rights of either
Lessor or Lessee to recover compensation from the condemning authority.
23. ASSIGNMENT AND SUBLETTING. Except as set forth in the following
sentence, Lessee may not transfer, sublet or assign any interest in this
Agreement without the prior written consent of Lessor, which Lessor shall not
unreasonably withhold. Lessee may, upon prior written notice to Lessor,
transfer, sublet or assign any interest in this Agreement to any subsidiary,
affiliate or other entity under common control with Lessee without the consent
of Lessor, provided that in such event Lessee shall remain liable for the full,
faithful and complete performance of this Agreement as provided herein. The
consent to any one assignment of subletting shall not be deemed a consent to a
subsequent assignment or subletting.
24. MECHANICS LIENS. Lessee agrees to keep the Demised Premises and all
parts thereof at all times free of mechanic's liens and other liens of labor,
services, supplies, equipment or material purchased or procured, directly or
indirectly by or for Lessee. Lessee, however, shall have the right to contest
the validity of the amount of any such lien as filed upon posting a bond in an
amount sufficient to discharge any lien, and upon a negative determination of
such contest shall immediately pay and discharge any judgment rendered, together
with all costs and charges incidental thereto, and shall cause the lien thereof
to be released from the Demised Premises. Should Lessee fail, within 90 days
after notice of filing of any such lien, to discharge or cause the release of
such liens or charges or to contest the same and post bond as provided for
above, then Lessor, at Lessor's option, may satisfy said liens by payment
thereof; and, in such event, the amount of such payment, together with interest
thereon at the rate of 10% per annum from the time the payment is so made until
repayment thereof, shall immediately be due and payable by Lessee to Lessor.
Upon the commencement of any work or alteration or repair, Lessor shall be
permitted to post on and affix to said premises proper notices of
nonresponsibility.
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<PAGE> 13
25. SUBORDINATION AND ATTORNMENT.
(a) General. Subject to the conditions set forth in this
Section, this Agreement is and shall be subordinate to any mortgage or
deed of trust now of record or recorded after the date hereof affecting
the Demised Premises; provided, however, that Lessee's agreement to
subordinate to any future mortgage is conditioned entirely upon the
agreement of the lienholder and any subsequent purchaser or acquiror to
not disturb Lessee's possession of the Demised Premises as long as
Lessee has not committed an Event of Default under this Agreement. In
the event of any foreclosure of any mortgage or deeds of trust
encumbering the Demised Premises, or any deed in lieu of foreclosure,
Lessee shall attorn to and recognize the purchaser at the foreclosure
sale or the acquiring party pursuant to the deed in lieu of foreclosure
as Lessee's landlord, provided that said purchaser also recognizes
Lessee's nondisturbance rights under this Agreement. Lessee shall
receive a copy of any notice of default sent to Lessor from any such
mortgagee on the Demised Premises and be given the same right to cure
as Lessor.
(b) Sale by Lessor. In the event of any sale or conveyance by
Lessor (or its mortgagee) of the Demised Premises or any part thereof
(i) the acquiring party shall take subject to this Agreement and the
rights of Lessee hereunder, and (ii) the sale shall operate to release
Lessor (and any mortgagee) from any further liability under any of the
terms, covenants, and conditions contained in this Agreement, express
or implied, arising after the date thereof and Lessee shall look solely
to the purchaser with respect to any matter arising after such date.
(c) Estoppel Certificates. Either party, within 10 days after
written request by the other, shall execute and deliver an estoppel
certificate which shall, at a minimum, state to the extent of the true
facts: (i) that the Agreement provided to the lender, purchaser or
other applicable third party is a true and correct copy of the
Agreement and that it has not been modified or terminated except as set
forth, (ii) that the rentals in the Agreement have not been modified,
(iii) that there are no other agreements between the parties affecting
the Demised Premises, (iv) that there are no disputes existing as to
the Agreement, (v) that no party is in default under this Agreement,
(vi) that there have been no rentals paid more than 30 days in advance,
and (vii) any other terms reasonably required, including, but not
limited to, a disclaimer from Lessor of any interest in accounts
receivable generated from the operation of the Demised Premises
(excluding Lessor's receivables provided for under Section 6) and an
agreement to turn any such receivables over to Lessee's
receivable-based lender, if requested by such lender.
(d) Leasehold Financing. As long as no Event of Default exists
hereunder, Lessee shall have the right to collaterally assign or
mortgage its interest in this Agreement. If Lessee does so, Lessor
agrees as follows: (i)
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<PAGE> 14
Lessor shall not agree to any modification, amendment or termination of
this Agreement without first obtaining the prior written approval of
Lessee's leasehold mortgagee (the "Lessee's Mortgagee"), which approval
shall not be unreasonably withheld, provided, however, that this
provision shall not impair Lessor's right to terminate this Agreement
pursuant to its terms due to Event of Default hereunder; (ii) Lessor
shall notify Lessee's Mortgagee in writing of any Event of Default by
Lessee under this Agreement at the time notice is sent to Lessee and
Lessee's Mortgagee shall then have the right, but not the obligation,
to correct any such default within the time allotted to Lessee under
this Agreement, provided, however, that no such notification of
Lessee's Mortgagee shall be required unless Lessee has provided Lessor
with name and current address of Lessee's Mortgagee; (iii) If for any
reason whatsoever, including the disaffirmance of rejection of this
Agreement in a bankruptcy proceeding, this Agreement shall terminate or
come to an end during the term of Lessee's Mortgagee's mortgage, Lessor
shall enter into a new lease with Lessee's Mortgagee on the same terms
and conditions as this Agreement if Lessee's Mortgagee shall pay Lessor
all amounts owed by Lessee under the Agreement, (iv) Lessee's Mortgagee
shall not be liable for the performance of this Agreement (subject to
subsection (iii) above) except during such time as Lessee's Mortgagee
shall be in possession due to foreclosure or other acquisition of the
leasehold estate, and upon any permitted subsequent assignment of this
Agreement by Lessee's Mortgagee, Lessee's Mortgagee shall remain liable
for the performance of the obligations of any Lessee under any
substitute agreement entered into between Lessee's Mortgagee and
Lessor.
Lessor shall enter into an agreement in recordable form with
Lessee's Mortgagee, if so requested by Lessee's Mortgagee, containing
the foregoing terms and conditions. In no event shall Lessor be liable
to pay any such amounts due to Lessee's Mortgagee or under any such
leasehold mortgage.
26. SURRENDER OF POSSESSION. Lessee shall, on or before the last day of
the term of this Agreement, surrender possession of the Demised Premises to
Lessor, clean and in good condition and repair, ordinary wear and tear excepted.
The Demised Premises, upon the surrender of possession, shall be in compliance
with all local codes and regulations, notwithstanding that such codes and
regulations may not have applied to Lessee during the term of this Agreement.
27. NOTICES. Any notice, demand or election required or permitted to be
given or made hereunder shall be in writing and shall be personally delivered,
telecopied with confirmation received, or mailed, certified by registered mail,
return receipt requested, addressed to the respective parties as follows:
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<PAGE> 15
Lessor: Westminister Healthcare, Inc.
3400 Remington Drive
Plano, Texas 75023
Attention: Mr. Thomas Hu
Telecopy: (214) 596-5559
Telephone: (214) 612-5368
With a Copy to: Vial, Hamilton, Koch & Knox, L.L.P.
1717 Main Street
Suite 4400
Dallas, Texas 75201-7388
Attention: Bruce Howell, Esq.
Telecopy: (214) 712-4402
Telephone: (214) 712-4326
-------
Lessee: BritWill Investments - II, Inc.
c/o Unison HealthCare Corporation
7272 East Indian School Road, Suite 214
Scottsdale, Arizona 85251
Attention: Jerry Walker, President and CEO
Telecopy: (602) 481-6479
Telephone: (602) 423-1954
With a Copy to: Quarles & Brady
One East Camelback, Suite 400
Phoenix, Arizona 85012
Attention: Robert S. Bornhoft, Esq.
Telecopy: (602) 230-5598
Telephone: (602) 230-5576
Notice will be deemed to be received when personally delivered (if
signed receipt obtained) or telecopied (confirmation received) or three days
after mailing. Lessor and Lessee may change their addresses and/or telephone
number for purposes of this Agreement by giving notice thereof in accordance
with the provisions of this Section.
28. NOTICE OF ACTION AGAINST LICENSE. Notwithstanding any other
provision of this Agreement to the contrary, Lessee shall inform Lessor
immediately by telephone, telecopy or telegraph of any action taken, commenced
or instituted by any state or federal authority having jurisdiction over the
Demised Premises as a health care facility to terminate or revoke any license or
certification of Lessee. Such notice shall be given to Lessor at the address or
telephone number set forth in the preceding Section.
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<PAGE> 16
29. QUIET ENJOYMENT. If and so long as Lessee is not in default
hereunder, Lessor agrees that it will not interfere with the peaceful and quiet
occupation and enjoyment of the Demised Premises by Lessee.
30. REPRESENTATIONS AND WARRANTIES.
(a) Lessor. Lessor hereby warrants and represents to Lessee
that:
(i) Lessor, if other than an individual, is a duly
organized and validly existing corporation, incorporated and in good
standing under the laws of the State of Texas. Lessor is qualified to
do business and in good standing in the state where the Demised
Premises is located.
(ii) Lessor has full power and authority to execute
and to deliver this Agreement and all related documents, and to carry
out the transactions contemplated herein. This Agreement is valid,
binding and enforceable against Lessor in accordance with its terms.
(iii) The Demised Premises is as described in Section
1 of this Agreement, and Lessor is the fee simple owner of the
Property. Except as set forth on Exhibit A-2 attached hereto, no
portion of the Demised Premises is subject to any liens. There are no
mechanics', materialmen's or similar claims or liens presently claimed
or, to the best of Lessor's knowledge, which will be claimed against
the Demised Premises for work performed or commenced prior to the
Commencement Date.
(iv) At all times prior to the Commencement Date,
Lessor, to the best of its knowledge, properly maintained all material
local, state and federal licenses necessary for the lawful operation of
the Demised Premises as a nursing home facility (the "Licenses") and,
to the best of its knowledge, currently meets all requirements
necessary for Lessee to secure the Licenses in its own name as of, or
as soon as practicable after, the Commencement Date. There is no action
pending or, to the best knowledge of Lessor, recommended by the
appropriate local, state or federal agency having jurisdiction thereto,
to terminate or rescind or not to renew any of the Licenses or any
action of any other type which would have a material adverse effect on
the Demised Premises. Lessor, to the best of its knowledge, is not
required to submit any notice, report or other filing with any
licensing agency or other federal, state or local governmental
authority in connection with the execution or delivery or performance
by Lessor of this Agreement or the consummation of the transactions
contemplated hereby, except such as already have been submitted or
filed or will be submitted or obtained in a timely manner.
(v) None of Lessor's employees are members of a labor
union or subject to a collective bargaining agreement. Lessor is not a
party to any labor dispute or grievance.
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<PAGE> 17
(vi) To the best of Lessor's knowledge, the Demised
Premises is in compliance with all currently applicable municipal,
county, state and federal laws, regulations, ordinances, standards and
orders and with all municipal, health, building and zoning by-laws and
regulations (including, without limitation, the building and zoning
codes) where the failure to comply therewith or to obtain a waiver
therefrom could have a material adverse effect on the business,
property, condition (financial or otherwise) or operation of the
Demised Premises. There are no outstanding deficiencies or work orders
of any authority having jurisdiction over the Demised Premises
requiring conformity to any applicable statute, regulation, ordinance
or by-law pertaining thereto.
(vii) Intentionally omitted.
(viii) Except in accordance with, and in full
compliance with, any and all applicable governmental laws, regulations
and requirements relating to environmental and occupational health and
safety matters and hazardous materials, substances or wastes (as
defined from time to time under any applicable federal, state or local
laws, regulations or ordinances), Lessor has not released into the
environment, or discharged, placed or disposed of any such hazardous
materials, substances or wastes or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or
under the Demised Premises or in the operation thereof.
(b) Lessee. Lessee hereby warrants and represents to Lessor
that:
(i) Lessee is a duly organized, validly existing
Arizona corporation and is qualified to do business and is in good
standing in the state where the Demised Premises is located.
(ii) Lessee has full power and authority to execute
and to deliver this Agreement and all related documents, and to carry
out the transactions contemplated herein. This Agreement is valid,
binding and enforceable against Lessee in accordance with its terms.
(iii) Lessee will operate the Demised Premises at all
times after the Commencement Date in material compliance with all
applicable laws.
(iv) Except in accordance with, and in full
compliance with, any and all applicable governmental laws, regulations
and requirements relating to environmental and occupational health and
safety matters and hazardous materials, substances or wastes (as
defined from time to time under any applicable federal, state or local
laws, regulations or ordinances), Lessee, on and after the Commencement
Date, shall not release into the environment, or discharge, place or
dispose of any such hazardous materials, substances or wastes or cause
the same to be so released into the environment or discharged,
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<PAGE> 18
placed or disposed of at, on or under the Demised Premises or in the
operation thereof.
31. NO WAIVER. No waiver of any default or breach of the terms,
covenants, conditions or agreements of this Agreement shall be construed to be a
waiver of any succeeding default or breach of the same or of any other term,
covenant, condition or agreement hereof; nor shall any custom or practice which
may develop between the parties in the administration of this Agreement be
construed to waive or lessen the right of Lessor or Lessee to insist upon the
performance by Lessee or Lessor in strict accordance with all of the terms,
covenants, conditions and agreements of this Agreement. The subsequent
acceptance of any payment owed by Lessee to Lessor or of any payment owed by
Lessor to Lessee under this Agreement, or the payment of rent by Lessee, shall
not be deemed to be a waiver of any preceding breach or default by Lessee or
Lessor of any term, covenant, condition or agreement of this Agreement, other
than the failure of Lessee or Lessor to make the specific payment so accepted by
Lessor or Lessee, regardless of Lessor's or Lessee's knowledge of such preceding
breach or default at the time of the making or acceptance of such payment.
32. INSPECTION AND ENTRY BY LESSOR. Lessor shall have the right to go
upon and inspect the Demised Premises at reasonable times during normal business
hours upon at least 24 hours' prior notice and at any time upon an emergency.
Such entry by Lessor shall not unreasonably interfere with Lessee's use and
occupancy of the Demised Premises or with the privacy of Lessee's residents or
patients. Lessor shall also have the right to enter the Demised Premises to show
such to any prospective purchaser or tenant or any potential or current
mortgagee.
33. POSTING. Lessor at all times has the right to go upon the Demised
Premises to post any notice that shall be required or permitted by any law
relating to or affecting liability of Lessor for labor performed or materials
furnished in or for the Demised Premises. Such entry or posting by Lessor shall
be effected in compliance with the immediately preceding Section, and shall not
unreasonably interfere with Lessee's use or occupancy of the Demised Premises.
34. FORCE MAJEURE. Except as otherwise specifically contemplated in
this Agreement, in the event that Lessor or Lessee shall be delayed or hindered
in, or prevented from, the performance of any act required hereunder (except for
the obligation of Lessee to pay rent) by reason of inability to procure
materials, delay by the other party, failure of power or unavailability of
utilities, riots, insurrection, war or other reason of a like nature not the
fault of such party or not within its control, then performance of such act
shall be excused for the period of delay, and the period for the performance of
any such act shall be extended for a period equivalent to the period of such
delay.
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<PAGE> 19
35. MEMORANDUM OF LEASE. If required by Lessee, Lessor agrees to
execute a Memorandum of Lease in recordable form, setting forth such provisions
hereof as reasonably may be required by Lessee.
36. HOLDING OVER. If Lessee continues to occupy the Demised Premises
after the expiration of the term of this Agreement, and Lessor elects to accept
rent thereafter, a month-to-month tenancy terminable by either Lessor or Lessee
on 30 days' notice shall be created, and the rent for such month-to-month
tenancy shall be at 125% of the monthly rent in effect immediately prior to
expiration. Except for the provisions of this Agreement regarding the rental
rate and the term of the Agreement, all other provisions, terms, conditions,
covenants and agreements contained in this Agreement shall apply to a
month-to-month tenancy.
37. RESOLUTION OF DISPUTE; ARBITRATION. In the event of any dispute or
disagreement between the parties hereto affecting the parties' respective rights
in this Agreement, the disputing party shall set forth its position and
disagreement in writing and give written notice of the same to the other party
that such dispute exists. The parties will make a good faith effort to resolve
the dispute or disagreement. If the dispute is not resolved at the expiration of
30 days from the time such notice is received, then the entire matter shall be
submitted to arbitration through and in accordance with the rules then existing
of the American Arbitration Association, and judgment upon the award rendered
may be entered in any court having jurisdiction thereof. The arbitrator(s) shall
be bound to the strict interpretation and observation of the terms of this
Agreement. Any arbitration proceeding shall be conducted in Dallas, Texas.
38. APPLICABLE LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Texas (without regard
to its rules of conflicts of laws).
39. HEADINGS. The descriptive headings used in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
40. AMENDMENT OR MODIFICATION. This Agreement shall not be amended or
modified without the prior written consent of the parties hereto.
41. SEVERABILITY. In event any part or provision of this Agreement
shall be determined to be invalid or unenforceable, the remaining portions of
this Agreement shall, nevertheless, continue in full force and effect.
42. TIME. Time is of the essence of this Agreement.
43. BINDING. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto, their estates, heirs, personal representatives,
successors in interest and permitted assigns.
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<PAGE> 20
44. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same Agreement.
45. INTENTIONALLY OMITTED.
46. RIGHT OF FIRST REFUSAL. Lessee shall have a right of first refusal
to purchase the Demised Premises upon the following terms and conditions:
(a) In the event Lessor shall make an offer to or receive an
offer from a party other than Lessee (the "Outside Purchaser") for the sale of
the Demised Premises, which offer the recipient desires to accept (the "Outside
Purchase Offer"), Lessor shall give written notice of such Outside Purchase
Offer to Lessee, which notice shall set forth the material features of such
Outside Purchase Offer. Lessee then shall have 30 business days from the date
notice is received in which to elect to purchase the Demised Premises on the
same terms and conditions as contained in the Outside Purchase Offer, including
any financing to be provided by Lessor, such election to be exercised by Lessee
giving written notice to Lessor within such 30 business day period.
(b) If Lessee elects to purchase the Demised Premises on the
terms and conditions contained in the Outside Purchase Offer, the closing shall
take place at the time provided in the Outside Purchase Offer or, if no time for
the closing is provided therein, the closing shall occur within 90 days after
written notice has been given by Lessee to Lessor of Lessee's exercise of such
election.
(c) If Lessee elects not to purchase the Demised Premises
within the 30 day period provided in Subsection (c) above, then Lessor may close
the sale thereof with the Outside Purchaser on the same terms and conditions set
forth in the notice of such Outside Purchase Offer to Lessee, but subject to
Lessee's rights under this Agreement, but excluding Lessee's rights under this
Section, which shall lapse upon the closing of the sale to the Outside
Purchaser.
47. TAX ESCROW. Along with each monthly payment of rent, Lessee shall
pay to Lessor an amount equal to one-twelfth of the real property taxes that
Lessor reasonably estimates will be payable during the next ensuing 12 months in
order to accumulate with Lessor sufficient funds to pay all such taxes at least
30 days prior to their respective due dates (the "Tax Escrow Fund"). Lessee
hereby pledges to Lessor and grants to Lessor a security interest in any and all
monies now or hereafter deposited in the Tax Escrow Fund as additional security
for the payment of any and all amounts due and arising under this Lease. Lessor
will apply the Tax Escrow Fund to payments of taxes required to be made by
Lessee hereunder. If the amount of the Tax Escrow Fund shall exceed at any time
the amount due for the next installment of taxes, Lessor shall promptly notify
Lessee, and, at Lessee's instruction, either return any excess to Lessee or
credit such excess against future payments to be made by Lessee to the Tax
Escrow Fund.
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<PAGE> 21
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement
effective as of the date first set forth above.
LESSOR:
WESTMINISTER HEALTHCARE, INC., a Texas
corporation
By /S/
--------------------------------------
Its Authorized Agent
----------------------------
LESSEE:
BRITWILL INVESTMENTS - II, INC., a
Delaware corporation
By /S/ Jerry M. Walker
--------------------------------------
Jerry M. Walker
President and CEO
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<PAGE> 22
EXHIBIT "A"
Situated in the County of Collin, State of Texas, being a part of the
Samuel McFall Survey, Abstract No. 641 also being a part of Lot 3, Block "E" of
Heritage, an addition to City of McKinney, Texas according to the amended plat
recorded in Volume F, Page 744, Map Records of Collin County, Texas, and being
described by metes and bounds as follows:
Beginning at a 1/2" steel rod found at the northeast corner of said Lot
3, said rod also being at the intersection of the south line of Pearson Avenue a
60' right-of-way and the west line of Graves Street a 50' right-of-way;
Thence South 02[degree]33'41" West with said west line a distance of
469.67 feet to "X" found cut in concrete at the southeast corner of said Lot 3;
Thence North 87[degree]09'28" West with the south line of said Lot 3 a
distance of 534.92 feet to a set 1/2" steel rod;
Thence North 02[degree]21'42" East a distance of 266.33 feet to a 1/2"
steel rod;
Thence in a northwesterly direction with a curve to the left having a
radius of 310.00 feet (chord bears North 07[degree]28'26" West, 111.27 feet) an
arc distance of 111.87 feet to a 1/2" steel rod;
Thence in a northwesterly direction with a curve to the left having a
radius of 284.88 feet (chord bears North 06[degree]04'17" West, 95.53 feet) an
arc distance of 95.99 feet to a 1/2" steel rod in said south line of Pearson
Avenue;
Thence in a southeasterly direction with said south line and a curve to
the left having a radius of 530.00 feet (chord bears South 84[degree]17'17"
East, 58.03 feet) an arc distance of 58.96 feet to a 1/2" steel rod;
Thence South 87[degree]25'36" East and continuing with said south line
a distance of 509.29 feet to the Point-of-Beginning and containing 5,808 acres
of land.
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<PAGE> 1
Exhibit 10.112.1
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
CONVERSION RIGHTS PURSUANT TO THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, PLEDGED OR HYPOTHECATED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO MAKER TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
UNISON HEALTHCARE CORPORATION
PROMISSORY NOTE
$1,028,188.07 Date: March 17, 1997
For value received, Unison HealthCare Corporation, a Delaware
corporation ("Maker"), promises to pay to the order of David A. Kremser
("Lender"), at 784 Yankee Creek Road, Evergreen, Colorado 80439 or at such other
place as Lender may direct, the principal sum of $1,028,188.07, with interest on
unpaid principal at the rate of 12% per annum.
The indebtedness evidenced by this Note will be subject to the
following terms and conditions:
1. Payments. The entire unpaid principal amount of this Note, together
with accrued and unpaid interest thereon, will be due and payable in full on
December 31, 1997 (the "Maturity Date").
2. Acceleration. Upon the occurrence of an Event of Default (as defined
in Section 3 below) or an Acquisition Event (as defined below), Lender may
without notice to Maker declare the entire unpaid principal amount of this Note
to be (or in the case of an Event of Default specified in Section 3(d), such
amounts will automatically be) immediately due and payable. Notwithstanding
anything to the contrary in this Note, after maturity, whether by acceleration
or otherwise, amounts outstanding under this Note will bear interest until paid
at an annual rate that is equal to the sum of 5% plus the greater of (i) 12% or
(ii) the rate announced by Wells Fargo Bank in Denver, Colorado as its prime
rate (the "Prime Rate"), adjusted as and when changes in the Prime Rate are
made.
As used in this Note, "Acquisition Event" means (i) a merger or
consolidation of the Company with one or more other entities, whether or not the
Company is the surviving corporation, (ii) a sale or other disposition of all or
substantially all of the assets of the Company pursuant to a plan that provides
for the liquidation of the Company, (iii) an exchange
1
<PAGE> 2
by the holders of all of the outstanding shares of Common Stock for securities
issued by another entity, or in whole or in part for cash or other property,
pursuant to a plan of exchange approved by the holders of a majority of such
outstanding shares or (iv) a change in control of the Company, with "control"
defined as the power to direct or cause the direction of the management and
policies of the Company, whether through the ownership of voting securities, by
contract or otherwise.
3. Events of Default. The following events will be Events of Default:
(a) Maker fails to make any payment under this Note when due;
(b) Maker breaches or violates any term or condition of, or defaults
with respect to any obligations under, any agreement between Maker and Lender or
between Maker and any person or entity controlling, controlled by, or under
common control with, Lender, including, but not limited to, the Services
Agreement dated as of March 31, 1997, between Maker and Lender and any
agreements or instruments required to be delivered pursuant to or contemplated
by that Services Agreement in any case after the expiration of any applicable
grace period or opportunity to cure such breach, violation or default;
(c) Maker fails to make any payment due by it on any indebtedness which
in the aggregate exceeds $50,000 for or with respect to borrowed money or the
deferred purchase price of property or any such indebtedness is accelerated or
is required to be paid prior to the stated maturity thereof or prior to any
regularly scheduled dates of payment, or Maker defaults in the performance of
any term contained in, or any event or condition exists under, any agreement or
instrument pursuant to which it has outstanding indebtedness for borrowed money
or for the deferred purchase price of property pursuant to which, in each such
case, there is payable more than $50,000 if the effect of such default, event or
condition is to cause, or permit a holder of such indebtedness (or a trustee or
agent on behalf of such holder) to cause, such indebtedness to become due and
payable prior to its stated maturity or regularly scheduled dates of payment; or
(d) Maker is insolvent or generally ceases to pay, or is unable to pay,
its debts as they become due or makes any admission in writing to the foregoing
effect; or a substantial part of the operations or business of Maker (taken as a
whole) is suspended; or Maker makes an assignment for the benefit of creditors;
or Maker commences (as debtor) a case under the United States Bankruptcy Code,
or commences any proceeding with respect to itself, or a substantial portion of
its property, under any other insolvency, bankruptcy, arrangement,
reorganization, liquidation, dissolution or similar law of the United States or
any other jurisdiction, or applies for a trustee, receiver or custodian (however
named) for all or a substantial portion of its property for the purpose of
general administration of such property for the benefit of creditors or for any
other purpose or takes any action to authorize any of the foregoing actions; or
a court of competent jurisdiction in the premises enters an order for relief
against Maker as a debtor in a case under the United States Bankruptcy Code; or
a case under the United States Bankruptcy Code is commenced against Maker or any
proceeding under any
2
<PAGE> 3
other insolvency, bankruptcy, reorganization, arrangement, liquidation,
dissolution or similar law of the United States or any other jurisdiction is
commenced against Maker and such case or proceeding remains undismissed for 60
days or Maker consents to or admits the material allegations against it in any
such case or proceeding; or any trustee, receiver or similar officer, however
named, is appointed for all or a substantial part of the property of Maker and
Maker consents thereto or such trusteeship or receivership continues for a
period of 60 days.
4. Prepayments. This Note may be prepaid at any time and from time to
time, in whole or in part, without premium or penalty, upon at least 10 days'
prior notice to Lender.
5. Certain Waivers. Maker and all persons or entities now or at any
time liable, whether primarily or secondarily, for the payment of the
indebtedness evidenced by this Note, expressly waive presentment for payment,
notice of dishonor, protest, notice of protest and diligence in collection, and
consent that the time of payment or any part thereof may be extended by Lender
and that Lender may release, fail to perfect or enforce its rights against, or
otherwise deal with any other person or entity liable on this Note without in
any way modifying, altering, releasing or limiting their respective liabilities.
In the event any amount owing under this Note is not paid when due, Maker agrees
to pay all costs of collection, including reasonable attorneys' fees.
6. Conversion. Lender will have the right, at any time after June 30,
1997 and from time to time after June 30, 1997, to convert the principal of this
Note, in whole or in part, into fully paid and nonassessable shares ("Shares")
of Maker's common stock ("Common Stock"), at a price (in dollars of principal
amount of this Note so converted) of $2.875 per Share, subject to adjustment as
provided in Section 13 (the "Conversion Price").
7. Conversion Notice. To convert all or any portion of the principal of
this Note as provided in Section 6, Lender will give Maker written notice of
Lender's election to convert, which notice will specify the amount of principal
converted and will fix a date on or after which Lender will present this Note at
Maker's offices. Maker may within 10 days after receipt of any such notice, pay
to Lender the full unpaid principal of this Note, together with accrued
interest, in which case Lender will forfeit the right to convert any portion of
this Note into Shares.
8. Issuance of Shares. Upon presentation and surrender of this Note at
Maker's offices on or after the date fixed in the notice from Lender under
Section 7 or during normal business hours, Maker will cause its Transfer Agent
(as defined below) to deliver to Lender certificates representing the number of
Shares into which this Note has been converted, together with any cash payable
in respect of any adjustment for fractional shares under Section 16, any accrued
interest payable under Section 11, and a new Note for any unconverted portion of
the principal of this Note surrendered. Upon the giving of notice of conversion
by Lender under Section 7 with respect to the portion of the principal of this
Note so converted, this Note will cease to represent any obligation of Maker
other than the obligation to deliver to Lender, upon presentation and surrender
of this Note as provided herein, the Shares into which the
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<PAGE> 4
principal of this Note was converted, any cash payable in respect of any
adjustment for fractional shares under Section 16, and any accrued interest
payable under Section 11. So long as any amounts remain outstanding under this
Note, Maker will promptly notify Lender in the event Maker determines to
register any Common Stock or Convertible Securities, whether in connection with
a public offering of securities by the Company or by stockholders, and all
Shares issued upon conversion of this Note will be "Registrable Securities"
within the meaning of the Registration Rights Agreement dated as of October 31,
1996, among Maker, David A. Kremser and John D. Filkoski.
9. Legends. Each certificate representing the number of shares of
Common Stock into which this Note has been converted will bear a legend
substantially to the effect of the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL AND STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
COUNSEL, IN FORM REASONABLY ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF
SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
10. Registered Holder. Upon surrender of this Note as provided above,
Lender will be deemed for all purposes the registered holder of the shares of
Common Stock into which this Note has been converted.
11. Interest at Conversion. Upon conversion of this Note, Maker will
pay interest on this Note accrued through the date notice of conversion is given
to Maker. At Lender's election, accrued but unpaid interest may be paid by the
issuance to Lender of Shares in an amount equal to the amount of such interest
divided by the Conversion Price.
12. Dividends Prior to Conversion. There will be no payment or
adjustment on account of any dividends on the Common Stock issued prior to
conversion.
13. Antidilution. The Conversion Price in effect at any time will be
subject to adjustment from time to time as provided in this Section. For
purposes hereof, the term "Common Stock" or "Common Shares" will include any
stock of Maker (whether voting or nonvoting) of any class or series which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of Maker and
which is not subject to redemption by Maker.
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<PAGE> 5
(a) Stock Dividends. If at any time Maker declares a dividend in shares
of its Common Stock, the Conversion Price in effect immediately prior to such
issue or sale will thereupon be reduced to a price determined by multiplying the
Conversion Price in effect immediately prior to the time of such issue or sale
by a fraction, the numerator of which will be the number of shares of Common
Stock outstanding immediately prior to such issue or sale and the denominator of
which will be the total number of shares of Common Stock outstanding immediately
after such issue or sale.
(b) Adjustment for Certain Special Dividends. In case Maker, by
dividend or otherwise, distributes to the holders of its Common Stock cash or
assets in the form of non-cash consideration (including, without limitation,
evidences of its or its affiliates' indebtedness or securities and excluding
distributions for which adjustments to the Conversion Price are required to be
made pursuant to other provisions of this Section), Lender will, upon the
conversion of this Note after the record date for such distribution or, in the
absence of a record date, after the date of such distribution, receive, in
addition to shares of Common Stock issuable in respect thereof, the amount of
such assets (or, at the option of Maker, a sum in cash equal to the Fair Market
Value thereof) which would have been distributed to Lender if Lender had
converted this Note immediately prior to the record date for such distribution
or, in the absence of a record date, immediately prior to the date fixed for
such distribution.
(c) Adjustment of Conversion Price upon Issuance of Common Stock. If at
any time the Company issues any shares of Common Stock for a consideration per
share (i) less than the Conversion Price in effect immediately prior to the time
of such issuance or (ii) less than the Market Price of Common Stock at the time
of such issuance, except for issuances of the Shares pursuant to conversion of
this Note, then the Conversion Price will be adjusted in accordance with the
following formula:
N P
---
C'= CO + M
-------
O + N
where: C' = the adjusted Conversion Price
C = the current Conversion Price
O = the number of shares of Common Stock outstanding on the date
of such issuance
N = the number of additional shares of Common Stock issued
P = the issue price per share of the additional shares of Common
Stock
M = the Market Price per share of Common Stock on the date of
such issuance
(d) Issuance of Securities.
(i) Issuance of Rights or Options. In the event the
Company grants (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any evidences of indebtedness,
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<PAGE> 6
shares of stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
additional shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event ("Convertible Securities") whether or not
such rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined as provided below) is
less than the Conversion Price in effect immediately prior to the time of the
granting of such rights or options (or less than the Market Price determined as
of the date of granting such rights or options, as the case may be), then the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such rights
or options will (as of the date of granting of such rights or options) be deemed
to be outstanding and to have been issued for such price per share. Except as
provided in clause (iii) of this subsection (d), no further adjustments of any
Conversion Price will be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities. For the purposes of this clause (i), the price per share
for which Common Stock is issuable upon the exercise of any such rights or
options or upon conversion or exchange of any such Convertible Securities will
be determined by dividing (A) the total amount, if any, received or receivable
by the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration payable to the Company
upon the exercise of all such rights or options, plus, in the case of such
rights or options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or options.
(ii) Issuance of Convertible Securities. In the event
the Company issues (whether directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) is less than the Conversion Price in effect
immediately prior to the time of such issue or sale (or less than the Market
Price, determined as of the date of such issue or sale of such Convertible
Securities, as the case may be), then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities will (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued for such price
per share, provided that (1) except as provided in clause (iii) of this
subsection (d), no further adjustments of any Conversion Price will be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (2) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which adjustments
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<PAGE> 7
of any Conversion Price have been or are to be made pursuant to other provisions
of this Section, no further adjustment of any Conversion Price will be made by
reason of such issue or sale. For the purposes of this clause (ii), the price
per share for which Common Stock is issuable upon conversion or exchange of
Convertible Securities will be determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any rights or options referred to in clause
(i) above, or the additional consideration, if any, payable upon the conversion
or exchange of Convertible Securities referred to in clause (i) or (ii) above,
or the rate at which any Convertible Securities referred to in clause (i) or
(ii) above are convertible into or exchangeable for Common Stock, changes (other
than under or by reason of provisions designed to protect against dilution),
then the Conversion Price in effect at the time of such event will be readjusted
to the Conversion Price that would have been in effect at such time had such
rights, options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold; and on the expiration of
any such option or right or the termination of any such right to convert of
exchange such Convertible Securities, the Conversion Price then in effect will
be increased to the Conversion Price that would have been in effect at the time
of such expiration or termination had such right, option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder will no
longer be deemed to be outstanding. If the purchase price provided for in any
such right or option referred to in clause (i) above or the rate at which any
Convertible Securities referred to in clause (i) or (ii) above are convertible
into or exchangeable for Common Stock, decreases at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Security, the
Conversion Price then in effect will be adjusted to such amount as would have
resulted had such right, option or Convertible Security never been issued as to
such Common Stock and had adjustments been made upon such issuance of Common
Stock, but only if as a result of such adjustment the Conversion Price then in
effect is decreased.
(iv) Consideration for Common Stock or Convertible
Securities. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any Common Stock or Convertible Securities are
issued or sold for cash, the consideration received therefor will be deemed to
be the amount received by the Company therefor, without deduction therefrom of
any expenses incurred. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities are issued or sold for a consideration other than cash or
securities, the amount of the consideration other than cash received by the
Company will be deemed to
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<PAGE> 8
be the Fair Market Value of such consideration without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase such shares of
Common Stock or Convertible Securities are issued in connection with any merger
or consolidation in which the Company is the surviving corporation (other than
any consolidation or merger in which the previously outstanding shares of Common
Stock are changed into or exchanged for the stock or other securities of another
corporation), the amount of consideration therefor will be deemed to be the Fair
Market Value of such portion of the assets and business of the non-surviving
corporation as the board of directors of Maker (the "Board") may determine to be
attributable to such shares of Common Stock, Convertible Securities, rights or
options, as the case may be. In the event of any consolidation or merger of the
Company in which the Company is not the surviving corporation or in which the
previously outstanding shares of Common Stock are changed into or exchanged for
the stock or other securities of another corporation or in the event of any sale
of all or substantially all of the assets of the Company for stock or other
securities of any corporation, the Company will be deemed to have issued a
number of shares of its Common Stock for stock or securities or other property
of the other corporation computed on the basis of the actual exchange ratio on
which the transaction was predicated and for a consideration equal to the Fair
Market Value on the date of such transaction of all such stock or securities or
other property of the other corporation, and if any such calculation results in
adjustment of the Conversion Price, the determination of the number of shares of
Common Stock issuable upon conversion of this Note immediately prior to such
merger, consolidation or sale will be made after giving effect to such
adjustment of the Conversion Price.
(e) Definition of Market Price.
(i) "Market Price," as to any security on any date,
means the average of the Closing Prices for 10 consecutive Trading Days ending
on the Trading Day immediately preceding the date in question. As used herein,
"Closing Price" means the last reported sale price regular way or, in case no
such sale takes place on such day, the average of the reported closing bid and
asked prices regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such sale or sales, as applicable, are not so
reported, the reported last sales price regular way or, if no, such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the principal national securities exchange on
which such security is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations National Market System
(the "NMS") or, if not listed or admitted to trading on any national securities
exchange or quoted on the NMS, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected by Lender for that purpose. "Trading Day" means each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on such exchange or in such market.
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<PAGE> 9
(ii) If the security is not listed or admitted to
trading on any national securities exchange, quoted on the NMS or traded in the
over-the-counter market, the "Market Price" per share of such security on any
date will be deemed to be the Fair Market Value thereof.
(f) Equitable Adjustments. In case Maker (i) subdivides its
outstanding Common Stock; (ii) combines its outstanding Common Stock into a
smaller number of shares; or (iii) issues any shares of its capital stock by
reclassification of its Common Stock, the Conversion Price in effect at the time
of the effective date of such subdivision, combination or reclassification will
be proportionately adjusted so that Lender, upon conversion of this Note after
such date, will be entitled to receive the aggregate number and kind of shares
which, if this Note had been converted immediately prior to such time, it would
have owned upon such conversion and been entitled to receive upon such
subdivision, combination or reclassification.
(g) Other Adjustments to Conversion Price. Maker may make such
reductions in the Conversion Price, in addition to those otherwise required by
this Section, as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the recipients.
(h) Certain Events. If any event occurs as to which in the
reasonable opinion of Maker, in good faith, the provisions of this Section are
not strictly applicable but the lack of any adjustment would not fairly protect
the rights of Lender in accordance with the basic intent and principles of such
provisions, then the board of directors of Maker (with the consent of Lender)
will in good faith make an adjustment to the application of such provisions in
accordance with the basic intent and principles established in the other
provisions of this Section, so as to preserve the rights of Lender.
(i) Successive Adjustments. Any adjustments required by this
Section will be made, to the extent applicable, successively whenever any event
described in this Section occurs.
(j) Notice of Adjustment. Whenever the Conversion Price is
adjusted as provided in this Agreement, Maker will promptly (but in no event
later than 10 calendar days thereafter) compute the adjusted Conversion Price
and cause a notice setting forth such adjusted Conversion Price to be mailed to
Lender and will cause a certified copy thereof to be mailed to the transfer
agent for the Common Stock (the "Transfer Agent"), if such Transfer Agent is
other than Maker. Maker will, upon the request in writing of Lender, retain a
nationally recognized firm of independent public accountants selected by the
Board to make any computation required by this Section, and a certificate signed
by such firm will be conclusive evidence of the correctness of such adjustment,
which will be binding on Lender and Maker. The failure to give the notice
required in this Section or any defect therein will not affect the legality or
validity of the event causing the adjustment of the Conversion Price or the vote
thereon or any other action taken in connection therewith.
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<PAGE> 10
(k) Definition of Fair Market Value. As used in this
Agreement, "Fair Market Value" means, as to any securities, the Market Price of
such securities, and, as to other property (including securities that are not
listed or admitted to trading on any national securities exchange, quoted on the
NMS or traded in the over-the-counter market), the price at which a willing
seller would sell and a willing buyer would buy such property having full
knowledge of the facts, in an arm's-length transaction without time constraints,
and without being under any compulsion to buy or sell. For purposes of this
Note, the Fair Market Value of any item will be determined by agreement between
Maker and Lender or, if they cannot agree on such Fair Market Value within 20
days after the need for such determination arises, by an independent investment
banking firm of nationally recognized standing selected by Lender in good faith
and approved by Maker, which approval will not be unreasonably withheld. The
fees and expenses of any such investment banking firm will be paid one-half by
Lender and one-half by Maker.
14. Mergers. In the case of any merger, consolidation or other
reorganization or combination to which Maker is a party and which affects the
outstanding shares of Common Stock, from and after the effective date of the
transaction, Lender shall be entitled to receive upon conversion of this Note
the number and kind of shares or other units of stock or other securities or
property it would have received in the transaction if this Note had been
converted immediately prior to such effective date. Maker shall take such steps
in connection with such consolidation or merger as may be necessary to ensure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property (including any
cash) thereafter deliverable upon the conversion of this Note; provided,
however, that if upon such consolidation or merger different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
conversion of this Note shall be as determined in good faith by the board of
directors of Maker, whose determination shall be conclusive. Maker shall not
effect any such consolidation or merger unless prior to or simultaneously with
the consummation thereof, the successor or surviving corporation or entity (if
other than Maker) resulting from such consolidation or merger shall assume, by
written agreement duly executed and mailed to Lender or delivered in accordance
with Section 18 hereof, the obligation to deliver to Lender the shares of stock,
securities or assets which Lender is entitled to purchase in accordance with the
foregoing provisions. The provisions of this Section shall also apply to
successive mergers or consolidations.
15. Notice of Certain Events. If any of the following occurs
on or before the Maturity Date:
(a) Maker declares any cash dividend on its Common Stock;
(b) Maker declares a dividend payable in stock upon its Common
Stock or makes any distribution (other than cash dividends and rights, warrants
or options governed by clause (c) below) to the holders of its Common Stock;
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<PAGE> 11
(c) Maker issues any share of Common Stock or securities
convertible into Common Stock or authorizes the granting to the holders of its
Common Stock of rights, warrants or options to subscribe for or purchase any
additional shares of stock of any class or any other rights;
(d) there occurs any reorganization or reclassification of the
capital stock of Maker, or a consolidation or merger of Maker with or into
another entity (other than any merger as to which Maker is the surviving
corporation and there is no change in the Common Stock in connection therewith)
or any sale or transfer of all or substantially all of the assets of Maker;
(e) Maker, any subsidiary of Maker or any other person or
entity makes a tender offer for Maker's Common Stock;
(f) there occurs an Acquisition Event;
(g) there occurs a voluntary or involuntary dissolution,
liquidation or winding up of Maker; or
(h) Maker proposes to take any other action or an event occurs
which would require an adjustment of the Conversion Price pursuant to Section
13(f);
then, in each of such cases, Maker will give to Lender, at least 20 days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights, warrants or options, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, warrants or options are to be
determined, (y) the date on which such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record will be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
other action or (z) the date on which the right to tender shares of Common Stock
in such tender offer is expected to terminate and the Conversion Price in effect
until the termination of such right. The failure to give the notice required in
this Section or any defect therein will not affect the legality or validity of
any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or tender offer or
other action or the vote thereon or any other action taken in connection
therewith.
16. Fractional Shares. No fractional share of Common Stock
will be issued upon the conversion of this Note. If such conversion results in a
fraction, Maker will make a cash payment in lieu of such fraction in an amount
in cash equal to such fraction multiplied by the Conversion Price.
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<PAGE> 12
17. Warranty. Upon conversion of this Note and payment by
Lender of the Conversion Price, shares of Common Stock issued in respect of such
conversion will be validly issued, fully paid and nonassessable outstanding
shares of Common Stock of Maker. Maker has reserved and will maintain as
authorized and unissued shares of Common Stock, free from any preemptive or
similar rights, the maximum number of shares of Common Stock issuable upon
conversion of this Note.
18. Notices. Any notice required or permitted to be given
under this Note will be in writing and will be given by personal delivery,
telecopy or by certified mail, postage prepaid, to the intended recipient at the
following addresses:
If to Maker: Unison HealthCare Corporation
8800 North Gainey Center Drive
Suite 245
Scottsdale, Arizona 85258
Attn: President
Telecopy: (602) 481-6479
If to Lender: David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telecopy: (303) 670-5207
Any party may change its address for notice purposes by notice to the other
parties in the manner provided above.
19. Security. This Note is secured by collateral pursuant to
the Loan and Security Agreement by and among Maker, Elk Meadows Investments,
L.L.C. and Britwill Investments Company, Ltd. dated as of April 21, 1997.
20. Maximum Legal Rate. Notwithstanding anything to the
contrary contained in this Note, the rate or rates of interest (including any
charges required to be characterized as interest under applicable law)
prescribed in this Note will in no event exceed the maximum legal rate under
applicable law and, in the event such rate is found to exceed such maximum legal
rate, Maker will be required to pay interest only at such maximum legal rate.
21. Business Days. If any payment of principal of, or interest
on, this Note is due on, or if the last day for the giving of any notice or the
taking of any other action is, a Saturday, Sunday or other day which is a day on
which banking institutions in New York, New York, Phoenix, Arizona or Denver,
Colorado are authorized by law to be closed for business, then such due date
will be extended to the next following business day, and interest will accrue
and be payable for the period of such extension.
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22. Governing Law. This Note will be governed by the laws of
Colorado, without regard to such jurisdiction's rules regarding conflicts of
laws.
23. Waiver and Amendments. This Note may not be modified,
amended or waived except in a writing executed by Maker and Lender or, in the
case of a waiver, by the party having the right proposed to be waived. No
failure or delay in exercising any right or privilege hereunder will operate as
a waiver thereof, nor will any single or partial exercise of any such right or
privilege preclude any other or further exercise thereof. No waiver of any
right, privilege or default hereunder will constitute a waiver of any other
right, privilege or default on that or any other occasion. All rights and
remedies provided in this Note are cumulative and not exclusive of any rights or
remedies otherwise provided hereunder, at law or in equity.
24. Hart-Scott-Rodino Compliance. If in the reasonable
judgment of Lender or Maker, Lender's holding of Common Stock or other
securities of Maker or its acquisition of Common Stock or other securities of
Maker upon conversion or exercise of this Note or any other security convertible
into, or any warrant, option or other right to acquire, Common Stock or other
securities of Maker (this Note and such other convertible securities, warrants,
options and rights being referred to individually as a "Derivative Security" and
collectively as "Derivative Securities") would require a filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), Maker and Lender each will take such actions as may be required promptly
to comply with the requirements of the HSR Act relating to the filing and
furnishing of information (an "HSR Report") to the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "DOJ"), such
actions to include (i) preparing and cooperating with each other in preparing
the HSR Report to be filed by or on behalf of each of them so as to avoid errors
or inconsistencies between their HSR Reports in the description of the reported
transaction and to permit the filing of their HSR Reports in a timely fashion,
(ii) complying with any request for additional documents or information made by
the FTC or the DOJ or by any court and assisting the other in so complying and
(iii) causing all persons or entities which are part of the same "person" (as
defined for purposes of the HSR Act) as such party to cooperate and assist in
such compliance. Maker and Lender each will pay any costs that it incurs in
complying with the obligations set forth in this Section, except that each will
bear one-half of any fee payable in connection with the filing of an HSR Report.
It will be a condition precedent to the effectiveness of the conversion or
exercise of any Derivative Security held by Lender or any of its successors or
assigns that either (i) no filing under the HSR Act by the holder of such
Derivative Security would be required in connection with its acquisition of
Common Stock or other voting securities upon such conversion or exercise or (ii)
any applicable waiting period under the HSR Act has expired or been terminated.
If an acquisition of securities of Maker by Lender upon conversion or exercise
of a Derivative Security requires the filing of an HSR Report, then any time
period within which Lender is required to convert or exercise such Derivative
Security will be deemed extended, up to a maximum of 90 days, to permit
compliance with the HSR Act, including filing of the requisite HSR Reports and
expiration or termination of the applicable waiting period; provided, that if
such extension relates to this
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<PAGE> 14
Note following notice from Maker of payment in accordance with Section 4 above,
interest will not accrue during the period of such extension on the portion of
this Note for which notice of payment was given. If the waiting period has not
so expired or been terminated prior to the end of such period of extension and
of the period within which Lender is required to convert or exercise such
Derivative Security or if Lender determines to withdraw his HSR Report, then
Maker will use its best efforts to afford to Lender the benefits intended to be
provided by the Derivative Security by (i) granting to Lender the right to
acquire other securities of Maker having the same rights, privileges and
preferences as the securities originally to be acquired, except that such other
securities will not possess voting rights, on the same terms as the securities
originally to be acquired or (ii) if such replacement right cannot be granted,
providing to Lender such other right as may reasonably represent the value of
the conversion or exercise right required to be foregone.
If Lender, in his sole opinion, considers a request from a
governmental agency for additional data and information in connection with the
HSR Act to be unduly burdensome, Lender may withdraw his HSR Report and rescind
his conversion or exercise of the affected Derivative Security, in which case
his rights will be the same as existed immediately before such attempted
conversion or exercise and, in addition, Lender will have the rights described
in the last sentence of the preceding paragraph.
The provisions of this Section will (i) survive the payment or
conversion of this Note, (ii) apply to any Derivative Security now held by
Lender and, absent any provision expressly to the contrary set forth therein, to
each Derivative Security hereafter acquired by Lender and (iii) inure to the
benefit of, and be binding on, Lender, Maker and their respective successors and
assigns, including, in the case of Lender, any transferee of a Derivative
Security.
UNISON HEALTHCARE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
14
<PAGE> 1
Exhibit 10.112.2
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
CONVERSION RIGHTS PURSUANT TO THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, PLEDGED OR HYPOTHECATED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO MAKER TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
UNISON HEALTHCARE CORPORATION
PROMISSORY NOTE
$ Date: March 17, 1997
-----------------
For value received, Unison HealthCare Corporation, a Delaware
corporation ("Maker"), promises to pay to the order of ("Lender"),
c/o David A. Kremser, 784 Yankee Creek Road, Evergreen, Colorado 80439 or at
such other place as Lender may direct, the principal sum of $ , with
interest on unpaid principal at the rate of 12% per annum.
The indebtedness evidenced by this Note will be subject to the
following terms and conditions:
1. Payments. The entire unpaid principal amount of this Note, together
with accrued and unpaid interest thereon, will be due and payable in full on
December 31, 1997 (the "Maturity Date").
2. Acceleration. Upon the occurrence of an Event of Default (as defined
in Section 3 below) or an Acquisition Event (as defined below), Lender may
without notice to Maker declare the entire unpaid principal amount of this Note
to be (or in the case of an Event of Default specified in Section 3(d), such
amounts will automatically be) immediately due and payable. Notwithstanding
anything to the contrary in this Note, after maturity, whether by acceleration
or otherwise, amounts outstanding under this Note will bear interest until paid
at an annual rate that is equal to the sum of 5% plus the greater of (i) 12% or
(ii) the rate announced by Wells Fargo Bank in Denver, Colorado as its prime
rate (the "Prime Rate"), adjusted as and when changes in the Prime Rate are
made.
As used in this Note, "Acquisition Event" means (i) a merger or
consolidation of the Company with one or more other entities, whether or not the
Company is the surviving corporation, (ii) a sale or other disposition of all or
substantially all of the assets of the Company pursuant to a plan that provides
for the liquidation of the Company, (iii) an exchange by the holders of all of
the outstanding shares of Common Stock for securities issued by another entity,
or in whole or in part for cash or other property, pursuant to a plan of
exchange
<PAGE> 2
approved by the holders of a majority of such outstanding shares or (iv) a
change in control of the Company, with "control" defined as the power to direct
or cause the direction of the management and policies of the Company, whether
through the ownership of voting securities, by contract or otherwise.
3. Events of Default. The following events will be Events of Default:
(a) Maker fails to make any payment under this Note when due;
(b) Maker fails to make any payment due by it on any indebtedness which
in the aggregate exceeds $50,000 for or with respect to borrowed money or the
deferred purchase price of property or any such indebtedness is accelerated or
is required to be paid prior to the stated maturity thereof or prior to any
regularly scheduled dates of payment, or Maker defaults in the performance of
any term contained in, or any event or condition exists under, any agreement or
instrument pursuant to which it has outstanding indebtedness for borrowed money
or for the deferred purchase price of property pursuant to which, in each such
case, there is payable more than $50,000 if the effect of such default, event or
condition is to cause, or permit a holder of such indebtedness (or a trustee or
agent on behalf of such holder) to cause, such indebtedness to become due and
payable prior to its stated maturity or regularly scheduled dates of payment; or
(c) Maker is insolvent or generally ceases to pay, or is unable to pay,
its debts as they become due or makes any admission in writing to the foregoing
effect; or a substantial part of the operations or business of Maker (taken as a
whole) is suspended; or Maker makes an assignment for the benefit of creditors;
or Maker commences (as debtor) a case under the United States Bankruptcy Code,
or commences any proceeding with respect to itself, or a substantial portion of
its property, under any other insolvency, bankruptcy, arrangement,
reorganization, liquidation, dissolution or similar law of the United States or
any other jurisdiction, or applies for a trustee, receiver or custodian (however
named) for all or a substantial portion of its property for the purpose of
general administration of such property for the benefit of creditors or for any
other purpose or takes any action to authorize any of the foregoing actions; or
a court of competent jurisdiction in the premises enters an order for relief
against Maker as a debtor in a case under the United States Bankruptcy Code; or
a case under the United States Bankruptcy Code is commenced against Maker or any
proceeding under any other insolvency, bankruptcy, reorganization, arrangement,
liquidation, dissolution or similar law of the United States or any other
jurisdiction is commenced against Maker and such case or proceeding remains
undismissed for 60 days or Maker consents to or admits the material allegations
against it in any such case or proceeding; or any trustee, receiver or similar
officer, however named, is appointed for all or a substantial part of the
property of Maker and Maker consents thereto or such trusteeship or receivership
continues for a period of 60 days.
2
<PAGE> 3
4. Prepayments. This Note may be prepaid at any time and from time to
time, in whole or in part, without premium or penalty, upon at least 10 days'
prior notice to Lender.
5. Certain Waivers. Maker and all persons or entities now or at any
time liable, whether primarily or secondarily, for the payment of the
indebtedness evidenced by this Note, expressly waive presentment for payment,
notice of dishonor, protest, notice of protest and diligence in collection, and
consent that the time of payment or any part thereof may be extended by Lender
and that Lender may release, fail to perfect or enforce its rights against, or
otherwise deal with any other person or entity liable on this Note without in
any way modifying, altering, releasing or limiting their respective liabilities.
In the event any amount owing under this Note is not paid when due, Maker agrees
to pay all costs of collection, including reasonable attorneys' fees.
6. Conversion. Lender will have the right, at any time after June 30,
1997 and from time to time after June 30, 1997, to convert the principal of this
Note, in whole or in part, into fully paid and nonassessable shares ("Shares")
of Maker's common stock ("Common Stock"), at a price (in dollars of principal
amount of this Note so converted) of $2.875 per Share, subject to adjustment as
provided in Section 13 (the "Conversion Price").
7. Conversion Notice. To convert all or any portion of the principal of
this Note as provided in Section 6, Lender will give Maker written notice of
Lender's election to convert, which notice will specify the amount of principal
converted and will fix a date on or after which Lender will present this Note at
Maker's offices. Maker may within 10 days after receipt of any such notice, pay
to Lender the full unpaid principal of this Note, together with accrued
interest, in which case Lender will forfeit the right to convert any portion of
this Note into Shares.
8. Issuance of Shares. Upon presentation and surrender of this Note at
Maker's offices on or after the date fixed in the notice from Lender under
Section 7 or during normal business hours, Maker will cause its Transfer Agent
(as defined below) to deliver to Lender certificates representing the number of
Shares into which this Note has been converted, together with any cash payable
in respect of any adjustment for fractional shares under Section 16, any accrued
interest payable under Section 11, and a new Note for any unconverted portion of
the principal of this Note surrendered. Upon the giving of notice of conversion
by Lender under Section 7 with respect to the portion of the principal of this
Note so converted, this Note will cease to represent any obligation of Maker
other than the obligation to deliver to Lender, upon presentation and surrender
of this Note as provided herein, the Shares into which the principal of this
Note was converted, any cash payable in respect of any adjustment for fractional
shares under Section 16, and any accrued interest payable under Section 11. So
long as any amounts remain outstanding under this Note, Maker will promptly
notify Lender in the event Maker determines to register any Common Stock or
Convertible Securities, whether in connection with a public offering of
securities by the Company or by stockholders, and all Shares issued upon
conversion of this Note will be "Registrable Securities" within the meaning
3
<PAGE> 4
of the Registration Rights Agreement dated as of October 31, 1996, among Maker,
David A. Kremser and John D. Filkoski.
9. Legends. Each certificate representing the number of shares of
Common Stock into which this Note has been converted will bear a legend
substantially to the effect of the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL AND STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
COUNSEL, IN FORM REASONABLY ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF
SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGNMENT.
10. Registered Holder. Upon surrender of this Note as provided above,
Lender will be deemed for all purposes the registered holder of the shares of
Common Stock into which this Note has been converted.
11. Interest at Conversion. Upon conversion of this Note, Maker will
pay interest on this Note accrued through the date notice of conversion is given
to Maker. At Lender's election, accrued but unpaid interest may be paid by the
issuance to Lender of Shares in an amount equal to the amount of such interest
divided by the Conversion Price.
12. Dividends Prior to Conversion. There will be no payment or
adjustment on account of any dividends on the Common Stock issued prior to
conversion.
13. Antidilution. The Conversion Price in effect at any time will be
subject to adjustment from time to time as provided in this Section. For
purposes hereof, the term "Common Stock" or "Common Shares" will include any
stock of Maker (whether voting or nonvoting) of any class or series which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of Maker and
which is not subject to redemption by Maker.
(a) Stock Dividends. If at any time Maker declares a dividend in shares
of its Common Stock, the Conversion Price in effect immediately prior to such
issue or sale will thereupon be reduced to a price determined by multiplying the
Conversion Price in effect immediately prior to the time of such issue or sale
by a fraction, the numerator of which will be the number of shares of Common
Stock outstanding immediately prior to such issue or sale
4
<PAGE> 5
and the denominator of which will be the total number of shares of Common Stock
outstanding immediately after such issue or sale.
(b) Adjustment for Certain Special Dividends. In case Maker, by
dividend or otherwise, distributes to the holders of its Common Stock cash or
assets in the form of non-cash consideration (including, without limitation,
evidences of its or its affiliates' indebtedness or securities and excluding
distributions for which adjustments to the Conversion Price are required to be
made pursuant to other provisions of this Section), Lender will, upon the
conversion of this Note after the record date for such distribution or, in the
absence of a record date, after the date of such distribution, receive, in
addition to shares of Common Stock issuable in respect thereof, the amount of
such assets (or, at the option of Maker, a sum in cash equal to the Fair Market
Value thereof) which would have been distributed to Lender if Lender had
converted this Note immediately prior to the record date for such distribution
or, in the absence of a record date, immediately prior to the date fixed for
such distribution.
(c) Adjustment of Conversion Price upon Issuance of Common Stock. If at
any time the Company issues any shares of Common Stock for a consideration per
share (i) less than the Conversion Price in effect immediately prior to the time
of such issuance or (ii) less than the Market Price of Common Stock at the time
of such issuance, except for issuances of the Shares pursuant to conversion of
this Note, then the Conversion Price will be adjusted in accordance with the
following formula:
N P
---
C'= CO + M
-------
O + N
where: C' = the adjusted Conversion Price
C = the current Conversion Price
O = the number of shares of Common Stock outstanding on the date
of such issuance
N = the number of additional shares of Common Stock issued
P = the issue price per share of the additional shares of Common
Stock
M = the Market Price per share of Common Stock on the date of such
issuance
(d) Issuance of Securities.
(i) Issuance of Rights or Options. In the event the
Company grants (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, additional shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event ("Convertible Securities") whether or not such rights or options
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share
5
<PAGE> 6
for which Common Stock is issuable upon the exercise of such rights or options
or upon conversion or exchange of such Convertible Securities (determined as
provided below) is less than the Conversion Price in effect immediately prior to
the time of the granting of such rights or options (or less than the Market
Price determined as of the date of granting such rights or options, as the case
may be), then the total maximum number of shares of Common Stock issuable upon
the exercise of such rights or options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such rights or options will (as of the date of granting of such rights or
options) be deemed to be outstanding and to have been issued for such price per
share. Except as provided in clause (iii) of this subsection (d), no further
adjustments of any Conversion Price will be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such rights or
options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities. For the purposes of this clause (i),
the price per share for which Common Stock is issuable upon the exercise of any
such rights or options or upon conversion or exchange of any such Convertible
Securities will be determined by dividing (A) the total amount, if any, received
or receivable by the Company as consideration for the granting of such rights or
options, plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of all such rights or options, plus, in the
case of such rights or options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options.
(ii) Issuance of Convertible Securities. In the event
the Company issues (whether directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) is less than the Conversion Price in effect
immediately prior to the time of such issue or sale (or less than the Market
Price, determined as of the date of such issue or sale of such Convertible
Securities, as the case may be), then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities will (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued for such price
per share, provided that (1) except as provided in clause (iii) of this
subsection (d), no further adjustments of any Conversion Price will be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (2) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which adjustments
of any Conversion Price have been or are to be made pursuant to other provisions
of this Section, no further adjustment of any Conversion Price will be made by
reason of such issue or sale. For the purposes of this clause (ii), the price
per share for which Common Stock is issuable upon conversion or exchange of
Convertible Securities will be determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or
6
<PAGE> 7
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any rights or options referred to in clause
(i) above, or the additional consideration, if any, payable upon the conversion
or exchange of Convertible Securities referred to in clause (i) or (ii) above,
or the rate at which any Convertible Securities referred to in clause (i) or
(ii) above are convertible into or exchangeable for Common Stock, changes (other
than under or by reason of provisions designed to protect against dilution),
then the Conversion Price in effect at the time of such event will be readjusted
to the Conversion Price that would have been in effect at such time had such
rights, options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold; and on the expiration of
any such option or right or the termination of any such right to convert of
exchange such Convertible Securities, the Conversion Price then in effect will
be increased to the Conversion Price that would have been in effect at the time
of such expiration or termination had such right, option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder will no
longer be deemed to be outstanding. If the purchase price provided for in any
such right or option referred to in clause (i) above or the rate at which any
Convertible Securities referred to in clause (i) or (ii) above are convertible
into or exchangeable for Common Stock, decreases at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Security, the
Conversion Price then in effect will be adjusted to such amount as would have
resulted had such right, option or Convertible Security never been issued as to
such Common Stock and had adjustments been made upon such issuance of Common
Stock, but only if as a result of such adjustment the Conversion Price then in
effect is decreased.
(iv) Consideration for Common Stock or Convertible
Securities. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any Common Stock or Convertible Securities are
issued or sold for cash, the consideration received therefor will be deemed to
be the amount received by the Company therefor, without deduction therefrom of
any expenses incurred. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities are issued or sold for a consideration other than cash or
securities, the amount of the consideration other than cash received by the
Company will be deemed to be the Fair Market Value of such consideration without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. In case any
shares of Common Stock or Convertible Securities or any rights or options to
purchase such shares of Common Stock or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is the
surviving
7
<PAGE> 8
corporation (other than any consolidation or merger in which the previously
outstanding shares of Common Stock are changed into or exchanged for the stock
or other securities of another corporation), the amount of consideration
therefor will be deemed to be the Fair Market Value of such portion of the
assets and business of the non-surviving corporation as the board of directors
of Maker (the "Board") may determine to be attributable to such shares of Common
Stock, Convertible Securities, rights or options, as the case may be. In the
event of any consolidation or merger of the Company in which the Company is not
the surviving corporation or in which the previously outstanding shares of
Common Stock are changed into or exchanged for the stock or other securities of
another corporation or in the event of any sale of all or substantially all of
the assets of the Company for stock or other securities of any corporation, the
Company will be deemed to have issued a number of shares of its Common Stock for
stock or securities or other property of the other corporation computed on the
basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the Fair Market Value on the date of such
transaction of all such stock or securities or other property of the other
corporation, and if any such calculation results in adjustment of the Conversion
Price, the determination of the number of shares of Common Stock issuable upon
conversion of this Note immediately prior to such merger, consolidation or sale
will be made after giving effect to such adjustment of the Conversion Price.
(e) Definition of Market Price.
(i) "Market Price," as to any security on any date,
means the average of the Closing Prices for 10 consecutive Trading Days ending
on the Trading Day immediately preceding the date in question. As used herein,
"Closing Price" means the last reported sale price regular way or, in case no
such sale takes place on such day, the average of the reported closing bid and
asked prices regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such sale or sales, as applicable, are not so
reported, the reported last sales price regular way or, if no, such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the principal national securities exchange on
which such security is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations National Market System
(the "NMS") or, if not listed or admitted to trading on any national securities
exchange or quoted on the NMS, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected by Lender for that purpose. "Trading Day" means each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on such exchange or in such market.
(ii) If the security is not listed or admitted to
trading on any national securities exchange, quoted on the NMS or traded in the
over-the-counter market, the "Market Price" per share of such security on any
date will be deemed to be the Fair Market Value thereof.
8
<PAGE> 9
(f) Equitable Adjustments. In case Maker (i) subdivides its
outstanding Common Stock; (ii) combines its outstanding Common Stock into a
smaller number of shares; or (iii) issues any shares of its capital stock by
reclassification of its Common Stock, the Conversion Price in effect at the time
of the effective date of such subdivision, combination or reclassification will
be proportionately adjusted so that Lender, upon conversion of this Note after
such date, will be entitled to receive the aggregate number and kind of shares
which, if this Note had been converted immediately prior to such time, it would
have owned upon such conversion and been entitled to receive upon such
subdivision, combination or reclassification.
(g) Other Adjustments to Conversion Price. Maker may make such
reductions in the Conversion Price, in addition to those otherwise required by
this Section, as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the recipients.
(h) Certain Events. If any event occurs as to which in the
reasonable opinion of Maker, in good faith, the provisions of this Section are
not strictly applicable but the lack of any adjustment would not fairly protect
the rights of Lender in accordance with the basic intent and principles of such
provisions, then the board of directors of Maker (with the consent of Lender)
will in good faith make an adjustment to the application of such provisions in
accordance with the basic intent and principles established in the other
provisions of this Section, so as to preserve the rights of Lender.
(i) Successive Adjustments. Any adjustments required by this
Section will be made, to the extent applicable, successively whenever any event
described in this Section occurs.
(j) Notice of Adjustment. Whenever the Conversion Price is
adjusted as provided in this Agreement, Maker will promptly (but in no event
later than 10 calendar days thereafter) compute the adjusted Conversion Price
and cause a notice setting forth such adjusted Conversion Price to be mailed to
Lender and will cause a certified copy thereof to be mailed to the transfer
agent for the Common Stock (the "Transfer Agent"), if such Transfer Agent is
other than Maker. Maker will, upon the request in writing of Lender, retain a
nationally recognized firm of independent public accountants selected by the
Board to make any computation required by this Section, and a certificate signed
by such firm will be conclusive evidence of the correctness of such adjustment,
which will be binding on Lender and Maker. The failure to give the notice
required in this Section or any defect therein will not affect the legality or
validity of the event causing the adjustment of the Conversion Price or the vote
thereon or any other action taken in connection therewith.
(k) Definition of Fair Market Value. As used in this
Agreement, "Fair Market Value" means, as to any securities, the Market Price of
such securities, and, as to other property (including securities that are not
listed or admitted to trading on any national securities exchange, quoted on the
NMS or traded in the over-the-counter market), the price at which a willing
seller would sell and a willing buyer would buy such property having full
knowledge
9
<PAGE> 10
of the facts, in an arm's-length transaction without time constraints, and
without being under any compulsion to buy or sell. For purposes of this Note,
the Fair Market Value of any item will be determined by agreement between Maker
and Lender or, if they cannot agree on such Fair Market Value within 20 days
after the need for such determination arises, by an independent investment
banking firm of nationally recognized standing selected by Lender in good faith
and approved by Maker, which approval will not be unreasonably withheld. The
fees and expenses of any such investment banking firm will be paid one-half by
Lender and one-half by Maker.
14. Mergers. In the case of any merger, consolidation or other
reorganization or combination to which Maker is a party and which affects the
outstanding shares of Common Stock, from and after the effective date of the
transaction, Lender shall be entitled to receive upon conversion of this Note
the number and kind of shares or other units of stock or other securities or
property it would have received in the transaction if this Note had been
converted immediately prior to such effective date. Maker shall take such steps
in connection with such consolidation or merger as may be necessary to ensure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property (including any
cash) thereafter deliverable upon the conversion of this Note; provided,
however, that if upon such consolidation or merger different holders of Common
Stock shall be entitled to receive different forms of consideration for their
Common Stock, the form of such consideration thereafter deliverable upon the
conversion of this Note shall be as determined in good faith by the board of
directors of Maker, whose determination shall be conclusive. Maker shall not
effect any such consolidation or merger unless prior to or simultaneously with
the consummation thereof, the successor or surviving corporation or entity (if
other than Maker) resulting from such consolidation or merger shall assume, by
written agreement duly executed and mailed to Lender or delivered in accordance
with Section 18 hereof, the obligation to deliver to Lender the shares of stock,
securities or assets which Lender is entitled to purchase in accordance with the
foregoing provisions. The provisions of this Section shall also apply to
successive mergers or consolidations.
15. Notice of Certain Events. If any of the following occurs
on or before the Maturity Date:
(a) Maker declares any cash dividend on its Common Stock;
(b) Maker declares a dividend payable in stock upon its Common
Stock or makes any distribution (other than cash dividends and rights, warrants
or options governed by clause (c) below) to the holders of its Common Stock;
(c) Maker issues any share of Common Stock or securities
convertible into Common Stock or authorizes the granting to the holders of its
Common Stock of rights, warrants or options to subscribe for or purchase any
additional shares of stock of any class or any other rights;
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<PAGE> 11
(d) there occurs any reorganization or reclassification of the
capital stock of Maker, or a consolidation or merger of Maker with or into
another entity (other than any merger as to which Maker is the surviving
corporation and there is no change in the Common Stock in connection therewith)
or any sale or transfer of all or substantially all of the assets of Maker;
(e) Maker, any subsidiary of Maker or any other person or
entity makes a tender offer for Maker's Common Stock;
(f) there occurs an Acquisition Event;
(g) there occurs a voluntary or involuntary dissolution,
liquidation or winding up of Maker; or
(h) Maker proposes to take any other action or an event occurs
which would require an adjustment of the Conversion Price pursuant to Section
13(f);
then, in each of such cases, Maker will give to Lender, at least 20 days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights, warrants or options, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, warrants or options are to be
determined, (y) the date on which such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record will be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
other action or (z) the date on which the right to tender shares of Common Stock
in such tender offer is expected to terminate and the Conversion Price in effect
until the termination of such right. The failure to give the notice required in
this Section or any defect therein will not affect the legality or validity of
any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or tender offer or
other action or the vote thereon or any other action taken in connection
therewith.
16. Fractional Shares. No fractional share of Common Stock
will be issued upon the conversion of this Note. If such conversion results in a
fraction, Maker will make a cash payment in lieu of such fraction in an amount
in cash equal to such fraction multiplied by the Conversion Price.
17. Warranty. Upon conversion of this Note and payment by
Lender of the Conversion Price, shares of Common Stock issued in respect of such
conversion will be validly issued, fully paid and nonassessable outstanding
shares of Common Stock of Maker. Maker has reserved and will maintain as
authorized and unissued shares of Common Stock, free from
11
<PAGE> 12
any preemptive or similar rights, the maximum number of shares of Common Stock
issuable upon conversion of this Note.
18. Notices. Any notice required or permitted to be given
under this Note will be in writing and will be given by personal delivery,
telecopy or by certified mail, postage prepaid, to the intended recipient at the
following addresses:
If to Maker: Unison HealthCare Corporation
8800 North Gainey Center Drive
Suite 245
Scottsdale, Arizona 85258
Attn: President
Telecopy: (602) 481-6479
If to Lender: Stanley A. Kremser
c/o David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telecopy: (303) 670-5207
Any party may change its address for notice purposes by notice to the other
parties in the manner provided above.
19. Security. This Note is secured by collateral pursuant to
the Loan and Security Agreement by and among Maker, Elk Meadows Investments,
L.L.C. and Britwill Investments Company, Ltd. dated as of April 21, 1997.
20. Maximum Legal Rate. Notwithstanding anything to the
contrary contained in this Note, the rate or rates of interest (including any
charges required to be characterized as interest under applicable law)
prescribed in this Note will in no event exceed the maximum legal rate under
applicable law and, in the event such rate is found to exceed such maximum legal
rate, Maker will be required to pay interest only at such maximum legal rate.
21. Business Days. If any payment of principal of, or interest
on, this Note is due on, or if the last day for the giving of any notice or the
taking of any other action is, a Saturday, Sunday or other day which is a day on
which banking institutions in New York, New York, Phoenix, Arizona or Denver,
Colorado are authorized by law to be closed for business, then such due date
will be extended to the next following business day, and interest will accrue
and be payable for the period of such extension.
22. Governing Law. This Note will be governed by the laws of
Colorado, without regard to such jurisdiction's rules regarding conflicts of
laws.
12
<PAGE> 13
23. Waiver and Amendments. This Note may not be modified,
amended or waived except in a writing executed by Maker and Lender or, in the
case of a waiver, by the party having the right proposed to be waived. No
failure or delay in exercising any right or privilege hereunder will operate as
a waiver thereof, nor will any single or partial exercise of any such right or
privilege preclude any other or further exercise thereof. No waiver of any
right, privilege or default hereunder will constitute a waiver of any other
right, privilege or default on that or any other occasion. All rights and
remedies provided in this Note are cumulative and not exclusive of any rights or
remedies otherwise provided hereunder, at law or in equity.
24. Hart-Scott-Rodino Compliance. If in the reasonable
judgment of Lender or Maker, Lender's holding of Common Stock or other
securities of Maker or its acquisition of Common Stock or other securities of
Maker upon conversion or exercise of this Note or any other security convertible
into, or any warrant, option or other right to acquire, Common Stock or other
securities of Maker (this Note and such other convertible securities, warrants,
options and rights being referred to individually as a "Derivative Security" and
collectively as "Derivative Securities") would require a filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), Maker and Lender each will take such actions as may be required promptly
to comply with the requirements of the HSR Act relating to the filing and
furnishing of information (an "HSR Report") to the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "DOJ"), such
actions to include (i) preparing and cooperating with each other in preparing
the HSR Report to be filed by or on behalf of each of them so as to avoid errors
or inconsistencies between their HSR Reports in the description of the reported
transaction and to permit the filing of their HSR Reports in a timely fashion,
(ii) complying with any request for additional documents or information made by
the FTC or the DOJ or by any court and assisting the other in so complying and
(iii) causing all persons or entities which are part of the same "person" (as
defined for purposes of the HSR Act) as such party to cooperate and assist in
such compliance. Maker and Lender each will pay any costs that it incurs in
complying with the obligations set forth in this Section, except that each will
bear one-half of any fee payable in connection with the filing of an HSR Report.
It will be a condition precedent to the effectiveness of the conversion or
exercise of any Derivative Security held by Lender or any of its successors or
assigns that either (i) no filing under the HSR Act by the holder of such
Derivative Security would be required in connection with its acquisition of
Common Stock or other voting securities upon such conversion or exercise or (ii)
any applicable waiting period under the HSR Act has expired or been terminated.
If an acquisition of securities of Maker by Lender upon conversion or exercise
of a Derivative Security requires the filing of an HSR Report, then any time
period within which Lender is required to convert or exercise such Derivative
Security will be deemed extended, up to a maximum of 90 days, to permit
compliance with the HSR Act, including filing of the requisite HSR Reports and
expiration or termination of the applicable waiting period; provided, that if
such extension relates to this Note following notice from Maker of payment in
accordance with Section 4 above, interest will not accrue during the period of
such extension on the portion of this Note for which notice of payment was
given. If the waiting period has not so expired or been terminated prior to the
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<PAGE> 14
end of such period of extension and of the period within which Lender is
required to convert or exercise such Derivative Security or if Lender determines
to withdraw his HSR Report, then Maker will use its best efforts to afford to
Lender the benefits intended to be provided by the Derivative Security by (i)
granting to Lender the right to acquire other securities of Maker having the
same rights, privileges and preferences as the securities originally to be
acquired, except that such other securities will not possess voting rights, on
the same terms as the securities originally to be acquired or (ii) if such
replacement right cannot be granted, providing to Lender such other right as may
reasonably represent the value of the conversion or exercise right required to
be foregone.
If Lender, in his sole opinion, considers a request from a
governmental agency for additional data and information in connection with the
HSR Act to be unduly burdensome, Lender may withdraw his HSR Report and rescind
his conversion or exercise of the affected Derivative Security, in which case
his rights will be the same as existed immediately before such attempted
conversion or exercise and, in addition, Lender will have the rights described
in the last sentence of the preceding paragraph.
The provisions of this Section will (i) survive the payment or
conversion of this Note, (ii) apply to any Derivative Security now held by
Lender and, absent any provision expressly to the contrary set forth therein, to
each Derivative Security hereafter acquired by Lender and (iii) inure to the
benefit of, and be binding on, Lender, Maker and their respective successors and
assigns, including, in the case of Lender, any transferee of a Derivative
Security.
UNISON HEALTHCARE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
14
<PAGE> 1
Exhibit 10.113
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made by and
between Unison HealthCare Corporation, a Delaware corporation (the "Company"),
and David A. Kremser ("Kremser") as of March 31, 1997.
RECITALS
Kremser currently is a director of the Company and, as such,
serves as Chairman of the Executive Committee of the Company's Board of
Directors (the "Board"). The Company wishes to engage Kremser to perform
services in his capacity as Chairman of the Executive Committee that are more
extensive than those currently performed by him and Kremser desires to be so
engaged, all upon the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants set forth in this
Agreement, the parties agree as follows:
1. Engagement.
1. Scope of Engagement. The Company hereby engages
Kremser, acting in his capacity as Chairman of the Executive Committee of the
Board, to provide consulting and similar services to the Company as the Company
may reasonably request, and Kremser hereby accepts such engagement, all subject
to the terms and conditions set forth in this Agreement.
2. Compensation.
1. Weekly Compensation. The Company will pay to
Kremser $7,500 per week beginning on the date of this Agreement and continuing
until the end of the Engagement Term.
2. Options. Upon execution of this Agreement, the
Company will issue to Kremser options to acquire 50,000 shares of common stock
of the Company, par value $0.001 per share (the "Options"). The Options will be
issued pursuant to the Company's 1995 Stock Option Plan (the "Option Plan") and
will be exercisable at any time and from time to time for a period of 5 years
after the date of issuance at an exercise price of $2.875 per share. The Options
will be evidenced by an option grant letter in the form of Exhibit A. The number
of shares issuable upon exercise of the Options and the exercise price of the
Options will be subject to adjustment in accordance with the Option Plan. The
shares issued upon exercise of the Options will be deemed to be "Registrable
Securities" within the meaning of the Registration Rights Agreement dated as of
October 31, 1996, among the Company, Kremser and John D. Filkoski (the
"Registration Rights Agreement"). In addition, the parties will
1
<PAGE> 2
amend the Registration Rights Agreement to change the reference to "July 1,
1997" in Section 2.2 of that agreement to "April 16, 1997."
3. Expenses.
1. Business Expenses. The Company will
reimburse Kremser (upon the submission of a reasonably itemized statement of
such expenses in accordance with the Company's normal practice) for all such
expenses as Kremser may reasonably incur (including, among other things,
business travel and business entertainment expenses) in connection with the
performance of his duties in accordance with the Company's policies as in effect
from time to time. After the end of the Engagement Term, Kremser will be
entitled to receive reimbursement for the unreimbursed expenses described in
this Section that were incurred during the Engagement Term so long as Kremser
submits an itemized statement of such expenses to the Company within 30 days
after the end of the Engagement Term.
2. Attorney Fees. The Company will reimburse
Kremser for reasonable fees and expenses of attorneys incurred by Kremser in
connection with the engagement of Kremser contemplated by this Agreement,
including those incurred in the preparation and negotiation of this Agreement,
the Tolling Agreement and the other documents necessary to effect Kremser's
engagement, the issuance of the Options and the other transactions contemplated
by this Agreement.
3. Term of Engagement. The engagement by the Company of
Kremser pursuant to this Agreement will commence on the date of this Agreement
and will continue until this Agreement is terminated by either party by
providing the other party with two weeks' advance written notice of such
termination. The period of such engagement is referred to as the "Engagement
Term." In addition to the preceding right to terminate the Engagement Term,
Kremser may terminate the Engagement Term immediately if (i) he ceases to be a
director of the Company or (ii) the Company fails to maintain insurance coverage
or provide evidence of such coverage as set forth in Section 5.2.
4. Tolling Agreement. Concurrently with the execution of this
Agreement, the Company and Kremser will enter into the Tolling Agreement
attached as Exhibit B. The termination of this Agreement or of the engagement of
Kremser will not in any way affect the validity or enforceability of such
Tolling Agreement.
5. Indemnification; Insurance.
1. Indemnification Agreement. Concurrently with the
execution of this Agreement, the Company and Kremser will enter into the
Indemnification Agreement attached as Exhibit C. The termination of this
Agreement or the engagement of Kremser will not in any way affect the validity
or enforceability of such Indemnification Agreement.
2. Insurance. During the Engagement Term and, if such
coverage is on a "claims made" rather than an "occurrence" basis, for a period
of three years thereafter, the Company will use its best efforts to procure and
maintain directors' and officers' liability
2
<PAGE> 3
insurance under which Kremser is an insured person in such amounts and on such
terms as are the same in all material respects as those that exist under
insurance policies in effect (including those in effect pursuant to binders) as
of the date of this Agreement. The Company will provide Kremser with evidence
reasonably satisfactory to him that such insurance is in effect and that he is
an insured person. The provisions of this Section will survive the Engagement
Term and any termination of this Agreement.
6. Miscellaneous Provisions.
1. Execution in Counterparts. This Agreement may be
executed in two or more counterparts, each of which will be deemed an original,
and all of which taken together will constitute one and the same agreement.
2. Notices. All notices and other communications
under this Agreement will be in writing and will be deemed to have been duly
given when: (a) personally delivered (including delivery by Federal Express or
other nationally recognized overnight courier) or (b) sent by telecopy, receipt
confirmed, as follows:
If to the Company, to:
Unison HealthCare Corporation
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
Telecopy: (602) 481-6479
with a copy to:
Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012-1649
Telecopy: (602) 230-5598
Attn: Mark N. Rogers, Esq.
If to Kremser, to:
David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telecopy: (303) 670-5307
with a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Telecopy: (303) 298-0940
3
<PAGE> 4
Attn: Charles Y. Tanabe, Esq.
or to such other addresses and numbers as may be provided by the parties from
time to time by notice.
3. Amendment. No provision of this Agreement may be
modified, amended, waived or discharged in any manner except by a written
instrument executed by each of the parties.
4. Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter of this
Agreement, and supersedes all prior agreements and understandings of the
parties, oral or written, with respect to the subject matter of this Agreement.
5. Applicable Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware without
reference to conflicts of law provisions.
6. Headings. The headings contained in this Agreement
are for convenience of reference only and will not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
7. Binding Effect; Successors. This Agreement will
inure to the benefit of, and be binding upon, the parties and their respective
heirs, legal representatives, successors and permitted assigns.
8. Waiver. The failure or delay of either party at
any time to enforce any provision of this Agreement will not be deemed to be a
waiver of any such provision or in any way to affect the validity of any
provision of this Agreement or the right of either party thereafter to enforce
any provision of this Agreement. No waiver of any breach of any provision of
this Agreement will be effective unless in writing executed by the party against
whom or which enforcement of such waiver is sought and no waiver of any such
breach will be construed or deemed to be a waiver of any other or subsequent
breach.
9. Severability. If any provision of this Agreement,
or the application of such provision to any person or circumstance, is found by
a court of competent jurisdiction to be unenforceable for any reason, such
provision may be modified or severed from this Agreement to the extent necessary
to make such provision enforceable against such person or in such circumstance.
Neither the unenforceability of such provision nor the modification or severance
of such provision will affect (i) the enforceability of any other provision of
this Agreement or (ii) the enforceability of such provision against any person
or in any circumstance other than those against or in which such provision is
found to be unenforceable.
10. Authority. Kremser hereby represents and warrants
to the Company that: (i) he has full power, authority and capacity to execute
and deliver this Agreement, and to perform his obligations hereunder; and (ii)
this Agreement is a valid and binding obligation of Kremser enforceable against
Kremser in accordance with its terms. The
4
<PAGE> 5
Company hereby represents and warrants to Kremser that: (i) it has full power,
authority and capacity to execute and deliver this Agreement, and to perform its
obligations hereunder; (ii) the Board has approved the terms and conditions of
and has consented to the execution of this Agreement; and (iii) this Agreement
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
UNISON HEALTHCARE CORPORATION
By:/s/ Phillip R. Rollins
---------------------------------------
Name: Phillip R. Rollins
-------------------------------------
Title:EVP/COO
------------------------------------
/s/ David A. Kremser
------------------------------------------
David A. Kremser
5
<PAGE> 1
Exhibit 10.114
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is entered into as of
March 31, 1997, between Unison HealthCare Corporation, a Delaware corporation
(the "Company"), and David A. Kremser, a director of the Company (the
"Indemnitee").
RECITALS
WHEREAS, it is essential to the Company to retain and attract
as employees, directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director of the Company and has been
asked to perform services for the Company in his capacity as such pursuant to
the Services Agreement between the Company and the Indemnitee dated as of March
31, 1997 (the "Services Agreement"); and
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the indemnification of, and the advancing of expenses to,
Indemnitee to the fullest extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and for coverage of Indemnitee under the
Company's liability insurance policies.
THEREFORE, in consideration of Indemnitee agreeing to serve as a
director of the Company and to enter into the Services Agreement, and intending
to be legally bound hereby, and for other good and valuable consideration, the
adequacy of which is hereby acknowledged, the parties agree as follows:
1. Certain Definitions:
(a) Action: any threatened, pending or completed action, suit
or proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
(b) Change in Control: shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 20% or more of
the total voting power represented by the Company's then outstanding Voting
Securities (as defined below), or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the
<PAGE> 2
Page - 2
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all or substantially all the Company's
assets.
(c) Derivative Action: an Action by or in the right of the
Company.
(d) Expenses: include reasonable attorneys' fees, court costs,
deposition costs, court reporter fees, travel and all other costs, expenses and
obligations actually paid to another or incurred in connection with
investigating the facts underlying the Action, preparing to defend and defending
the Action or preparing for and participating in the Action as a witness, or any
of the foregoing expenses incurred on appeal, or any other reasonable expenses
incurred by Indemnitee in participating in any Indemnifiable Action or
Indemnifiable Derivative Action.
(e) Indemnifiable Action or Indemnifiable Derivative Action:
any Action or Derivative Action arising out of or relating, directly or
indirectly, to the fact that Indemnitee is or was a director, employee, agent or
fiduciary of the Company, or a subsidiary of the Company, or is or was serving
at the request of the Company as a director, employee, trustee, agent or
fiduciary of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity.
(f) Potential Change in Control: shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control; (iii)
any person other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's then
outstanding Voting Securities, increases such person's beneficial ownership of
such securities by five percentage points (5%) or more over the percentage so
owned by such
<PAGE> 3
Page - 3
person; or (iv) the Board of Directors adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has occurred.
(g) Voting Securities: any securities of the Company which
vote generally in the election of directors.
2. Indemnification For Actions Other Than Derivative Actions. If
Indemnitee was, is, or becomes a party to or a witness or other participant in,
or is threatened to be made a party to or witness or other participant in, an
Indemnifiable Action other than an Indemnifiable Derivative Action, the Company
shall, subject to the provisions of this Agreement, indemnify Indemnitee to the
fullest extent permitted by law against any and all Expenses, judgments, fines,
penalties, and amounts paid in settlement of such Action.
3. Indemnification For Derivative Actions.
(a) Basic Indemnification. If Indemnitee was, is, or becomes a
party to or a witness or other participant in, or is threatened to be made a
party to or witness or other participant in an Indemnifiable Derivative Action,
the Company shall, subject to the provisions of this Agreement, indemnify
Indemnitee to the fullest extent permitted by the Delaware General Corporation
Law against any and all Expenses, but not judgments, fines, or, except as set
forth below, amounts paid in settlement of such Derivative Action.
(b) Adjudication of Liability in Derivative Actions.
Notwithstanding Paragraph 3(a), no indemnification shall be made in respect of
any claim, issue, or matter as to which Indemnitee shall have been adjudged (by
final judicial determination from which there is no further right to appeal) to
be liable to the Company unless and only to the extent that the court in which
such Derivative Action was brought shall determine upon application by
Indemnitee that despite the adjudication of liability and in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification which such court shall deem proper.
(c) Settlement of Derivative Actions. Notwithstanding
Paragraph 3(a), the court in which such Derivative Action was brought may
determine upon application of Indemnitee that, in view of all circumstances of
the case, indemnity for amounts paid in settlement is proper and may order
indemnity for the amounts so paid in settlement and for the Expenses actually
and reasonably paid in connection with such application, to the extent the court
deems proper.
4. Limits on Indemnification. Except as stated in Paragraph 5, there
shall be no indemnification pursuant to this Indemnification Agreement:
(a) to the extent that payment for the same claims or amounts
are actually made to the Indemnitee under a valid and collectible insurance
policy; provided, however, that
<PAGE> 4
Page - 4
if it should subsequently be determined that the Indemnitee is not legally
entitled to retain any such payment, the restriction on indemnification pursuant
to this subparagraph (a) shall no longer apply;
(b) to the extent that the Indemnitee is indemnified or
receives a recovery for the same claims or amounts otherwise than pursuant to
this Indemnification Agreement; provided, however, that if it should
subsequently be determined that the Indemnitee is not legally entitled to retain
any such recovery, the restriction on indemnification pursuant to this
subparagraph (b) shall no longer apply;
(c) to the extent that the Indemnitee is held, by a court of
competent jurisdiction in a final judgment from which there is no further right
to appeal, to have violated Section l6(b) of the Securities Exchange Act of
l934, as amended, and rules promulgated thereunder;
(d) to the extent that the Indemnitee is held, by a court of
competent jurisdiction in a final judgment from which there is no further right
to appeal, to have violated Section l0(b) of the Securities Exchange Act of
l934, as amended (the "Exchange Act"), and any rules promulgated thereunder, or
similar state law, to the extent that such violation is based on (i) the
purchase or sale of a security by Indemnitee or a person affiliated with
Indemnitee while Indemnitee is in possession of material nonpublic information
about the Company, or (ii) the communication of material nonpublic information
about the Company in connection with any transaction on or through the
facilities of a national securities exchange or from or through a broker or
dealer, other than as part of a securities offering by the Company;
(e) with respect to any transaction from which the Indemnitee
is held, by a court of competent jurisdiction in a final judgment from which
there is no further right to appeal, to have derived an improper personal
benefit to which he is not legally entitled;
(f) for the return of any remuneration paid to the Indemnitee
that is held, by a court of competent jurisdiction in a final judgment from
which there is no further right to appeal, to have been illegal or improper;
(g) to the extent that an act or omission of the Indemnitee
(i) was not in good faith, or (ii) involved intentional misconduct or a knowing
violation of law; or
(h) if in a final judgment from which there is no further
right to appeal a court of competent jurisdiction in the matter shall have
determined that such indemnification is not lawful.
5. Partial and Mandatory Indemnity. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company of some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of an Action but not for the total
<PAGE> 5
Page - 5
amount, the Company shall indemnify Indemnitee for the portion to which
Indemnitee is entitled. To the extent that Indemnitee has been successful on the
merits or otherwise (including dismissal with or without prejudice) in defense
of any Indemnifiable Action or Indemnifiable Derivative Action, or in defense of
any claim, issue or matter therein, he or she shall be indemnified against
Expenses actually and reasonably incurred by him in connection therewith, except
as stated in Paragraph 4(a) or 4(b).
6. Notification of Indemnifiable Action or Indemnifiable Derivative
Action. Indemnitee shall promptly notify the Company of any Indemnifiable Action
or Indemnifiable Derivative Action promptly after receipt by Indemnitee of
notice of the commencement of such Indemnifiable Action or Derivative Action.
With respect thereto:
(a) The Company will be entitled to participate therein at its
own expense.
(b) Except as otherwise provided below, the Company jointly
with any other indemnifying party may assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee to be chosen or approved by the Company.
After notice from the Company to Indemnitee of its election to so assume the
defense thereof, the Company will not be liable to Indemnitee for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or participation in
any Action or Derivative Action (including travel expenses) or as otherwise
provided below. Indemnitee shall have the right to employ independent counsel in
such Action or Derivative Action; however, the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense thereof
shall be at the expense of Indemnitee unless:
(i) the employment of independent counsel by
Indemnitee has been authorized by the Company;
(ii) counsel employed by the Company to represent the
Indemnitee shall have reasonably concluded that there may be a conflict
of interest in the conduct of the defense of such action that prevents
such counsel from representing Indemnitee; or
(iii) the Company shall not in fact have employed
counsel to assume the defense of such Action or Derivative Action on
behalf of Indemnitee.
The fees and expenses of independent counsel of Indemnitee in subparagraphs
6(b)(i), (ii) and (iii) shall be borne by the Company.
(c) If the Company has assumed the defense of the Indemnitee
pursuant to subparagraph (b) above, the Company shall not be liable to indemnify
Indemnitee under this Agreement for any amount paid in settlement of any Action
or Derivative Action effected
<PAGE> 6
Page - 6
without its written consent, the Company shall not settle any Action or
Derivative Action in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent, and neither the Company nor
Indemnitee will unreasonably withhold their consent to any proposed settlement.
7. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
for the benefit of Indemnitee and from time to time upon written request of
Indemnitee shall fund such trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Indemnifiable
Action or Indemnifiable Derivative Action, and any and all judgments, fines,
penalties and settlement amounts of any and all Indemnifiable Actions or
Indemnifiable Derivative Action from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid; provided, however, that in no
event shall more than $250,000 be required to be deposited in any trust created
hereunder in excess of amounts deposited in respect of reasonably anticipated
Expenses. The terms of the trust shall provide that upon a Change in Control (i)
the trust shall not be revoked or the principal thereof invaded without the
written consent of the Indemnitee, (ii) the trustee shall advance, within ten
(10) business days of a written request by the Indemnitee, any and all Expenses
to the Indemnitee (and the Indemnitee hereby agrees to reimburse the trust under
the circumstances under which the Indemnitee would be required to reimburse the
Company under Section 8(b) of this Agreement), (iii) the trust shall continue to
be funded by the Company in accordance with the funding obligation set forth
above, (iv) the trustee shall promptly pay to Indemnitee all amounts for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such trust shall revert to the
Company upon a final determination by the Indemnitee or a court of competent
jurisdiction, as the case may be, that Indemnitee has been fully indemnified
under the terms of this Agreement. Trustee shall be chosen by the Board of
Directors. Nothing in this Section 8 shall relieve the Company of any of its
obligations under this Agreement.
8. Advance of Expenses; Failure to Pay Claim.
(a) Written Request. If so requested by Indemnitee in writing,
the Company shall (subject to the provisions of this Agreement) advance to
Indemnitee (an "Expense Advance") any and all Expenses incurred in connection
with the investigation and preparation of the Indemnitee's participation in any
Indemnifiable Action or Indemnifiable Derivative Action, whether as a witness or
a party, pursuant to this Agreement. The Company shall comply with the
Indemnitee's written request for an Expense Advance within ten (10) business
days of receipt of such written request together with the reimbursement
commitment referred to in subparagraph (b) below. If the Company does not honor
Indemnitee's request for an Expense Advance, Indemnitee may bring an action in
any court of competent jurisdiction to enforce the right to an Expense Advance,
and the Company shall have the burden of proof in such action to demonstrate
that the Expense Advance is not payable.
<PAGE> 7
Page - 7
(b) Reimbursement by Indemnitee. The obligation of the Company
to make an Expense Advance shall be subject to the condition that, if it is
ultimately determined (by final judicial determination from which there is no
further right to appeal) that there are matters to which Indemnitee is not
entitled to indemnity under this Agreement, the Company shall be entitled to be
reimbursed by Indemnitee for all such amounts. Prior to obtaining the initial
Expense Advance, Indemnitee must confirm such reimbursement obligation by
delivery to Company of a signed undertaking in the form of Exhibit A or in such
other form as Company may reasonably accept.
(c) Expense Advance Rules. Expenses in all cases must be
reasonable and comply with existing or future billing procedures of the Company
so that the Company can reasonably monitor and audit such Expenses. With respect
to attorneys' fees, the Company will give reasonable consideration to requests
for specific counsel and to requests for the grouping of individuals for joint
defense purposes. Any attorney representing more than one individual may be
requested to render separate statements to each individual or otherwise allocate
billings by individual.
(d) Failure to Pay Claim. If loss has been incurred and a
claim for indemnification under this Agreement is not paid by the Company within
ten (10) business days after a written claim has been received by the Company,
Indemnitee may at any time thereafter bring suit against the Company to recover
any unpaid amount of the claim.
9. Burden of Proof. In connection with any determination as to whether
Indemnitee is entitled to be indemnified hereunder the burden of proof shall be
on the Company to establish that Indemnitee is not so entitled.
10. No Presumption. For purposes of this Agreement, the termination of
any action, suit or proceeding by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not payable under this Indemnification
Agreement or permitted by applicable law.
11. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the Company's
Certificate of Incorporation, or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General Corporation Law
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Company's Certificate of
Incorporation and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change.
<PAGE> 8
Page - 8
12. Liability Insurance. From the date of this Agreement until
Indemnitee ceases to serve as a director of or in any other capacity with the
Company and, if such coverage is on a "claims made" rather than an "occurrence"
basis, for a period of three years thereafter, the Company will use its best
efforts to procure and maintain directors' and officers' liability insurance
under which Indemnitee is an insured person in such amounts and on such terms as
are the same in all material respects as those that exist under insurance
policies in effect (including those in effect pursuant to binders) as of the
date of this Agreement. The Company will provide Indemnitee with copies of
directors' and officers' liability insurance policies procured and will provide
him with notices received from the carrier of such insurance regarding changes
to his status as an insured person under such policies.
13. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such
shorter period shall govern.
14. Amendments and Waiver. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto; provided, however, that if any provision of this Agreement is
challenged as being unlawful, the parties agree that the court in which such
challenge is litigated may modify such provision so that it is enforceable to
the maximum extent permitted by law and may enforce the Agreement as so
modified. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
15. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
16. Binding Effect. Etc. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, heirs, and assigns.
17. Termination by Company. This Agreement shall continue in full force
and effect, regardless of whether Indemnitee continues to serve as an employee,
officer or director of the Company or any other enterprise at the Company's
request, unless terminated pursuant to this Paragraph. By giving written notice
to Indemnitee at his or her address according to Company records, the Company,
prior to a Potential Change of Control or Change of Control,
<PAGE> 9
Page - 9
may terminate its obligations under this Indemnification Agreement as to any act
or omission of Indemnitee after such written notice is given. Notice is deemed
given when actually received or two days after being sent by registered or
certified mail, whichever is earlier
18. Severability. The provisions of this Agreement shall be severable
and, in the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, the remaining
provisions shall remain enforceable to the fullest extent permitted by law,
including the provisions that have been modified by a court pursuant to
Paragraph 14 hereof.
19. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware applicable to
contracts and the indemnification rights of directors and officers made and to
be performed in such state without giving effect to the principles of conflicts
of laws.
20. Prior Agreements. This Agreement supersedes all prior
Indemnification Agreements between the Company and Indemnitee.
UNISON HEALTHCARE CORPORATION
By: /s/ Phillip R. Rollins
--------------------------------------
Its: EVP/COO
/s/ David A. Kremser
- -----------------------------------------
DAVID A. KREMSER INDEMNITEE
- -----------------------------------------
- -----------------------------------------
<PAGE> 10
EXHIBIT A
________ ____, l9__
Unison HealthCare Corporation
Attention: Chief Executive Officer
8800 North Gainey Center Drive
Suite 245
Scottsdale, Arizona 85258
RE: INDEMNIFICATION AGREEMENT DATED MARCH 31, 1997 (THE "AGREEMENT")
Gentlemen:
I am the beneficiary of the above Agreement and am a defendant,
witness, or other participant in the following legal action(s):
__________________________________________. A copy of the Complaint in this
action is attached for your information.
Pursuant to Paragraph 8 of the Agreement, I hereby request that Unison
HealthCare Corporation advance my Expenses as such term is used in the
Agreement, subject to the Expense Advance Rules, as such Rules are applied in
the Agreement. I hereby confirm that I will reimburse Unison HealthCare
Corporation for all the amounts advanced to me that are ultimately determined
(by final judicial determination from which there is no further right to appeal)
to be associated with matters to which I am not entitled to indemnity under the
Agreement.
If any additional information is needed, my address and telephone
number are listed below:
Address:
David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telephone Number:
303-670-5203
Very truly yours,
<PAGE> 1
Exhibit 10.115
TOLLING AGREEMENT
This Tolling Agreement (this "Agreement") is made by and between Unison
HealthCare Corporation, a Delaware corporation (the "Company"), and David A.
Kremser ("Kremser") as of March 31, 1997.
RECITALS
A. Pursuant to the Agreement and Plan of Merger among the Company,
Signature Health Care Corporation, Kremser and John D. Filkoski dated as of
August 2, 1996, the Company issued shares of its common stock, par value $0.001,
to Kremser in connection with which Kremser may have claims against the Company.
B. The Company and Kremser have agreed that Kremser will provide
services to the Company pursuant to the Services Agreement between the Company
and Kremser dated as of March 31, 1997 (the "Services Agreement").
AGREEMENT
In consideration of the mutual covenants set forth in this Agreement
and as an inducement for the parties to enter into the Services Agreement, the
parties agree as follows:
1. Definitions. As used in this Agreement, the following terms with
initial capital letters will have the meanings set forth below.
1. "Tolling Period" means the period commencing upon the date
of this Agreement and ending on the date Kremser ceases to serve on the board of
directors of the Company and perform services for the Company, whether pursuant
to the Services Agreement or otherwise.
2. "Statutes of Limitations Defense" means any defense or
avoidance of any claim Kremser may have against the Company, whether
individually or as a member of a class, based on the passage of time during the
Tolling Period, including without limitation any defense or avoidance of any
claim based upon any statute of limitation, any statute of repose or the
doctrines of waiver or laches.
2. Tolling.
1. The Company will not in any manner assert a Statute of
Limitations Defense in connection with any claim Kremser may have against the
Company. The Company further agrees that all applicable statutes of limitation
and statutes of repose will be tolled
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<PAGE> 2
during the Tolling Period.
2. Kremser will not file or initiate any legal action against
the Company during the Tolling Period.
3. Miscellaneous.
1. Execution in Counterparts. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, and all
of which taken together will constitute one and the same agreement.
2. Notices. All notices and other communications under this
Agreement will be in writing and will be deemed to have been duly given when:
(a) personally delivered (including delivery by Federal Express or other
nationally recognized overnight courier) or (b) sent by telecopy, receipt
confirmed, as follows:
If to the Company, to:
Unison HealthCare Corporation
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
Telecopy: (602) 481-6479
with a copy to:
Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012-1649
Telecopy: (602) 230-5598
Attn: Mark N. Rogers, Esq.
If to Kremser, to:
David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telecopy: (303) 670-5307
with a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
-2-
<PAGE> 3
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attn: Charles Y. Tanabe, Esq.
or to such other addresses and numbers as may be provided by the parties from
time to time by notice.
3. Amendment. No provision of this Agreement may be modified,
amended, waived or discharged in any manner except by a written instrument
executed by each of the parties.
4. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement,
and supersedes all prior agreements and understandings of the parties, oral or
written, with respect to the subject matter of this Agreement.
5. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Colorado without reference
to conflicts of law provisions.
6. Headings. The headings contained in this Agreement are for
convenience of reference only and will not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
7. Binding Effect; Successors. This Agreement may not be
assigned by either party without the prior written consent of the other. Subject
to the foregoing limitation, this Agreement will inure to the benefit of, and be
binding upon, the parties and their respective heirs, legal representatives,
successors and permitted assigns.
8. Waiver. The failure or delay of either party at any time to
enforce any provision of this Agreement will not be deemed to be a waiver of any
such provision or in any way to affect the validity of any provision of this
Agreement or the right of either party thereafter to enforce any provision of
this Agreement. No waiver of any breach of any provision of this Agreement will
be effective unless in writing executed by the party against whom or which
enforcement of such waiver is sought and no waiver of any such breach will be
construed or deemed to be a waiver of any other or subsequent breach.
9. Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, is found by a court
of competent jurisdiction to be unenforceable for any reason, such provision may
be modified or severed from this Agreement to the extent necessary to make such
provision enforceable against such person or in such circumstance. Neither the
unenforceability of such provision nor the modification or
-3-
<PAGE> 4
severance of such provision will affect (i) the enforceability of any other
provision of this Agreement or (ii) the enforceability of such provision against
any person or in any circumstance other than those against or in which such
provision is found to be unenforceable.
10. Authority. Kremser hereby represents and warrants to the
Company that: (i) he has full power, authority and capacity to execute and
deliver this Agreement, and to perform his obligations hereunder; and (ii) this
Agreement is a valid and binding obligation of Kremser enforceable against
Kremser in accordance with its terms. The Company hereby represents and warrants
to Kremser that: (i) it has full power, authority and capacity to execute and
deliver this Agreement, and to perform its obligations hereunder; (ii) the board
of directors of the Company has approved the terms and conditions of and has
authorized the execution of this Agreement; and (iii) this Agreement is a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Tolling Agreement as
of the date first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Phillip R. Rollins
----------------------------------
Name:Phillip R. Rollins
--------------------------------
Its:EVP/COO
---------------------------------
/s/ David A. Kremser
-------------------------------------
David A. Kremser
-4-
<PAGE> 1
Exhibit 10.116
OPTION AGREEMENT
This Option Agreement (this "Agreement") is entered into by and between
Unison HealthCare Corporation, a Delaware corporation (the "Company"), and David
A. Kremser ("Kremser") as of March 31, 1997.
RECITALS
The Company and Kremser wish to enter into the Services Agreement dated
as of March 31, 1997 (the "Services Agreement") pursuant to which Kremser will
provide services to the Company in his capacity as Chairman of the Executive
Committee of the Board of Directors.
The Company wishes to grant to Kremser, as an inducement for Kremser to
enter into the Services Agreement, options to acquire capital stock of the
Company as set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants set forth in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
1. Definitions. The following terms, when used in this Agreement with
initial capital letters, will have the following meanings:
(a) "Acquisition Event" means (i) a merger or consolidation of
the Company with one or more other Persons, whether or not the Company is the
surviving corporation, (ii) a sale or other disposition of all or substantially
all of the assets of the Company pursuant to a plan that provides for the
liquidation of the Company, or (iii) an exchange by the holders of all of the
outstanding shares of Common Stock for securities issued by another Person, or
in whole or in part for cash or other property, pursuant to a plan of exchange
approved by the holders of a majority of such outstanding shares.
(b) "Board" means the board of directors of the Company.
(c) "Common Stock" means the common stock of the Company, par
value $0.001 per share.
(d) "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
additional shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
1
<PAGE> 2
(e) "Fair Market Value" means, as to any securities, the
Market Price of such securities, and, as to other property (including securities
that are not listed or admitted to trading on any national securities exchange,
quoted on the NMS (as defined below) or traded in the over-the- counter market),
the price at which a willing seller would sell and a willing buyer would buy
such property having full knowledge of the facts, in an arm's-length transaction
without time constraints, and without being under any compulsion to buy or sell.
For purposes of this Agreement, the Fair Market Value of any item will be
determined by agreement between the Company and Kremser or, if they cannot agree
on such Fair Market Value within 20 days after the need for such determination
arises, by an independent investment banking firm of nationally recognized
standing selected by Kremser in good faith and approved by the Company, which
approval will not be unreasonably withheld. The fees and expenses of any such
investment banking firm will be paid one-half by Kremser and one-half by the
Company.
(f) "Market Price" means, with respect to any securities on a
given date, the average of the Closing Prices for 10 consecutive Trading Days
ending on the Trading Day immediately preceding the date in question. As used
herein, "Closing Price" means the last reported sale price regular way or, in
case no such sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case as reported on the New York
Stock Exchange Composite Tape or, if such sale or sales, as applicable, are not
so reported, the reported last sales price regular way or, if no, such sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the principal national securities exchange
on which such securities are listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations National Market System
(the "NMS") or, if not listed or admitted to trading on any national securities
exchange or quoted on the NMS, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm selected by Kremser for that purpose. "Trading Day" means each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on such exchange or in such market.
If such securities are not listed or admitted to trading on
any national securities exchange, quoted on the NMS or traded in the
over-the-counter market, the "Market Price" per share on any date will be deemed
to be the Fair Market Value thereof.
(g) "Person" means a human being or a corporation,
partnership, limited liability company, trust, unincorporated organization,
association or other entity.
(h) "Termination For Cause" means the termination of Kremser's
services to the Company (i) based on a determination by the Board, made in good
faith and on a reasonable basis, that Kremser has engaged in conduct
constituting willful misconduct or gross negligence, which misconduct or
negligence will have resulted in material damage to the Company, or (ii) because
Kremser has been convicted of a felony or been adjudged by a court of competent
jurisdiction, without a right to further appeal, to have defrauded the Company.
2
<PAGE> 3
2. Grant of Option. Effective March 31, 1997, the Company grants to
Kremser options (the "Options") to purchase from the Company 50,000 shares of
Common Stock (the "Shares"), at a purchase price of $2.875 per share (the
"Exercise Price"). The Options are issued under and are subject to the Unison
HealthCare Corporation 1995 Stock Option Plan, as revised (the "Plan"). The
Options are Nonqualified Stock Options under the Plan. The parties acknowledge
that the Plan provides a minimum level of rights of option holders, and that, as
permitted by Section 6(n) of the Plan, this Agreement provides additional and
more extensive rights to Kremser. To the extent that a court of competent
jurisdiction determines that terms of this Agreement are not permitted by the
terms of the Plan, the terms of the Plan will govern.
3. Exercise Term of Options. The Options may be exercised immediately,
in whole or in part, at any time and from time to time, prior to termination
pursuant to Section 4.
4. Termination. The Options will terminate on the earliest of:
(a) March 31, 2002;
(b) two years after the date Kremser ceases to provide
services to the Company for any reason other than death, permanent disability,
retirement or Termination For Cause;
(c) three years after the date Kremser ceases to provide
services to the Company because of death, permanent disability or retirement;
and
(d) 190 days after the date Kremser ceases to provide services
to the Company due to a Termination For Cause.
5. Restrictions on Transfer. The Options may not be transferred by
Kremser except as expressly provided in this Section, and any attempted transfer
in violation of this Section is void and of no force or effect. The Options may
be transferred in whole or in part at any time and from time to time to the
heirs or personal representatives of Kremser or to a trust for the benefit of
Kremser's family members, provided that any such transferee agrees to be bound
by the provisions of this Agreement by executing a counterpart signature page to
this Agreement (each a "Permitted Transferee"). Where the context so requires, a
reference in this Agreement to "Kremser" will be deemed to include a reference
to a Permitted Transferee.
6. Manner of Exercise.
(a) Each Option will be exercisable by Kremser or a Permitted
Transferee by written notice to the Company, which notice will state the
election to exercise all or a specified number of the Options and be signed by
Kremser or such Permitted Transferee, as the case may be. Such notice will be
accompanied by payment of the full exercise price for the Options exercised: (i)
in cash or by cashier's check; (ii) at Kremser's election, by delivery of shares
of Common Stock ("Delivered Stock"); or (iii) at Kremser's election, by delivery
of a combination of cash and Delivered Stock. If payment is made in whole or in
part in Delivered Stock, each share of Delivered Stock will be deemed to have a
value equal to its
3
<PAGE> 4
Market Price on the date of exercise. Notwithstanding the foregoing, the Company
may arrange for or cooperate with a broker-assisted cashless exercise of the
Options. The Company may also extend and maintain, or arrange for the extension
and maintenance of, credit to Kremser to finance the exercise of all or any part
of the Options.
(b) The Company will, within 10 days after receipt of such notice of
exercise and payment, issue and deliver to Kremser a certificate or certificates
representing the Shares issuable upon such exercise. Any liability for foreign,
federal, state or local taxes resulting from the exercise of, and the
disposition of the Shares issued pursuant to, the Options will be the sole
responsibility of Kremser (other than taxes in respect of income of the Company,
if any).
7. Registration Rights. Any Shares issued upon exercise of the Options
will be deemed to be "Registrable Securities" as defined in, and subject to, the
Registration Rights Agreement between the Company and Kremser dated as of
October 31, 1996.
8. Antidilution. The number of Shares issuable upon exercise, and the
Exercise Price, of the unexercised Options will be adjusted from time to time as
set forth in this Section.
(a) Stock Dividends, Subdivisions and Combinations. If at any
time the Company (i) declares a dividend in shares of Common Stock, (ii)
subdivides its outstanding shares of Common Stock into a larger number of shares
of Common Stock, (iii) combines its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issues any shares of its
capital stock by reclassification of the Common Stock, then the number and kind
of Shares issuable upon exercise of the unexercised Options immediately after
the happening of any such event will be adjusted to the number of shares of
Common Stock which Kremser would have been entitled to receive pursuant to such
event had he exercised all of the unexercised Options immediately prior to such
event. The Exercise Price will then be adjusted so that the aggregate Exercise
Price of the unexercised Options will not be affected by such adjustment to the
number or kind of Shares.
(b) Adjustment of Exercise Price upon Issuance of Common
Stock. If at any time the Company issues any shares of Common Stock for a
consideration per share (i) less than the Exercise Price in effect immediately
prior to the time of such issuance or (ii) less than the Market Price of Common
Stock at the time of such issuance, except for issuances of the Shares pursuant
to the Options, then the Exercise Price will be adjusted in accordance with the
following formula:
N P
---
C'= CO + M
-------
O + N
where: C' = the adjusted Conversion Price
C = the current Conversion Price
O = the number of shares of Common Stock outstanding on the date
of such issuance
N = the number of additional shares of Common Stock issued
4
<PAGE> 5
P = the issue price per share of the additional shares of Common
Stock
M = the Market Price per share of Common Stock on the date of
such issuance
(c) Issuance of Rights or Options. (i) In the event the
Company grants (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any Convertible Securities, whether or not such rights or
options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities (determined as provided below) is less
than the Exercise Price in effect immediately prior to the time of the granting
of such rights or options (or less than the Market Price determined as of the
date of granting such rights or options, as the case may be), then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such rights or options
will (as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per share. Except as provided
in clause (iii) of this subsection, no further adjustments of any Exercise Price
will be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities.
For the purposes of this clause (i), the price per share for which Common Stock
is issuable upon the exercise of any such rights or options or upon conversion
or exchange of any such Convertible Securities will be determined by dividing
(A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such rights or options, plus, in the case of such rights or
options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or options.
(ii) Issuance of Convertible Securities. In the event
the Company issues (whether directly or by assumption in a merger or otherwise)
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon conversion or exchange of such Convertible Securities
(determined as provided below) is less than the Exercise Price in effect
immediately prior to the time of such issue or sale (or less than the Market
Price, determined as of the date of such issue or sale of such Convertible
Securities, as the case may be), then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities will (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued for such price
per share, provided that (1) except as provided in clause (iii) of this
subsection, no further adjustments of any Exercise Price will be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (2) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or
5
<PAGE> 6
any option to purchase any such Convertible Securities for which adjustments of
any Exercise Price have been or are to be made pursuant to other provisions of
this Section, no further adjustment of any Exercise Price will be made by reason
of such issue or sale. For the purposes of this clause (ii), the price per share
for which Common Stock is issuable upon conversion or exchange of Convertible
Securities will be determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any rights or options referred to in clause
(i) above, or the additional consideration, if any, payable upon the conversion
or exchange of Convertible Securities referred to in clause (i) or (ii) above,
or the rate at which any Convertible Securities referred to in clause (i) or
(ii) above are convertible into or exchangeable for Common Stock, changes (other
than under or by reason of provisions designed to protect against dilution),
then the Exercise Price in effect at the time of such event will be readjusted
to the Exercise Price that would have been in effect at such time had such
rights, options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold; and on the expiration of
any such option or right or the termination of any such right to convert of
exchange such Convertible Securities, the Exercise Price then in effect will be
increased to the Exercise Price that would have been in effect at the time of
such expiration or termination had such right, option or Convertible Security,
to the extent outstanding immediately prior to such expiration or termination,
never been issued, and the Common Stock issuable thereunder will no longer be
deemed to be outstanding. If the purchase price provided for in any such right
or option referred to in clause (i) above or the rate at which any Convertible
Securities referred to in clause (i) or (ii) above are convertible into or
exchangeable for Common Stock, decreases at any time under or by reason of
provisions with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Security, the
Exercise Price then in effect will be adjusted to such amount as would have
resulted had such right, option or Convertible Security never been issued as to
such Common Stock and had adjustments been made upon such issuance of Common
Stock, but only if as a result of such adjustment the Exercise Price then in
effect is decreased.
(iv) Consideration for Common Stock or Convertible
Securities. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any Common Stock or Convertible Securities are
issued or sold for cash, the consideration received therefor will be deemed to
be the amount received by the Company therefor, without deduction therefrom of
any expenses incurred. In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities are issued or sold for a consideration other than cash or
securities, the amount of the consideration other than cash received by the
Company will be deemed to be the Fair Market Value of such consideration without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection
6
<PAGE> 7
therewith. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase such shares of Common Stock or Convertible
Securities are issued in connection with any merger or consolidation in which
the Company is the surviving corporation (other than any consolidation or merger
in which the previously outstanding shares of Common Stock are changed into or
exchanged for the stock or other securities of another corporation), the amount
of consideration therefor will be deemed to be the Fair Market Value of such
portion of the assets and business of the non-surviving corporation as the Board
may determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation or in which the previously outstanding shares of Common Stock are
changed into or exchanged for the stock or other securities of another
corporation or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company will be deemed to have issued a number of shares of its Common Stock for
stock or securities or other property of the other corporation computed on the
basis of the actual exchange ratio on which the transaction was predicated and
for a consideration equal to the Fair Market Value on the date of such
transaction of all such stock or securities or other property of the other
corporation, and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of shares of Common Stock issuable upon
exercise of the Options immediately prior to such merger, consolidation or sale,
for purposes of Section 9, will be made after giving effect to such adjustment
of the Exercise Price.
(d) Adjustment for Certain Dividends or Distributions. If at
any time the Company, by dividend or otherwise, distributes to the holders of
its Common Stock cash or assets in the form of non-cash consideration
(including, without limitation, evidences of its or its affiliates' indebtedness
or securities and excluding distributions for which adjustments are required to
be made pursuant to other provisions of this Section), Kremser will, upon
exercise of the Options after the record date for such distribution or, in the
absence of a record date, after the date of such distribution, receive, in
addition to the Shares issuable upon such exercise and in lieu of any adjustment
pursuant to subsection (d), the amount of such assets (or, at Kremser's option,
cash in an amount equal to the Fair Market Value thereof) which would have been
distributed to Kremser if Kremser had exercised the Options immediately prior to
the record date for such distribution or, in the absence of a record date,
immediately prior to the date fixed for such distribution.
(e) Adjustment of Shares. Whenever the Exercise Price is
adjusted pursuant to this Section (other than pursuant to subsection (a)), the
number of Shares issuable upon exercise of the unexercised Options will be
adjusted so that the aggregate Exercise Price of the unexercised Options will
not be affected by such adjustment to the Exercise Price.
(f) Minimum Adjustment of Exercise Price. Regardless of
anything to the contrary in this Section, no adjustment of the Exercise Price
will be made in an amount which would result in an adjustment of less than 1% of
the Exercise Price, and any such lesser adjustment will be carried forward and
will be made at the time of, and together with, the next subsequent adjustment
that, together with any adjustments so carried forward, amount to an adjustment
of at least 1% of the Exercise Price.
7
<PAGE> 8
(g) Other Adjustments to Exercise Price. The Company may make
such reductions in the Exercise Price, in addition to those otherwise required
by this Section, as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the recipients.
(h) Certain Events. If any event occurs as to which in the
reasonable opinion of the Company, in good faith, the provisions of this Section
are not strictly applicable but the lack of any adjustment would not fairly
protect the rights of Kremser in accordance with the basic intent and principles
of such provisions, then the Company (with the consent of Kremser) will in good
faith make an adjustment to the application of such provisions in accordance
with the basic intent and principles established in the other provisions of this
Section, so as to preserve the rights of Kremser.
(i) Successive Adjustments. Any adjustments required by this
Section will be made, to the extent applicable, successively whenever any event
described in this Section will occur.
(j) Notice of Adjustment. Whenever the Exercise Price is
adjusted pursuant to this Section, the Company will promptly (but in no event
later than 10 calendar days thereafter) compute the adjusted Exercise Price and
cause a notice setting forth such adjusted Exercise Price to be mailed to
Kremser and will cause a certified copy thereof to be mailed to the transfer
agent for the Common Stock (the "Transfer Agent"), if such Transfer Agent is
other than the Company. The Company will, upon the request in writing of
Kremser, retain a nationally recognized firm of independent public accountants
selected by the Board to make any computation required by this clause, and a
certificate signed by such firm will be conclusive evidence of the correctness
of such adjustment, which will be binding on Kremser and the Company. The
failure to give the notice required in this clause or any defect therein will
not affect the legality or validity of the event causing the adjustment of the
Exercise Price or the vote thereon or any other action taken in connection
therewith.
9. Substitution or Cancellation Upon Acquisition. In connection with
any Acquisition Event, Kremser will be required to elect to make a final
settlement for any unexercised Options in any one or more of the following
manners:
(i) if the consideration to be received by holders of Common
Stock in the Acquisition Event consists of securities, surrender such
unexercised Options for cancellation in exchange for the payment in such
securities in an amount the aggregate Market Price of which is equal to the
excess of the aggregate Market Price of the securities which would be issued to
the holder of the Shares issuable upon exercise of such Options in connection
with such Acquisition Event over the aggregate exercise price of such Options;
(ii) surrender such unexercised Options for cancellation in
exchange for the payment in cash of an amount not less than the excess of (A)
the Fair Market Value of the consideration that would be received by the holder
of the Shares issuable on exercise of such Options pursuant to the terms of the
Acquisition Event minus, if the Acquisition Event is effected as a sale of
assets, the liabilities of the Company and its subsidiaries attributable to
8
<PAGE> 9
such assets that are not assumed in such transaction allocated to such Shares on
a pro rata basis, as determined by the Board in its reasonable discretion, over
(B) the aggregate Exercise Price of such Options; or
(iii) exercise such Options prior to the Acquisition Event so
that Kremser will be entitled, with respect to the Shares acquired, to
participate in the Acquisition Event as a holder of Common Stock.
After an election by Kremser pursuant to this Section, such Options may
be canceled by the Company upon the occurrence of the Acquisition Event and
thereafter Kremser will be entitled only to receive the appropriate benefit
pursuant to clause (i), (ii) or (iii) above, whichever may be applicable. The
Board will in good faith separately value the Company if this Section is to be
applied in a transaction constituting an Acquisition Event effected as part of a
larger transaction in which no separate value is allocated to the Company.
The provisions of this Section are not intended to be exclusive of any
other arrangements that the Board may approve with the consent of Kremser for
settlement of any unexercised Options in connection with an Acquisition Event or
otherwise.
10. Valuation and Withholding. If required by applicable law, the
Company will, at the time of issuance of any Shares pursuant to this Agreement,
provide Kremser with a statement of valuation of the Shares issued. The Company
will be entitled to withhold amounts from Kremser's compensation or otherwise to
receive an amount adequate to provide for any applicable federal, state and
local income taxes (or to require Kremser to remit such amount as a condition of
issuance).
11. Rights of Option Holder. Kremser will have no rights as a
stockholder with respect to the Shares until the exercise of the Options and
payment of the full purchase price therefor in accordance with the terms of this
Agreement.
12. Fractional Shares. No fractional shares will be issued upon
exercise of any of the Options. The Company will pay to Kremser, in cash at the
time of issuance and delivery of the certificate or certificates representing
the Shares, the amount derived by multiplying any fraction of a share otherwise
issuable upon the exercise of such Options by the Market Price of a share of
Common Stock.
13. Restrictive Legend. Unless the issuance of the Shares has been
registered under the Securities Act, upon exercise of the Options and the
issuance of the Shares (in whole or in part), the Company will instruct its
transfer agent to enter stop transfer orders with respect to Shares, and all
certificates representing the Shares will bear substantially the following
legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended,
or any state securities laws, and may not be sold, offered for
sale, pledged, assigned, transferred or otherwise disposed of
unless registered under that Act and any applicable state
securities laws or an
9
<PAGE> 10
opinion of counsel to the Company is obtained stating that
such disposition is in compliance with an available exemption
from such registration."
14. Representations and Warranties of the Company. The Company
represents and warrants to Kremser that, as of the date of this Agreement:
(a) Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has all necessary corporate power and authority
to conduct its business as presently conducted and to enter into and perform its
obligations under this Agreement.
(b) Capitalization of the Company. The authorized capital
stock of the Company consists of 25,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, each par value $0.001 per share. The Company will
reserve a sufficient number of authorized but unissued shares of Common Stock
(or, if required, other securities) for issuance upon exercise of any of the
Options.
(c) Authority, Etc. The execution, delivery and performance of
this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforceability may be
affected by bankruptcy, insolvency or other laws affecting the rights of
creditors generally and by general equitable principles.
(d) Shares. All Shares issued upon exercise of the Options,
when issued in accordance with this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and will be free and clear of any security
interest, pledge or other encumbrance.
15. Investment Intent. Kremser represents and warrants to the Company
that he is acquiring the Options and will acquire any Shares upon exercise of
the Options for his own account for investment purposes only and not with a view
to any distribution thereof.
16. Hart-Scott-Rodino Compliance. If in the reasonable judgment of
Kremser or the Company, Kremser's holding of Common Stock or other securities of
the Company or his acquisition of Common Stock or other securities of the
Company upon exercise of the Options or any other security convertible into, or
any warrant, option or other right to acquire, Common Stock or other securities
of the Company (the Options and such other convertible securities, warrants,
options and rights being referred to individually as a "Derivative Security" and
collectively as "Derivative Securities") would require a filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Company and Kremser each will take such actions as may be required
promptly to comply with the requirements of the HSR Act relating to the filing
and furnishing of information (an "HSR Report") to the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the "DOJ"),
such actions to include (i) preparing and cooperating with each other in
preparing the HSR Report to be filed by or on behalf of each of them so as to
avoid errors or inconsistencies between their HSR Reports in the description of
the reported transaction and
10
<PAGE> 11
to permit the filing of their HSR Reports in a timely fashion, (ii) complying
with any request for additional documents or information made by the FTC or the
DOJ or by any court and assisting the other in so complying and (iii) causing
all persons or entities which are part of the same "person" (as defined for
purposes of the HSR Act) as such party to cooperate and assist in such
compliance. Kremser and the Company each will pay any costs that it incurs in
complying with the obligations set forth in this Section, except that each will
bear one-half of any fee payable in connection with the filing of an HSR Report.
It will be a condition precedent to the effectiveness of the conversion or
exercise of any Derivative Security held by Kremser or any of his successors or
assigns that either (i) no filing under the HSR Act by the holder of such
Derivative Security would be required in connection with his acquisition of
Common Stock or other voting securities upon such conversion or exercise or (ii)
any applicable waiting period under the HSR Act has expired or been terminated.
If an acquisition of securities of the Company by Kremser upon conversion or
exercise of a Derivative Security requires the filing of an HSR Report, then any
time period within which Kremser is required to convert or exercise such
Derivative Security will be deemed extended, up to a maximum of 90 days, to
permit compliance with the HSR Act, including filing of the requisite HSR
Reports and expiration or termination of the applicable waiting period. If the
waiting period has not so expired or been terminated prior to the end of such
period of extension and of the period within which Kremser is required to
convert or exercise such Derivative Security or if Kremser determines to
withdraw his HSR Report, then the Company will use its best efforts to afford to
Kremser the benefits intended to be provided by the Derivative Security by (i)
granting to Kremser the right to acquire other securities of the Company having
the same rights, privileges and preferences as the securities originally to be
acquired, except that such other securities will not possess voting rights, on
the same terms as the securities originally to be acquired or (ii) if such
replacement right cannot be granted, providing to Kremser such other right as
may reasonably represent the value of the conversion or exercise right required
to be foregone.
If Kremser, in his sole opinion, considers a request from a
governmental agency for additional data and information in connection with the
HSR Act to be unduly burdensome, Kremser may withdraw his HSR Report and rescind
his conversion or exercise of the affected Derivative Security, in which case
his rights will be the same as existed immediately before such attempted
conversion or exercise and, in addition, Kremser will have the rights described
in the last sentence of the preceding paragraph.
The provisions of this Section will (i) survive the exercise of the
Options, (ii) apply to any Derivative Security now held by Kremser and, absent
any provision expressly to the contrary set forth therein, to each Derivative
Security hereafter acquired by Kremser and (iii) inure to the benefit of, and be
binding on, Kremser, the Company and their respective successors and assigns,
including, in the case of Kremser, any transferee of a Derivative Security.
17. Miscellaneous Provisions.
(a) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original, and all
of which taken together will constitute one and the same agreement.
11
<PAGE> 12
(b) Notices. All notices and other communications under this
Agreement will be in writing and will be deemed to have been duly given when:
(i) personally delivered (including delivery by Federal Express or other
nationally recognized overnight courier) or (ii) sent by telecopy, receipt
confirmed, as follows:
If to the Company, to:
Unison HealthCare Corporation
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
Telecopy: (602) 481-6479
with a copy to:
Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012-1649
Telecopy: (602) 230-5598
Attn: Mark N. Rogers, Esq.
If to Kremser, to:
David A. Kremser
784 Yankee Creek Road
Evergreen, Colorado 80439
Telecopy: (303) 670-5307
with a copy to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attn: Charles Y. Tanabe, Esq.
or to such other addresses and numbers as may be provided by the parties from
time to time by notice.
(c) Amendment. No provision of this Agreement may be modified,
amended, waived or discharged in any manner except by a written instrument
executed by each of the parties.
(d) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement,
and supersedes all prior agreements and understandings of the parties, oral or
written, with respect to the subject matter of this Agreement.
12
<PAGE> 13
(e) Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware without reference
to conflicts of law provisions.
(f) Headings. The headings contained in this Agreement are for
convenience of reference only and will not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
(g) Binding Effect; Successors. This Agreement will inure to
the benefit of, and be binding upon, the parties and their respective heirs,
legal representatives, successors and permitted assigns.
(h) Waiver. The failure or delay of either party at any time
to enforce any provision of this Agreement will not be deemed to be a waiver of
any such provision or in any way to affect the validity of any provision of this
Agreement or the right of either party thereafter to enforce any provision of
this Agreement. No waiver of any breach of any provision of this Agreement will
be effective unless in writing executed by the party against whom or which
enforcement of such waiver is sought and no waiver of any such breach will be
construed or deemed to be a waiver of any other or subsequent breach.
(i) Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, is found by a court
of competent jurisdiction to be unenforceable for any reason, such provision may
be modified or severed from this Agreement to the extent necessary to make such
provision enforceable against such person or in such circumstance. Neither the
unenforceability of such provision nor the modification or severance of such
provision will affect (i) the enforceability of any other provision of this
Agreement or (ii) the enforceability of such provision against any Person or in
any circumstance other than those against or in which such provision is found to
be unenforceable.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the date first written above.
UNISON HEALTHCARE CORPORATION
By: /s/ Phillip R. Rollins
-----------------------------------
Name: Phillip R. Rollins
--------------------------------
Title: EVP/COO
-------------------------------
13
<PAGE> 1
EXHIBIT 10.117.1
LOAN AND SECURITY AGREEMENT
DATED AS OF APRIL 21, 1997
BY AND AMONG
UNISON HEALTHCARE CORPORATION,
AS BORROWER,
AND
ELK MEADOWS INVESTMENTS, L.L.C.,
AND
BRITWILL INVESTMENTS COMPANY, LTD.,
COLLECTIVELY, AS LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................. 1
1.1 Certain Defined Terms.................................... 1
1.2 Other Terms.............................................. 9
1.3 Interpretation........................................... 9
1.4 Rounding................................................. 9
ARTICLE II LOAN TERMS............................................... 9
2.1 Single Advance........................................... 9
2.2 Note..................................................... 9
2.3 Analysis of Collateral Value; Mandatory Loan Reductions.. 9
2.4 Loan Records............................................. 9
2.5 Interest................................................. 10
2.6 Fees..................................................... 10
2.7 Collections on Receivables............................... 10
ARTICLE III [Reserved]............................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES......................... 11
4.1 Representations and Warranties of the Borrower........... 11
ARTICLE V GENERAL COVENANTS OF THE BORROWER........................ 11
5.1 Affirmative Covenants of the Borrower.................... 11
5.2 Reporting Requirements of the Borrower................... 12
5.3 Negative Covenants of the Borrower....................... 13
ARTICLE VI [Reserved]............................................. 14
ARTICLE VII [Reserved]............................................. 14
ARTICLE VIII GRANT OF SECURITY INTERESTS............................ 14
8.1 Borrower's Grant of Security Interest.................... 14
8.2 Additional Collateral.................................... 15
8.3 Delivery of Collateral................................... 15
8.4 Borrower Remains Liable.................................. 15
8.5 Covenants of the Borrower Regarding the Collateral....... 15
8.6 All Obligations Secured.................................. 17
ARTICLE IX EVENTS OF DEFAULT...................................... 18
9.1 Events of Default........................................ 18
ARTICLE X REMEDIES............................................... 19
10.1 Actions Upon Event of Default............................ 19
10.2 Receipt of Payments in Trust............................. 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
10.3 Application of Proceeds.................................. 20
10.4 Exercise of Remedies..................................... 20
10.5 Severability of Remedies................................. 21
10.6 Waiver of Appraisement................................... 21
10.7 Power of Attorney........................................ 21
10.8 Additional Rights Regarding Pledged Stock................ 21
ARTICLE XI [Reserved]............................................. 22
ARTICLE XII INDEMNIFICATION........................................ 22
12.1 Indemnities by the Borrower.............................. 22
ARTICLE XIII MISCELLANEOUS.......................................... 23
13.1 Notices, Etc............................................. 23
13.2 Binding Effect; Assignability; Limits on Assignability... 23
13.3 Costs, Expenses and Taxes................................ 23
13.4 [Reserved]............................................... 24
13.5 Amendments; Waivers; Consents............................ 24
13.6 GOVERNING LAW; CONSENT TO JURISDICTION: WAIVER OF
JURY TRIAL............................................... 24
13.7 Execution in Counterparts; Facsimile Signatures;
Severability............................................. 25
13.8 Descriptive Headings..................................... 25
</TABLE>
EXHIBITS
A. Collateral Value Certificate
SCHEDULES
1. Representations and Warranties
-ii-
<PAGE> 4
This LOAN AND SECURITY AGREEMENT, dated as of April 21, 1997 (this
"Agreement"), is by and among UNISON HEALTHCARE CORPORATION, a Delaware
corporation (the "Borrower"), and ELK MEADOWS INVESTMENTS, L.L.C. and BRITWILL
INVESTMENTS COMPANY, LTD. (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower desires to obtain a loan from the Lender secured by
certain accounts receivable owned by it and purchased pursuant to the
Receivables Assignment Agreement;
WHEREAS, in order to secure the advances made to the Borrower by the
Lender, the Borrower intends to grant to the Lender and its assigns a security
interest in such receivables and other collateral owned by the Borrower.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. In addition to the items defined in the first
paragraph above, as used herein, the following terms shall have the following
meanings:
"Adverse Claim" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other
type of preferential arrangement having the effect or purpose of creating
a lien or security interest, other than the security interest created
under this Agreement;
"Affiliate" means as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person within the meaning of control under Section 15
of the Securities Act of 1933, as amended.
"Authorized Officer" means, with respect to any corporation, the
Chairman of the Board, the President, the Chief Financial Officer, the
Chief Operating Officer, the Secretary, the Treasurer, any Assistant
Secretary, any Assistant Treasurer and each other officer of such
corporation specifically authorized in resolutions of the Board of
Directors of such corporation to sign agreements, instruments or other
documents in connection with this Agreement.
"Billed Amount" means, with respect to any Receivable, the net
amount billed on the Billing Date to the related Obligor with respect
thereto.
"Billing Date" means the date on which the invoice or claim with
respect to a
<PAGE> 5
Receivable was generated by the related Facility Owner, which date,
subject to approval by the Lender, at the Lender's sole discretion, shall
be within a reasonable time after the date of the related service.
"Borrower Assigned Agreements" has the meaning specified in Section
8.1(b).
"Business Day" means any day of the year other than a Saturday,
Sunday or any day on which banks generally are required, or authorized to
close in Phoenix, Arizona.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering retirees and
dependents of a member or a former member of a uniformed service,
provided, financed and supervised by the United States Department of
Defense established by 10 USC Sections 1071 et seq.
"Change in Control" means, with respect to a Person, the time when
(i) any Person or "group" has acquired "beneficial ownership" (as such
terms are defined under Section 13d-3 of and Regulation 13D under the
Securities Exchange Act of 1934, as amended), either directly or
indirectly, of outstanding shares of Stock of another Person having more
than fifty percent (50%) of the voting power for the election of directors
of such Person under ordinary circumstances or (ii) more than fifty
percent (50%) of the members of such Person's board of directors shall
have been replaced by new directors not nominated for membership on the
board by a majority of directors who were directors on the Closing Date.
"Closing Date" means April 21, 1997.
"Closing Fee" means a non-refundable fee equal to $29,500 (1% of the
Maximum Loan Amount as of the Closing Date).
"Collateral" means all of the collateral pledged by the Borrower in
Sections 8.1 and 8.2.
"Collateral Value" means, as of the date of its computation, an
amount equal to the aggregate Outstanding Balance of Transferred
Receivables that are Eligible Receivables.
"Collateral Value Certificate" means an Officer's Certificate in the
form of Exhibit A, computing for any Business Day the Collateral Value and
the maximum outstanding principal balance of the Loan.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable.
"Contract" means an agreement (or agreements, including an invoice
or invoices,
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or claim or claims) pursuant to, or under which, an Obligor shall be
obligated to pay for provision of services (and any services or sales
ancillary thereto) rendered to clients of the Facilities, from time to
time.
"Daily Interest" means for any day the product of (a) the Interest
Rate times (b) the outstanding principal balance of the Loan at the end of
such day.
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) obligations of such
Person to pay the deferred purchase price of property or services, (d)
obligations of such Person as lessee under leases which have been or
should be, in accordance with GAAP, recorded as capital leases, (e)
obligations secured by any lien or other charge upon property or assets
owned by such Person, even though such Person has not assumed or become
liable for the payment of such obligations, (f) obligations of such Person
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e)
above, and (g) liabilities in respect of unfunded vested benefits under
plans covered by ERISA. For the purposes hereof, the term "guarantee"
shall include any agreement, whether such agreement is on a contingency or
otherwise, to purchase, repurchase or otherwise acquire Debt of any other
Person, or to purchase, sell or lease, as lessee or lessor, property or
services, in any such case primarily for the purpose of enabling another
person to make payment of Debt, or to make any payment (whether as an
advance, capital contribution, purchase of an equity interest or
otherwise) to assure a minimum equity, asset base, working capital or
other balance sheet or financial condition, in connection with the Debt of
another Person, or to supply funds to or in any manner invest in another
Person in connection with Debt of such Person.
"Default Rate" means a per annum rate equal to 2.5% plus the
otherwise applicable Interest Rate.
"Eligible Receivable" means, at any time, unless otherwise agreed to
by the Lender, a Receivable:
(a) which is a liability of (i) a commercial insurance company
acceptable to the Lender, organized under the laws of any
jurisdiction in the United States, having its principal office in
the United States, (ii) Medicare, Medicaid, or CHAMPUS, or (iii) a
HMO or PPO or any other type of Obligor not included in the
categories of Obligors listed in the foregoing clauses (i) and (ii),
organized under the laws of any jurisdiction in the United States,
having its principal office in the United States, and (iv) any other
receivables from time to time deemed acceptable by the Lender;
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<PAGE> 7
(b) the Obligor of which is not an Affiliate of any of the
parties hereto;
(c) as to which the representations and warranties of Sections
4.1 are true in all respects at the time of presentation of any
Collateral Value Certificate;
(d) which is not a Receivable aged more than 120 days from the
date of the related service; and
(e) which complies with such other criteria and requirements
(other than those relating to the collectibility of such
Receivables) as the Lender may from time to time specify to the
Borrower following five Business Days' notice.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time, and the regulations promulgated
thereunder.
"Event of Default" has the meaning specified in Section 9.1.
"Facilities" means the business facilities managed and operated by
the following Affiliates of the Borrower: Quest Pharmacies, Inc., Safford
Card, Inc., RehabWest, Inc., Cornerstone Care, Inc., Arkansas, Inc.,
Douglas Manor, Inc., Memphis Clinical Laboratory, Inc., Decatur Sports Fit
& Wellness Center, Inc., Therapy Health Systems, Inc., Henderson &
Associates Rehabilitation, Inc., Sunbelt Therapy Management Services,
Inc., Ampro Medical Services, Inc., and Gamma Laboratories, Inc.
"Facility Owner" means each of the Affiliates managing and operating
any Facilities, and its respective successors and assigns.
"Fees" means all fees and expenses incurred by, and not yet paid to,
the Lender in connection with the transactions contemplated by this
Agreement, including, without limitation, the Closing Fee, all legal fees
and expenses, accounting and auditing fees, any servicing fees paid to a
successor servicer hereunder, professional consulting fees, fees and
expenses associated with government filings, consents, licenses or
approvals, and all other fees and expenses payable by the Borrower
pursuant to the terms of Section 13.3 hereof.
"GAAP" means generally accepted accounting principles as in effect
in the United States, consistently applied, as of the date of such
application.
"Governmental Authority" means the United States of America, any
state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions thereof or pertaining thereto.
"Government Receivables" means Transferred Receivables payable by
Medicare, Medicaid or CHAMPUS.
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"HMO" means a health maintenance organization, organized under the
laws of any state, that provides or arranges for the provision of basic
and supplemental health services to its enrollees in the manner prescribed
by, and which otherwise meets the requirements of the Public Health
Service Act, 42 U.S.C. Section 300-e (including the regulations under 42
C.F.R. Part 417).
"Incipient Event" means an event which, upon the giving of notice or
the passage of time, or both, would become an Event of Default.
"Indemnified Amounts" has the meaning specified in Section 12.1.
"Indemnified Party" has the meaning specified in Section 12.1.
"Index Rate" means a percentage equal to the Prime Rate of Interest,
as published in the "Money Rates" column of the Wall Street Journal, as
the same may fluctuate from time to time.
"Interest," for any period, means the sum of the Daily Interest
amounts for each day in such period.
"Interest Rate" means the Index Rate, plus 2%, as calculated based
upon a 365-day year.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Loan" means the indebtedness issued by the Lender pursuant to this
Agreement.
"Loan To Value Ratio" means, as of any date, the ratio derived by
dividing the outstanding loan amount by the Collateral Value as of such
date.
"Material Adverse Effect" means, with respect to a Person, (a) a
material adverse effect on (a) the business, assets, operations,
prospects, or financial or other condition of such Person, the industry
within which such Person operates, or any of its Subsidiaries, (b) such
Person's ability to pay any Obligations or perform its duties or
obligations under this Agreement or any Related Document, in accordance
with the terms thereof, (c) the Lender's liens or security interest in the
Borrower's Collateral or the priority of any such liens or security
interests, or (d) the rights and remedies of Lender under this Agreement
and the Related Documents.
"Maturity Date" means the earliest of (a) August 1, 1997, (b) 30
days after written demand from the Lender to the Borrower, or (c) the date
of declaration or automatic occurrence of the Maturity Date pursuant to
Section 9.1.
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"Maximum Balance" has the meaning specified in Section 2.3.
"Maximum Loan Amount" means $2,950,000.
"Medicaid" means the medical assistance program established by Title
XIX of the Social Security Act (42 USC Sections 1396 et seq.) and
any statutes succeeding thereto or amendments thereof.
"Medicare" means the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 USC
Sections 1395 et seq.) and any statutes succeeding thereto or
amendments thereof.
"Note" means the $2,950,000 Promissory Note of even date herewith
from the Borrower to the Lender.
"Obligations" means all amounts and performances owed by the
Borrower under this Agreement, including repayment of principal, Interest,
Fees and indemnities, and all other amounts and performances owing from
the Borrower and any Affiliates of the Borrower to the Lender or any
Affiliates of the Lender, including without limitation the following:
(a) Repayment of eight promissory notes maturing on October 31, 1997
(four each currently held in two separate escrow accounts) payable by
Borrower to David Kremser or certain of his relatives, with the aggregate
principal amount of all eight notes totalling approximately $1,145,967.
(b) Repayment of Borrower's equity adjustment obligations owing with
respect to its acquisition of certain facilities. The obligations total
approximately $1,028,188 to Mr. Kremser and $131,626 each to four of Mr.
Kremser's family members. Mr. Kremser and Borrower anticipate that the
obligations soon will be evidenced by promissory notes from Borrower to
Mr. Kremser and certain of his relatives, respectively, for the amounts
listed in the preceding sentence.
(c) Repayment of the obligations owing to Bruce Whitehead, as Agent
for the former shareholders of BritWill HealthCare Company, pursuant to a
Contingent Payment Agreement, dated as of April 16, 1996, with an
effective date of August 10, 1995, and all documents related thereto.
(d) Repayment of any sums paid by Bruce Whitehead or David Kremser
based pursuant to their respective guarantees of certain obligations of
the Borrower and/or its Affiliates at any time prior to repayment in full
ot items (a) through (c) above.
"Obligor" means, with respect to any Receivable, the Person
primarily obligated to make payments in respect thereto.
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<PAGE> 10
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, Vice Chairman of the
Board, the President, the Chief Financial Officer, the Treasurer, the
Secretary or any other duly authorized officer of such Person acceptable
to the Lender.
"Other Costs" has the meaning specified in Section 13.3(a).
"Outstanding Balance" of any Receivable at any time means an amount
(not less than zero) equal to (a) its Billed Amount, minus (b) all
Collections received from the Obligor with respect thereto; provided, that
if the Lender makes a determination that all Collections from the Obligor
with respect to such Receivable have been made, its Outstanding Balance
shall be zero.
"Payment Date" means the first Business Day of a month until the
Maturity Date, and on and thereafter every Business Day.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, association, joint venture,
Governmental Authority or any other entity of whatever nature.
"PPO" means a preferred provider organization, consisting of
physicians and/or hospitals or other health care facilities that contract
with insurance companies, unions, or businesses to provide their health
care services at less than the usual or customary fee.
"Proceeds" means, with respect to any Collateral, whatever is
receivable or received when such Collateral is sold, collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes all rights to payment, including returned
premiums, with respect to any insurance relating to such Collateral.
"Receivable" means the net amount of (a) an account receivable
billed to, or otherwise due from an Obligor arising from the provision of
services in the ordinary course of business (services or sales ancillary
thereto) by facilities managed and operated by one of the Facility Owners
including the right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto;
(b) all security interests or liens and property subject thereto
from time to time purporting to secure payment by the Obligor;
(c) all contracts, contract rights, general intangibles, guarantees,
indemnities and warranties and proceeds thereof, proceeds of insurance
policies, financing statements and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such receivable;
(d) all Collections with respect to any of the foregoing;
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<PAGE> 11
(e) all Records with respect to any of the foregoing;
(f) all Proceeds of any of the foregoing; and
(g) all rights, remedies, powers and/or privileges of any Facility
Owner with respect to any of the foregoing.
Provided that Receivables from Quest Pharmacies, Inc. shall include all of
the above to the extent they constitute "accounts" as defined in the UCC,
but shall exclude all items listed above to the extent, and only to the
extent, that they are both (i) not "accounts" as defined in the UCC, and
(ii) pledged as collateral to Daniel Pugh pursuant to a Security Agreement
between him and Quest Pharmacies, Inc.
"Receivables Assignment Agreement" means each of the Receivables
Assignment Agreements dated as of the date hereof between the Borrower and
a Facility Owner.
"Records" means all Contracts and other documents, books, records
and other information (including, without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property
and rights) prepared and maintained by the Borrower with respect to
Receivables and the related Obligors.
"Related Documents" means the Note, each Receivables Assignment
Agreement and all agreements, instruments, certificates, financing
statements or other documents required to be delivered hereunder or
thereunder.
"Required Information" means, with respect to a Receivable, (a) the
Obligor, (b) the Obligor's address, (c) the Billed Amount, (d) any
discounts, and (e) the Billing Date.
"Self-Pay Receivable" means a Receivable on which the patient who
has received the related medical treatment is the Obligor.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated)
of or in a corporation, partnership or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended).
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the Board of Directors or other
Persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Transferred Receivable" means any receivable which has been
purchased by the
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Borrower under the Receivables Assignment Agreement.
"UCC" means, for any jurisdiction, the Uniform Commercial Code as
from time to time in effect in such jurisdiction.
1.2 Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC of the State of Arizona, and not specifically defined herein, are used
herein as defined in such Article 9. All hourly references herein shall refer to
Arizona time.
1.3 Interpretation. Except as otherwise indicated, all agreements defined
in this Agreement refer to the same as from time to time amended or supplemented
or as the terms of such agreements are waived or modified in accordance with
their terms.
1.4 Rounding. For purposes of any calculations referred to in this
Agreement (unless otherwise specified), (a) all percentages resulting from such
calculations will be rounded up, if necessary, to the nearest one ten-thousandth
of a percentage point (e.g., 9.87654% (or .0987654) being rounded up to 9.8766%
(or .098766)) and (b) all Dollar amounts used in or resulting from such
calculations will be rounded up to the nearest dollar (e.g., $1,057.37 being
rounded up to $1,058).
ARTICLE II
LOAN TERMS
2.1 Single Advance. The Lender hereby agrees, on the terms and subject to
the conditions of this Agreement, to make a single advance to the Borrower at
the Closing up to, but not exceeding, $2,950,000; provided that under no
circumstances shall the amount of the advance result in a Loan to Value Ratio of
greater than 60%.
2.2 Note. The advance made by the Lender hereunder shall be evidenced by
the Note.
2.3 Analysis of Collateral Value; Mandatory Loan Reductions. On the tenth
Business Day of each month and as otherwise requested by the Lender, the
Borrower shall file a Collateral Value Certificate with the Lender. The maximum
balance outstanding on the Loan at any time shall not exceed 60% of the
Collateral Value (the "Maximum Balance"). If the actual principal balance at any
time exceeds the Maximum Balance, the Borrower must repay the excess amount
within 5 Business Days after the submission of the Collateral Value Certificate
evidencing the overage.
2.4 Loan Records. The Lender shall maintain an account on its books to
record: (i) all payments relating to the Loan, (ii) all payments of Interest and
Fees made by Borrower, and (iii) all other appropriate debits and credits as
provided in this Agreement with respect to the
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obligations of the Borrower. All entries in the account shall be made in
accordance with Lender's customary accounting practices as in effect from time
to time. Borrower shall pay all of its obligations as such amounts become due or
are declared due -- pursuant to the terms of this Agreement.
2.5 Interest. (a) Borrower shall pay interest to the Lender, (i) in
arrears for the preceding calendar month, on each Payment Date commencing on
June 1, 1997, (ii) as accrued on the Maturity Date, and (iii) if any interest
accrues or remains payable after the Maturity Date, upon demand. If any interest
or other payment under this Agreement becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Borrower shall be obligated to pay interest to Lender on the
outstanding principal balance of the Loan at a floating rate equal to the
Interest Rate. All computations of interest shall be made by Lender and on the
basis of a 365-day year. Each determination by Lender of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(c) Following the occurrence of any Event of Default, at the option
of the Lender, the interest rate applicable to the Obligations shall, from the
date of the occurrence of such Event of Default and so long as such Event of
Default continues, be the Default Rate.
(d) The Lender is authorized to charge against the Loan an amount
equal to the amount of any Obligations from time to time due and payable to
Lender. Lender is authorized to, and at its option may, make or cause to be made
advances on behalf of Borrower for payment of all Fees, expenses, costs,
principal, interest, or other Obligations due and payable by Borrower under this
Agreement or any of the Related Documents, even if the making of any such
advance causes the Loan to exceed the maximum Loan to Value Ratio. Borrower
agrees that the making of any such advance in excess of the Loan to Value Ratio
shall constitute an automatic Event of Default, entitling Lender to exercise all
rights and remedies available to Lender under this Agreement, the Related
Documents or applicable law.
2.6 Fees. On the Closing Date, the Borrower shall have paid to the Lender
the Closing Fee and all other Fees due as of the Closing Date. The Lender may
elect to pay the Closing Fee and all other Fees due as of the Closing Date from
the proceeds of the initial Advance. On each Payment Date, the Borrower shall
have paid to the Lender all Fees due on or before such date.
2.7 Collections on Receivables. The Borrower, the Parent and the Facility
Owners shall have the right to service and collect Receivables in accordance
with their normal business practices, and shall arrange to have any Transferred
Receivables collected promptly applied to reduce the balance of Loan, as
necessary, to ensure that the Loan balance does not exceed the Maximum Balance.
Notwithstanding the previous sentence, Lender, at any time in its sole
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discretion, regardless of whether an Incipient Event or Event of Default exists,
shall have the right to demand that a lockbox mechanism be instituted for the
collection and application to the Loan of Transferred Receivables. Such
mechanism may, at the Lender's election, be structured in substantially the same
manner as the lockbox arrangement previously instituted by General Electric
Capital Corporation in its financing arrangement with the Borrower, or the
lockbox arrangement instituted by HealthPartners Funding, L.P., in its financing
arrangement with the Parent. The provisions of this Section 2.7 shall supplement
the provisions of Section 8.5(b) regarding the Lenders' rights with respect to
the collection of Transferred Receivables. To the extent that Collections are
applied to reduce the outstanding balance of the Obligations in the manner
contemplated therein, the Lender shall apply such amounts as follows: (a) first,
to all accrued and unpaid Fees; (b) second, to all accrued and unpaid Interest
on the Loan to such Business Day; (c) third, to all Indemnified Amounts incurred
and payable to any Indemnified Party; (d) fourth, to the principal balance of
the Loan; and (e) finally, to any other Obligations owed to the Lender
hereunder.
ARTICLE III
[Reserved]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Borrower. The Borrower hereby
makes each of the representations and warranties attached on Schedule 1 to the
Lender as of the Closing Date.
ARTICLE V
GENERAL COVENANTS OF THE BORROWER
5.1 Affirmative Covenants of the Borrower. The Borrower shall, unless the
Lender shall otherwise consent in writing:
(a) comply in all material respects with all applicable laws, rules,
regulations and orders with respect to it, its business and properties and all
Transferred Receivables, related Contracts, Collections and Proceeds with
respect thereto;
(b) preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation;
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(c) cooperate fully with all requests of the Lender regarding the
information and documents necessary or desirable to allow the Lender to carry
out its responsibilities hereunder;
(d) permit the Lender to make or cause to be made (at the Borrower's
expense) inspections and audits of any books, records and papers of the Borrower
and to make extracts therefrom and copies thereof, or to make inspections and
examinations of any properties and facilities of the Borrower, on reasonable
notice, at all such reasonable times and as often as required in order to assure
that the Borrower is and will be in compliance with its obligations under this
Agreement and the Related Documents or to evaluate the Lender's investment in
the then outstanding Note;
(e) pay, perform and discharge all of its obligations and
liabilities, including, without limitation, all taxes, assessments and
governmental charges upon its income and properties when due, unless and to the
extent only that such obligations, liabilities, taxes, assessments and
governmental charges shall be contested in good faith and by appropriate
proceedings and that, to the extent required by GAAP, proper and adequate book
reserves relating thereto are established by the Borrower and then only to the
extent that a bond is filed in cases where the filing of a bond is necessary to
avoid the creation of an Adverse Claim against any of its properties; and
(f) promptly notify the Lender in writing of any litigation, legal
proceeding or dispute, whether or not in the ordinary course of business, to
which the Borrower is a party or which would have a Material Adverse Effect on
the Borrower or its operations, whether or not fully covered by insurance, and
regardless of the subject matter thereof.
5.2 Reporting Requirements of the Borrower. The Borrower shall furnish, or
cause to be furnished, to the Lender:
(a) (i) no less frequently than on the tenth Business Day of each
month, commencing with the Closing Date, a Collateral Value Certificate; and
(ii) upon request of the Lender, a monthly trial balance showing Receivables
outstanding aged from their respective Billing Dates as follows: (A) O to 30
days, (B) 31 to 60 days, (C) 61 to 90 days, and (D) 91 days or more, in each
case in both summary format by Obligor and in detail, and in each case
accompanied by such supporting detail and documentation as shall be requested by
the Lender in its sole discretion;
(b) as soon as available, a copy of the annual report for such year
for the Borrower and its consolidated Subsidiaries containing audited financial
statements for such fiscal year;
(c) beginning with the second quarter of 1997, as soon as available
and in any event within 45 days after the end of each of the quarters of each
fiscal year of the Borrower, a consolidated and consolidating balance sheet of
the Borrower and its consolidated Subsidiaries
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as of the end of such quarter, and consolidated and consolidating statements of
income and retained earnings, and cash flow, of the Borrower and its
consolidated Subsidiaries for such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter,
together with a certificate of the chief financial officer or chief accounting
officer of the Borrower identifying such documents as being the documents
described in this paragraph (c) and stating that the information set forth
therein fairly presents the financial condition of the Borrower and its
consolidated Subsidiaries as of and for the period then ended in accordance with
GAAP, consistently applied, subject to year-end adjustments consisting only of
normal, recurring accruals.
(d) as soon as possible and in any event within five days after the
occurrence of an Event of Default, the statement of the chief executive officer
of the Borrower setting forth complete details of such Event of Default and the
action which the Borrower has taken, is taking and proposes to take with respect
thereto;
(e) within 15 Business Days of receipt, a copy of the letter of the
independent public accountants to Borrower's management with respect to their
annual audit of the Borrower and management's response thereto;
(f) promptly, and in any event within 30 days after the end of each
fiscal month, a summary financial report of the financial condition and
operating results on a monthly and year-to-date basis of the Borrower and its
consolidated Subsidiaries in the form of a balance sheet, statements of income
and retained earnings, and statements of cash flow; and
(g) promptly, from time to time, such other information, documents,
records or reports respecting the Transferred Receivables, the Contracts, the
Collateral or the condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries as the Lender may, from time to time,
reasonably request.
5.3 Negative Covenants of the Borrower. The Borrower shall not, and shall
cause its Subsidiaries not to, without the written consent of the Lender:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of, any of the Collateral;
(b) extend, amend, forgive, discharge, compromise, cancel or
otherwise modify the terms of the Receivables Assignment Agreement, any Related
Document or of any Transferred Receivable, or amend, modify or waive any term or
condition of any Contract related thereto;
(c) amend its certificate of incorporation, its by-laws or any
Related Document; or
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(d) merge with or into, consolidate with or into, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person (whether in one transaction or in
a series of transactions).
ARTICLE VI
[Reserved]
ARTICLE VII
[Reserved]
ARTICLE VIII
GRANT OF SECURITY INTERESTS
8.1 Borrower's Grant of Security Interest. As security for the prompt
payment or performance in full when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations, the Borrower hereby assigns and
pledges to the Lender, and grants to the Lender a security interest in and lien
upon, all of the Borrower's right, title and interest in and to the following,
in each case whether now or hereafter existing or in which Borrower now has or
hereafter acquires an interest and wherever the same may be located
(collectively, the "Collateral"):
(a) all Transferred Receivables, Contracts and Collections and
Proceeds;
(b) the Related Documents now or hereafter in effect relating to the
purchase, servicing or processing of Transferred Receivables (the "Borrower
Assigned Agreements"), including (i) all rights of the Borrower to receive
moneys due and to become due under or pursuant to the Borrower Assigned
Agreements, (ii) all rights of the Borrower to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Borrower Assigned
Agreements, (iii) claims of the Borrower for damages arising out of or for
breach of or default under the Borrower Assigned Agreements, and (iv) the right
of the Borrower to amend, waive or terminate the Borrower Assigned Agreements,
to perform under the Borrower Assigned Agreements and to compel performance and
otherwise exercise all remedies under the Borrower Assigned Agreements;
(c) all additional property that may from time to time hereafter be
granted and pledged to the Lender by the Borrower or by anyone on its behalf,
including the deposit with the Lender of additional moneys by the Borrower; and
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(d) all Proceeds, accessions, substitutions, rents and profits of
any and all of the foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not the Lender or any
assignee or agent on behalf of the Lender is the loss payee thereof) or any
indemnity, warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
8.2 Additional Collateral. The Collateral shall also include the pledge by
the Borrower of its stock ownership interests in various Affiliates that are, or
control, the Facility Owners. The pledge shall be evidenced by a Stock Pledge
Agreement of even date herewith.
8.3 Delivery of Collateral. All certificates or instruments representing
or evidencing Collateral shall be delivered to and held by or on behalf of the
Lender pursuant to this Agreement, and shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, and in form and substance satisfactory to the Lender, and
to the extent not constituting an assignment shall be irrevocable powers of
attorney coupled with an interest. The Lender shall have the right, at any time
in its discretion and without notice to the Borrower, to transfer to or to
register in the name of the Lender or any of its nominees any or all of the
Collateral. In addition, the Lender shall have the right at any time to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
8.4 Borrower Remains Liable. Notwithstanding anything in this Agreement,
(i) the Borrower shall remain liable under the Transferred Receivables,
Contracts, Borrower Assigned Agreements and other agreements included in the
Collateral to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by the
Lender of any of its rights under this Agreement shall not release the Borrower
or any other party thereto from any of their respective duties or obligations
under the Transferred Receivables, Contracts, Borrower Assigned Agreements or
other agreements included in the Collateral, (iii) the Lender shall not have any
obligation or liability under the Transferred Receivables, Contracts, Borrower
Assigned Agreements or other agreements included in the Collateral by reason of
this Agreement, and (iv) the Lender shall not be obligated to perform any of the
obligations or duties of the Borrower under the Transferred Receivables,
Contracts, Borrower Assigned Agreements or other agreements included in the
Collateral or to take any action to collect or enforce any claim for payment
assigned under this Agreement.
8.5 Covenants of the Borrower Regarding the Collateral.
(a) Offices and Records. The Borrower shall keep its principal place
of business and chief executive offices and the office where it keeps its
Records at the location specified underneath the line on which its signature
appears in this Agreement or, upon 30 days' prior written notice to the Lender,
at such other location in a jurisdiction where all action required by Section
8.5(f) shall have been taken with respect to the Collateral. The Borrower will,
upon two Business Days notice, permit representatives of the Lender at any time
and from time to time during normal business hours, and at such times outside of
normal business hours
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as the Lender shall reasonably request, (i) to inspect and make copies of and
abstracts from such records, and (ii) to visit the properties of the Borrower
utilized in connection with the collection, processing or servicing of the
Transferred Receivables for the purpose of examining such Records, and to
discuss matters relating to the Receivables or the Borrower's performance under
this Agreement with any officer or employee of the Borrower having knowledge of
such matters. In connection therewith, the Lender may institute procedures to
permit it to confirm the Obligor balances in respect of any Transferred
Receivables. The Borrower agrees to render to the Lender such clerical and other
assistance as may be reasonably requested with regard to the foregoing.
(b) Collection of Transferred Receivables. Except as otherwise
provided in this Section 8.5(b), the Borrower shall continue to collect or cause
to be collected, at its own expense, all amounts due or to become due to the
Borrower under the Transferred Receivables, the Borrower Assigned Agreements and
any other Collateral. In connection with such collections, the Borrower may take
(and at the Lender's direction after an Event of Default has occurred and is
continuing, shall take) such action as the Borrower or the Lender may deem
necessary or advisable to enforce collection of the Transferred Receivables and
the Borrower Assigned Agreements; provided, however, that the Lender may, at any
time that an Event of Default has occurred and is continuing, notify any Obligor
with respect to any Transferred Receivables or obligors under the Borrower
Assigned Agreements of the assignment of such Transferred Receivables or
Borrower Assigned Agreements, as the case may be, to the Lender and direct that,
except with respect to payments on Government Receivables, payments of all
amounts due or to become due to the Borrower thereunder be made directly to, the
Lender or any servicer, collection agent or lockbox or other account designated
by the Lender and, upon such notification and at the expense of the Borrower,
the Lender may enforce collection of any such Transferred Receivables or the
Borrower Assigned Agreements and adjust, settle or compromise the amount or
payment thereof.
(c) Maintain Records of Transferred Receivables. The Borrower shall,
at its own cost and expense, maintain (or cause to be maintained) satisfactory
and complete records of the Collateral, including a record of all payments
received and all credits granted with respect to the Collateral and all other
dealings with the Collateral. Upon the occurrence and during the continuation of
an Event of Default, the Borrower shall (i) deliver and turn over (or cause to
be delivered and turned over) to the Lender or to its representatives, or at the
option of the Lender shall provide the Lender or its representatives with access
to, at any time on demand of the Lender, all of the Borrower's facilities,
personnel, books and records pertaining to the Collateral, including all
Records, and (ii) allow the Lender to occupy the premises of the Borrower where
such books, records and Records are maintained, and utilize such premises, the
equipment thereon and any authorized personnel of the Borrower that the Lender
may wish to employ for such reasonable period of time as is necessary to
administer, service and collect the Transferred Receivables.
(d) Performance of Borrower Assigned Agreements. The Borrower shall
(i) perform and observe all the terms and provisions of the Borrower Assigned
Agreements to be
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performed or observed by it, maintain the Borrower Assigned Agreements in full
force and effect, enforce the Borrower Assigned Agreements in accordance with
their terms and take all such action to such end as may be from time to time
requested by the Lender, and (ii) upon request of the Lender, make to any other
party to the Borrower Assigned Agreements such demands and requests for
information and reports or for action as the Borrower is entitled to make under
the Borrower Assigned Agreements.
(e) Notice of Adverse Claim. The Borrower shall advise the Lender
promptly, in reasonable detail, (i) of any Adverse Claim known to it made or
asserted against any of the Collateral, and (ii) of the occurrence of any event
which would have a material adverse effect on the aggregate value of the
Collateral or on the assignments and security interests granted by the Borrower
in this Agreement.
(f) Further Assurances; Financing Statements.
(i) The Borrower agrees that at any time and from time to
time, at its expense, it shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable or that the Lender may request to perfect and
protect the assignments and security interests granted or purported to be
granted by this Article VIII or to enable the Lender to exercise and
enforce its rights and remedies under this Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, the Borrower
shall execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be
necessary or desirable or that the Lender may request to protect and
preserve the assignments and security interests granted by this Agreement.
(ii) The Borrower hereby authorizes the Lender to file one or
more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of the
Borrower where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law. The Lender will promptly send to the
Borrower any financing or continuation statements thereto which it files
without the signature of the Borrower except, in the case of filings of
copies of this Agreement as financing statements, the Lender will promptly
send the Borrower the filing or recordation information with respect
thereto.
8.6 All Obligations Secured. Even if the Note is paid in full, the
security interests granted herein and in the Pledge Agreement shall continue to
secure repayment of any other Obligations, and shall remain in effect until all
Obligations have been satisfied.
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ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. If any of the following events (each, an "Event of
Default") shall occur and be continuing, without any notice or opportunity to
cure except as set forth in a particular provision below, and with any such
notice or opportunity to cure only applying to such provision:
(a) (i) the Borrower shall default in the payment of any amount owed
by it hereunder and such failure shall remain unremedied for two Business Days,
or (ii) the Borrower shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement and such failure shall remain
unremedied for a period ending five Business Days after written notice thereof
shall have been given by the Lender to the Borrower; or
(b) a default shall have occurred (and any applicable grace period
shall have elapsed) and be continuing under any instrument or agreement
evidencing, securing or providing for the Obligations or the issuance of Debt of
the Borrower and such default shall not have been waived or be the subject of
forbearance by the non-defaulting party; or
(c) the Borrower shall generally not pay any of its respective Debts
as such Debts become due, or shall admit in writing its inability to pay its
Debts generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Borrower
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or any of its Debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property, or any of
the actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur, or the Borrower shall take any corporate action to
authorize any of the actions set forth in this subsection; or
(d) judgments or orders for the payment of money (other than such
judgments or orders in respect of which adequate insurance is maintained for the
payment thereof) in excess of $250,000 in the aggregate against the Borrower or
any of its Affiliates including any of the Facility Owners, shall remain unpaid,
unstayed on appeal, undischarged, unbounded or undismissed for a period of 30
days or more; or
(e) a judgment or order for the payment of money is rendered against
the Borrower in excess of $100,000 and shall remain unpaid, unstayed on appeal,
undischarged, unbounded or undismissed for a period of 30 days or more; or
(f) there is, in the judgment of the Lender, a material breach of
any of the
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representations and warranties of the Borrower set forth in Section 4.1;
provided, however, that if such breach is capable of being cured within 30
Business Days of its occurrence, such breach shall not cause an Event of Default
to occur until such breach has continued and remained uncured for such 30
Business Day period; or
(g) any Governmental Authority shall file notice of a lien with
regard to any assets of the Borrower; or
(h) the Lender ceases to hold a first priority, perfected security
interest in the Collateral; provided that this shall not be a default so long as
the outstanding balance of the Loan does not exceed 60% of the value of the
Collateral in which the Lender does hold a first priority, perfected security
interest;
then and in any such event, at the election of the Lender, the Maturity Date
shall automatically occur, without demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower.
ARTICLE X
REMEDIES
10.1 Actions Upon Event of Default. If any Event of Default shall have
occurred and be continuing and the Lender shall have declared the Maturity Date
to have occurred or the Maturity Date shall have been deemed to have occurred
pursuant to Section 9.1, then the Lender may exercise in respect of the
Collateral, in addition to any and all other rights and remedies otherwise
available to it, all of the rights and remedies of a secured party upon default
under the UCC (such right and remedies to be cumulative and nonexclusive) and,
in addition, may take the following remedial actions:
(a) The Lender may solicit and accept bids for and sell the
Collateral or any part of the Collateral in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Lender's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable. The Lender agrees to give
at least ten Business Days' notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed for such sale, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. Every such
sale shall operate to divest all right, title, interest, claim and demand
whatsoever of the Borrower in and to the Collateral so sold, and shall be a
perpetual bar, both at law and in equity, against the Borrower, any Person
claiming the Collateral sold through the Borrower, and their respective
successors or assigns.
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(b) Upon the completion of any sale under Section 10.1(a), the
Borrower will deliver or cause to be delivered all of the Collateral sold to the
purchaser or purchasers at such sale on the date of sale, or within a reasonable
time thereafter if it shall be impractical to make immediate delivery, but in
any event full title and right of possession to such property shall pass to such
purchaser or purchasers forthwith upon the completion of such sale.
Nevertheless, if so requested by the Lender or by any purchaser, the Borrower
shall confirm any such sale or transfer by executing and delivering to such
purchaser all proper instruments of conveyance and transfer and releases as may
be designated in any such request.
(c) At any public sale under Section 10.1(a), the Lender may bid for
and purchase the property offered for sale and, upon compliance with the terms
of sale, may hold, retain and dispose of such property without further
accountability therefor. Any purchaser at any sale under Section 10.1(a) shall
be entitled, for the purpose of making payment for the property purchased, to
use the Note in order that there may be credited thereon the sums payable out of
the net proceeds of such sale to any such holder, and thereupon such purchaser
shall be credited on account of such purchase price with the portion of such net
proceeds that shall be applicable to the payment of, and shall have been
credited upon, the Note so used.
(d) The Lender may exercise at the Borrower's expense any and all
rights and remedies of the Borrower under or in connection with the Borrower
Assigned Agreements or the other Collateral, including any and all rights of the
Borrower to demand or otherwise require payment of any amount under, or
performance of any provisions of, any Borrower Assigned Agreement.
10.2 Receipt of Payments in Trust. In the event of an Event of Default all
payments received by the Borrower in connection with the Collateral shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of such party and shall be forthwith paid over to the Lender in the same
form as so received (with any necessary endorsement).
10.3 Application of Proceeds. Any cash held by or on behalf of the Lender,
whether from Transferred Receivables or otherwise, and any cash proceeds
received by the Lender in respect of any sale of, collection from or other
realization upon all or any part of the Collateral, shall be applied as set
forth in Section 2.7.
10.4 Exercise of Remedies. No failure or delay on the part of the Lender
to exercise any right, power or privilege under this Agreement and no course of
dealing between the Borrower, on the one hand, and the Lender, on the other
hand, shall operate as a waiver of such right, power or privilege, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. The rights and remedies
expressly provided in this Agreement are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have pursuant to law or
equity. No notice to or demand on any party in any case shall entitle such party
to any other or further notice or demand in similar or other circumstances, or
constitute a waiver of the right of the other party to any other or further
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action in any circumstances without notice or demand.
10.5 Severability of Remedies. The invalidity of any remedy in any
jurisdiction shall not invalidate such remedy in any other jurisdiction. The
invalidity or unenforceability of the remedies herein provided in any
jurisdiction shall not in any way affect the right of the enforcement in such
jurisdiction or elsewhere of any of the other remedies herein provided.
10.6 Waiver of Appraisement. The Borrower agrees, to the full extent that
it may lawfully so agree, that neither it nor anyone claiming through or under
it will set up, claim or seek to take advantage of any appraisement, valuation,
stay, extension or redemption law now or hereafter in force in any locality
where any Collateral may be situated in order to prevent, hinder or delay the
enforcement or foreclosure of this Agreement, or the absolute sale of any of the
Collateral or any part thereof, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and
the Borrower, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may be lawful so to do, the benefit of
all such laws to the extent they may prevent, hinder or delay the enforcement or
foreclosure of the Agreement, and any and all right to have any of the
properties or assets comprising the Collateral marshalled upon any such sale,
and agrees that the Lender or any court having jurisdiction to foreclose the
security interest granted in this Agreement may sell the Collateral as an
entirety or in such parcels as the Lender or such court may determine.
10.7 Power of Attorney. The Borrower hereby irrevocably appoints the
Lender its true and lawful attorney (with full power of substitution) in its
name, place and stead and at its expense, in connection with the enforcement of
the rights and remedies provided for in this Article X, including with the
following powers; (a) to give any necessary receipt or acquittance for amount
collected or received hereunder, (b) to make an necessary transfers of the
Collateral in connection with any sale or other disposition made pursuant
hereto, (c) to execute and deliver for value an necessary or appropriate bills
of sale, assignments and other instrumental in connection with any such sale or
other disposition, the Borrower hereby ratifying and confirming all that such
attorney (or any substitute) shall lawfully to hereunder and pursuant hereto,
and (d) to sign any agreements, orders or other documents in connection with or
pursuant to this Agreement and any Related Document. Nevertheless, if so
requested by the Lender or a purchaser of Collateral, the Borrower shall ratify
and confirm any such sale or other disposition by executing and delivering to
the Lender or such purchaser all proper bills of sale, assignments, releases and
other instruments as may be designated in any such request.
10.8 Additional Rights Regarding Pledged Stock. In addition to the
foregoing provisions, the Lender also shall be entitled to rely upon the terms
of the separate Stock Pledge Agreement described in Section 8.2, and to exercise
any rights or remedies set forth therein.
ARTICLE XI
[Reserved]
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ARTICLE XII
INDEMNIFICATION
12.1 Indemnities by the Borrower. (a) Without limiting any other rights
that the Lender or any director, officer, employee or agent of such party (each
an "Indemnified Party") may have hereunder or under applicable law, the Borrower
hereby agrees to indemnify each Indemnified Party from and against any and all
claims, losses, liabilities, obligations, damages, penalties, actions,
judgments, suits, and related costs and expenses of any nature whatsoever,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts"), which may be imposed
on, or incurred by an Indemnified Party in any way arising out of or relating to
(i) any breach of the Borrower's obligations under this Agreement, (ii) the
financing or the pledge of the Transferred Receivables, or (iii) any Receivable
or any Contract, excluding, however, Indemnified Amounts to the extent resulting
from gross negligence or wilful misconduct on the part of such Indemnified
Party. Without limiting or being limited by the foregoing, the Borrower shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from:
(A) reliance on any representation or warranty made or deemed made
by the Borrower (or any of its officers) under or in connection with this
Agreement, any Related Document or any report or other information
delivered by the Borrower pursuant hereto which shall have been incorrect
in any material respect when made or deemed made or delivered;
(B) the failure by the Borrower to comply with any term, provision
or covenant contained in this Agreement, any Related Document or any
agreement executed by it in connection with this Agreement or with any
applicable law, rule or regulation with respect to any Transferred
Receivable or its related Contract, or the nonconformity of any
Transferred Receivable or its related Contract with any such applicable
law, rule or regulation; or
(C) the failure to vest and maintain vested in the Borrower legal
and equitable title to and ownership of the Receivables which are, or are
purported to be, Transferred Receivables, together with an Collections and
Proceeds in respect thereof free and clear of any Adverse Claim (except as
permitted hereunder) whether exiting at the time of the purchase of such
Receivable or at any time thereafter, and to maintain or transfer to the
Lender a first priority, perfected security interest therein.
(b) Any Indemnified Amounts subject to the indemnification
provisions of this Section 12.1 not paid in accordance with Article VI, to the
extent that funds are available therefor in accordance with the provisions of
Article VI, shall be paid to the Indemnified Party
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within five Business Days following final settlement or adjudication thereof.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices, Etc. All notices and other communications provided for
hereunder, unless otherwise stated herein, shall be in writing and mailed or
telecommunicated, or delivered as to each party hereto, at its address set forth
beneath its signature line herein or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be deemed effective as against the party
to whom such notice or communication is addressed on the third Business Day
following deposit of such notice in the U.S. mails, or on the next Business Day
following delivery by the sender of such notice to an overnight delivery
service.
13.2 Binding Effect; Assignability; Limits on Assignability. This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lender, and their respective permitted successors and assigns. The Borrower may
not assign any of its rights and obligations hereunder or any interest herein
without the prior written consent of the Lender. Lender may assign any of its
rights and obligations under this Agreement without the consent of any other
party hereto; provided, however, that any assignment by Lender that conflicts
with, requires consent or approval of the Trustee under, or requires affirmative
conduct of the Borrower under the terms of the Borrower's $100,000,000 Indenture
shall require the prior written consent of Borrower. This Agreement shall create
and constitute the continuing obligations of the parties hereto in accordance
with its terms, and shall remain in full force and effect until its termination;
provided that the rights and remedies with respect to any breach of any
representation and warranty made by the Borrower or the Servicer pursuant to
Article IV and the indemnification and payment provisions of Article XII shall
be continuing and shall survive any termination of this Agreement.
13.3 Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification under Article XII hereof, the Borrower agrees to pay upon demand
all reasonable costs and expenses and taxes (excluding income and similar taxes)
incurred by the Lender ("Other Costs") in connection with the administration
(including periodic auditing, modification and amendment) of this Agreement, the
Related Documents and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Lender, with respect thereto and with respect to advising the Lender as
to its rights and remedies under this Agreement, the Related Document and the
other agreements executed pursuant hereto. The Borrower further agrees to pay
within five Business Days after demand all reasonable costs, counsel fees and
expenses in connection with the enforcement (whether through negotiation, legal
proceedings or otherwise) of this Agreement, the Related Documents and the other
agreements and documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 13.3.
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(b) In addition, the Borrower shall pay on demand any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing or recording of this Agreement,
the Related Documents or the other agreements and documents to be delivered
hereunder, and agrees to indemnify and save each Indemnified Party from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
(c) If the Borrower fails to perform any agreement or obligation
contained herein, the Lender may (but shall not be required to) itself perform,
or cause performance of, such agreement or obligation, and the expenses of such
party incurred in connection therewith shall be payable by the party which has
failed to so perform upon such party's demand therefor.
13.4 [Reserved]
13.5 Amendments; Waivers; Consents. No modification, amendment or waiver
of or with respect to any provision of this Agreement, the Related Documents or
any other agreements, instruments and documents delivered pursuant hereto, nor
consent to any departure by the Borrower from any of the terms or conditions
thereof shall be effective unless it shall be in writing and signed by each of
the parties hereto. Any waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No consent to or demand
on the Borrower in any case shall, in itself, entitle it to any other consent or
further notice or demand in similar or other circumstances. This Agreement, the
Related Documents and the documents referred to therein embody the entire
agreement among the Borrower and supersede all prior agreements and
understandings relating to the subject hereof.
13.6 GOVERNING LAW; CONSENT TO JURISDICTION: WAIVER OF JURY TRIAL. (a)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF
ARIZONA.
(b) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN
A BENCH TRIAL WITHOUT A JURY.
13.7 Execution in Counterparts; Facsimile Signatures; Severability. This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
when taken together shall consist as one and the same agreement. Delivery by any
party of a facsimile signature shall constitute effective delivery of an
original, binding signature hereto. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
libations, or of such provision or obligation
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shall not in any way be affected or impaired thereby in such jurisdiction and
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation shall not be impaired thereby in
any other jurisdiction.
13.8 Descriptive Headings. The descriptive headings of the various
sections of this Agreement are inserted for convenience of reference only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
-25-
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date first above written.
UNISON HEALTHCARE BRITWILL INVESTMENTS COMPANY,
CORPORATION, as Borrower LTD., as Lender
By: /s/ Phillip Rollins By:__________________________________
----------------------------------- Its:___________________________
Its:EVP/COO Address:
Address: _______________________________
8800 North Gainey Center Drive _______________________________
Suite 245 _______________________________
Scottsdale, Arizona 85258
ELK MEADOWS INVESTMENTS,
L.L.C., as Lender
By:__________________________________
Its:___________________________
Address:
_______________________________
_______________________________
_______________________________
-26-
<PAGE> 30
Schedule 1
Representations and Warranties
Part I:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business, and is in good standing, in each jurisdiction in which
the nature of its business requires it to be so qualified (except where such
failure to be so qualified would not have a material adverse effect).
(b) The Borrower has the power and authority, subject to applicable
restrictions in its certificate of incorporation, to own and convey all of its
properties and to execute and deliver this Agreement and the Related Documents
and to perform the transactions contemplated hereby and thereby.
(c) The execution, delivery and performance by the Borrower of this
Agreement, the Related Documents and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate or other action
on the part of the Borrower, (ii) do not contravene or cause the Borrower to be
in default under (A) the Borrower's certificate of incorporation or by-laws, (B)
any contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other agreement
or instrument binding on or affecting the Borrower or its property or the Parent
or its property, or (C) any law, rule, regulation, order, license requirement,
writ, judgment, award, injunction, or decree applicable to, binding on or
affecting the Borrower or its property or the Parent or its property, and (iii)
do not result in or require the creation of any Adverse Claim upon or with
respect to any of the property of the Borrower or the Parent (other than in
favor of the Lender as contemplated hereunder).
(d) This Agreement and the Related Documents have each been duly executed
and delivered by the Borrower.
(e) No consent of, notice to, filing with or permits, qualifications or
other action by any Governmental Authority or any other party is required (i)
for the due execution, delivery and performance by the Borrower of this
Agreement or any of the Related Documents, (ii) for the perfection of or the
exercise by the Lender of any of its rights or remedies hereunder or thereunder,
except as may be required by federal law for certain Government Receivables,
(iii) for the grant by the Borrower of the security interests granted under this
Agreement, except as may be required by federal law for certain Government
Receivables, (iv) for the perfection of or the exercise by the Lender of its
rights and remedies provided for in this Agreement, except as may be required by
federal law for certain Government Receivables, or (v) to ensure the legality,
validity, enforceability or admissibility into evidence of this Agreement in any
-1-
<PAGE> 31
jurisdiction in which any of the Collateral is located, in each case other than
consents, notices, filings and other actions which have been obtained or made
and complete copies of which have been provided to the Lender.
(f) No transaction contemplated by this Agreement requires compliance with
any bulk sales an or similar law.
(g) This Agreement and each Related Document is the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its respective terms. Each of the Borrower Assigned Agreements
to which the Borrower is a party constitutes its the legal, valid and binding
obligation, enforceable against the Borrower in accordance with its terms.
(h) The principal place of business and chief executive office of the
Borrower, and the office where the Borrower keeps its Records and the original
copies of the Borrower Assigned Agreements are located at the address of the
Borrower for notices as set forth under the line containing its signature
herein, except for its previous offices at 7272 East Indian School Road, Suite
214, Scottsdale, Arizona, and there are currently no, and during the past four
months (or such shorter time as the Borrower has been in existence) there have
not been, any other locations where the Borrower is located (as that term is
used in the UCC of the jurisdiction where such principal place of business is
located) or keeps Records.
(i) The Borrower has complied in all respects with all applicable laws,
rules regulations, and orders with respect to it, its business and properties
and all Collateral.
(j) The Borrower has filed on a timely basis all tax returns (federal,
state and local) required to be filed, is not liable for taxes payable by any
other Person and has paid or made adequate provisions for the payment of all
taxes, assessments and other governmental charges due from the Borrower.
(k) Each Collateral Value Certificate is accurate in all material
respects.
(l) Each Transferred Receivable is owned by the Borrower free and clear of
any Adverse Claim and the Borrower has the right to pledge the same and
interests therein, and the interest acquired the Lender therein will be a
perfected, first priority and valid security interest in such Transferred
Receivable, free and clear of any Adverse Claim. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording official except such as may have been
filed in favor of the Lender as secured party.
(m) All information heretofore or hereafter furnished by or on behalf of
the Borrower to the Lender in connection with this Agreement or any transaction
contemplated hereby is and will be true and complete in all material respects
and does not and did not omit to state a material fact necessary to make the
statements contained therein not misleading.
-2-
<PAGE> 32
EXHIBIT A
[Form of Collateral Value Certificate]
Unison HealthCare Corporation
Accounts Receivable Collateral Value Certificate
Certificate For the Period to:__________________________________________________
(in dollars)
<TABLE>
<CAPTION>
RECONCILIATION TOTAL
<S> <C>
Accounts Receivable Per Aging Summary $
---------
Less Ineligibles:
Accounts Receivable over 120 days from billing date $
---------
Credits over 120 days old
Finance Charges
Other (Describe if significant)
Total Ineligibles $
---------
Total Eligible Receivables $
---------
Maximum Loan to Value Ratio 60%
Maximum Outstanding Principal Balance $
=========
</TABLE>
<PAGE> 33
The undersigned, the authorized signer of Unison HealthCare Corporation (the
"Borrower"), is delivering this Collateral Value Certificate pursuant to the
Loan and Security Agreement dated as of April 21, 1997 (as amended, modified,
supplemented or restated and in effect from time to time, the "Agreement"). The
undersigned hereby certifies to the Lender that the information set forth above
in this Collateral Value Certificate is true and correct as of the date set
forth above.
By:___________________________________________
Title:________________________________________
Attach executed Assignment hereto.
<PAGE> 1
Exhibit 10.117.2
STOCK PLEDGE AGREEMENT
By this Stock Pledge Agreement (this "Agreement"), dated as of April
21, 1997, ELK MEADOWS INVESTMENTS, L.L.C., and BRITWILL INVESTMENTS COMPANY,
LTD. (collectively, "Lender"), and UNISON HEALTHCARE CORPORATION ("Borrower")
agree as follows:
RECITALS
A. Pursuant to a Promissory Note (the "Note"), of even date herewith
executed by Borrower for the benefit of Lender, Lender is lending $2,950,000 to
Borrower.
B. As security for the performance of Borrower's Obligations, Borrower has
agreed to pledge to Lender and to grant to Lender a security interest in the
Collateral.
AGREEMENT
Section 1. Definitions. As used herein, the terms listed in this Section
shall have the following meanings:
"Borrower" has the meaning set forth in the introductory paragraph
above.
"Common Stock" means the common stock of the Subsidiaries owned by
Pledgor.
"Collateral" means collectively the following shares of Common
Stock, which constitute 100% of the issued and outstanding Common Stock of each
of the following Subsidiaries, except as otherwise indicated, all of which is
owned by Borrower: _____ shares of Quest Pharmacies, Inc., which constitutes 75%
of the issued and outstanding Common Stock of such corporation; _____ shares of
Safford Care, Inc.; _____ shares of Rehab West, Inc., conducting business in
Arizona as Therapy West, Inc.; _____ shares of Cornerstone Care, Inc.; _____
shares of Arkansas, Inc.; _____ shares of Douglas Manor, Inc.; _____ shares of
Memphis Clinical Laboratory, Inc.; _____ shares of Sunbelt Therapy Management
Services, Inc., an Arizona corporation (the holding company for Decatur Sports
Fit & Wellness Center, Inc., Therapy Health Systems, Inc., Henderson &
Associates Rehabilitation, Inc. and Sunbelt Therapy Management Services, Inc.,
an Alabama corporation); and _____ shares of American
<PAGE> 2
Professional Holding, Inc. (the holding company for Ampro Medical Services, Inc.
and Gamma Laboratories, Inc.).
"Market Value" means (i) if the Common Stock is traded on a
nationally recognized market on the Sale Date, the greater of the low per share
trading price for the Common Stock or the actual per share sales price of the
Collateral on the Sale Date, or (ii) if the Common Stock is not traded on a
nationally recognized market on the Sale Date, the actual per share sales price
of the Collateral on the Sale Date.
"Obligations" means all of the representations, warranties,
performances and obligations of Borrower and/or any Subsidiaries under the Note
or any other documents executed in connection with the $2,950,000 loan and all
other amounts and performances owing from the Borrower and any Affiliates of the
Borrower to the Lender or any Affiliates of the Lender, including without
limitation the following:
(a) Repayment of eight promissory notes maturing on October 31, 1997
(four each currently held in two separate escrow accounts) payable by
Borrower to David Kremser or certain of his relatives, with the aggregate
principal amount of all eight notes totalling approximately $1,145,967.
(b) Repayment of Borrower's equity adjustment obligations owing with
respect to its acquisition of certain facilities. The obligations total
approximately $1,028,188 to Mr. Kremser and $131,626 each to four of Mr.
Kremser's family members. Mr. Kremser and Borrower anticipate that the
obligations soon will be evidenced by promissory notes from Borrower to
Mr. Kremser and certain of his relatives, respectively, for the amounts
listed in the preceding sentence.
(c) Repayment of the obligations owing to Bruce Whitehead, as Agent
for the former shareholders of BritWill HealthCare Company, pursuant to a
Contingent Payment Agreement, dated as of April 16, 1996, with an
effective date of August 10, 1995, and all documents related thereto.
(d) Repayment of any sums paid by Bruce Whitehead or David Kremser
pursuant to their respective guarantees of certain obligations of the
Borrower and/or its Affiliates at any time prior to repayment in full of
items (a) through (c) above.
"Sale Date" means the date of sale, transfer or retention of the
Collateral by Lender after an Event of Default.
"Subsidiaries" means each of the subsidiaries or affiliates of
Borrower that will sell its receivables to Borrower, which are as follows: Quest
Pharmacies, Inc., Safford Card, Inc., RehabWest, Inc., Cornerstone Care, Inc.,
Arkansas, Inc., Douglas Manor, Inc., Memphis Clinical Laboratory, Inc., Decatur
Sports Fit & Wellness Center, Inc., Therapy Health Systems,
-2-
<PAGE> 3
Inc., Henderson & Associates Rehabilitation, Inc., Sunbelt Therapy Management
Services, Inc., Ampro Medical Services, Inc., and Gamma Laboratories, Inc.
Section 2. Pledge of Collateral. In consideration of the loan evidenced by
the Note, and as security for performance of the Obligations, Borrower hereby
delivers to Lender, and grants to Lender a security interest in, the Collateral,
with stock powers duly executed by Borrower, with medallion signature
guarantees, in blank for all original share certificates representing all issued
and outstanding Common Stock of each Subsidiary that is owned by Borrower. Upon
request of Lender, Borrower agrees to endorse and deposit any additional
certificates for shares of Common Stock constituting proceeds or products of the
Collateral, to be held by Lender in a manner identical to the Collateral pledged
in this Agreement. Further, Borrower agrees at any time, or from time to time
hereafter, to execute such financing statements and other instruments and
perform such acts as Lender may reasonably request to establish and maintain a
valid, perfected security interest in the Collateral.
Section 3. Obligations Secured. The security interest created by this
Agreement shall secure the performance of the Obligations. Even if the Note is
paid in full, this Agreement shall continue in full force and effect until all
of the other Obligations have been satisfied.
Section 4. Covenants and Restrictions. As of the date hereof and at all
times while this Agreement is in effect, Borrower covenants and agrees as
follows:
4.1. Borrower is the legal and beneficial owner of the Collateral,
and is conveying the Collateral to Lender free and clear of all liens,
security interests and encumbrances. Borrower waives for the benefit of
Lender any restrictions on transfer of the Collateral contained in any
agreements by or among any of them. Aside from agreements subject to the
preceding sentence, no restrictions on transfer of the Collateral exist,
except such restrictions on transfer as may be required by laws affecting
the transfer of securities generally.
4.2. This pledge of the Collateral creates a valid and perfected
first priority security interest in the Collateral.
4.3. No authorization, approval, or other action by any party, and
no notice to or filing with any governmental authority or regulatory body,
is required for the (i) consummation of this pledge and Borrower's
performance of this Agreement, or (ii) exercise by Lender of its rights
and remedies pursuant to this Agreement (except as may be required by laws
affecting the offering and sale of securities generally).
4.4. Borrower will not sell, transfer, convey, assign or otherwise
dispose of, or grant a security interest in or option with respect to, any
Collateral at any time while any of the Obligations are outstanding.
-3-
<PAGE> 4
Section 5. Default. Any "Event of Default" under the Loan and Security
Agreement of even date herewith executed in connection with the $2,950,000 loan
shall be an "Event of Default" hereunder.
Section 6. Rights of Lender on Default.
6.1. Upon the occurrence of an Event of Default, Lender shall have
all the rights and remedies granted a secured party under the Arizona Uniform
Commercial Code or under the Note or this Agreement, including, without
limitation, the right to do or perform any or all of the following:
6.1.1. To declare the unpaid balance of the Note immediately
due and payable and exercise any other remedies for default set forth
herein.
6.1.2. If the Common Stock is publicly traded on a nationally
recognized market, to proceed in accordance with Arizona law with respect
to retention of all or part of the Collateral, valued at Market Value, in
partial or full satisfaction of the Note.
6.1.3. To dispose of the Collateral for Market Value by public
or private sale in accordance with Arizona law. Borrower recognizes that
Lender may be unable or may determine that it is undesirable to effect a
public sale of any or all of the Collateral, but may elect to resort to
one or more private sales thereof to a restricted group of purchasers who
will be required to agree, among other things, to acquire any such
securities for their own account for investment and not with a view to the
distribution or resale thereof. Borrower acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to
the seller than if such sale were a public sale, and, notwithstanding such
circumstances, agrees that any such private sale subject to such
conditions and otherwise made in accordance in all material respects with
applicable law will be deemed to have been made in a commercially
reasonable manner. Lender will be under no obligation to delay a sale of
any of the Collateral for the period of time necessary to permit an issuer
of any of the Collateral to register the public sale of such securities
under the Securities Act of 1933, as amended, or other applicable
securities laws. Borrower further agrees to do or cause to be done all
such other acts and things as may be necessary to make such private sale
or sales of any portion or all of the Collateral valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all governmental authorities
having jurisdiction over any such sale or sales, all at Borrower's
expense.
6.1.4. Without regard to the adequacy of the foregoing, to
proceed directly against any guarantor or any other obligor of the Note,
or to exercise any other remedy available at law or in equity.
-4-
<PAGE> 5
6.1.5. Exercise all voting rights in the Collateral,
including, without limitation, the right to vote to remove any one or more
of the directors and officers of any issuer of Common Stock pledged as
Collateral, and to elect new directors and officers of such issues, who
thereafter will manage the affairs of such issuer.
6.2. Lender shall not be deemed to have waived any rights under this
Agreement or any other writing signed by Borrower unless such waiver be in
writing and signed by Lender. No delay or omission on the part of Lender shall
operate as a waiver of such right or any other right. A waiver by any party of a
breach of a provision of this Agreement shall not constitute a waiver or
prejudice the party's right otherwise to demand strict compliance with that
provision or any other provision. Election by Lender to pursue any remedy shall
not exclude pursuit of any other remedy, and an election to make expenditures or
take action to perform an obligation of Borrower under this Agreement after
failure of Borrower to perform shall not affect Lender's right to declare a
default and exercise its remedies under this Section 6.
6.3. All Lender's rights and remedies, whether evidenced in this
Agreement or by any other writing, shall be cumulative and may be exercised
singly or concurrently.
6.4. Lender is hereby irrevocably appointed attorney in fact of each
Borrower with full power of substitution to sell and to execute such assignments
and instruments in the name of each Borrower as may be expedient to consummate
the sale or transfer of such portion of the Collateral as is necessary to
satisfy the Obligations, in the manner provided herein in the event of an
occurrence of an Event of Default.
6.5. Lender shall not be liable or responsible for any failure or
delay in exercising any right or remedy because of any restriction on transfer
pursuant to applicable securities laws, and Borrower waives any claim arising by
virtue of any such restriction.
7. Notice. Any notice required or permitted to be given under this
Agreement or under the Uniform Commercial Code shall be deemed given on the date
such notice is personally delivered, one day after the date deposited with a
nationally recognized overnight courier service with instructions to deliver on
the following day, or three days after the date deposited in the United States
mail, with postage prepaid, certified with return receipt requested. Any notice
shall be delivered to the address of the party to whom notice is given as set
forth below or to such other address as either party may hereafter designate to
the other by written notice to the address set forth below:
If to Borrower 8800 North Gainey Center Drive #245
Scottsdale, Arizona 85258
If to Lender: _____________________________
_____________________________
_____________________________
-5-
<PAGE> 6
and
_____________________________
_____________________________
_____________________________
8. Voting. Borrower shall be entitled to exercise all voting and consent
rights, if any, with respect to the Collateral until the occurrence of an Event
of Default. This pledge and grant of security interest is for security purposes
only.
9. Preservation of Collateral. Lender shall have no responsibility with
respect to the Collateral other than (i) to use reasonable care in the custody
and preservation thereof as though such Collateral were Lender's own, and (ii)
not to sell, transfer or convey any of the Collateral at any time prior to the
occurrence of an Event of Default. Lender shall (or shall allow Borrower to)
take reasonable, appropriate action in response to calls, conversions,
exchanges, maturities and other matters with respect to the Collateral. Upon
payment of the Note and performance of the Obligations, the Collateral shall be
returned to Borrower, and all rights and obligations hereunder shall terminate.
10. Successors and Assigns. Lender's rights hereunder shall inure to the
benefit of its successors, heirs and assigns.
11. Attorney Fees and Costs. Borrower agrees to pay all costs and
attorneys' fees incurred by Lender in the preparation and negotiation of this
Agreement and the Note, and the closing of the transaction reflected by those
documents. Borrower also agrees to pay all costs and reasonable attorneys' fees
incurred by Lender upon an Event of Default (or an event which with notice or
passage of time could mature into an Event of Default) if (i) there is no
litigation, or (ii) litigation is instituted and Lender is the prevailing party
in such litigation, including appeals, upon final judgment.
12. Time of Essence. Time of payment and performance is of the essence of
this Agreement.
13. Applicable Laws. This Agreement is governed by and shall be construed
in accordance with the substantive laws of the State of Arizona, without regard
to conflicts of laws principles. Borrower consents to be sued in, and otherwise
submit to the jurisdiction of, the courts of the State of Arizona with respect
to any dispute arising out of this Agreement.
14. Counterparts. This Agreement may be executed in counterparts.
-6-
<PAGE> 7
Dated as of the date and year first set forth above.
BORROWER:
UNISON HEALTHCARE CORPORATION
By:_________________________________
Its:________________________________
LENDER:
ELK MEADOWS INVESTMENTS, L.L.C.
By:_________________________________
Its:________________________________
BRITWILL INVESTMENTS COMPANY, LTD.
By:_________________________________
Its:________________________________
-7-
<PAGE> 1
Exhibit 10.118
ASSET PURCHASE AGREEMENT
BY AND AMONG
SUNBELT THERAPY MANAGEMENT SERVICES, INC.,
SPINE REHABILITATION AND PHYSICAL THERAPY CENTER, INC.
AND
DOUGLAS L. BATES
DATED AS OF DECEMBER 20, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS.............................................. 1
ARTICLE II. PURCHASE AND SALE; PURCHASE PRICE........................ 4
1. Purchase and Sale........................................ 4
2. Payment of Purchase Price................................ 5
ARTICLE III. OTHER AGREEMENTS....................................... 5
1. Access................................................... 5
2. Disclosure Schedule...................................... 5
3. Public Announcements..................................... 5
4. Transfer of Intangible Assets............................ 6
5. Retained Liabilities..................................... 6
7. Effective Time of Closing................................ 6
8. Allocation of Purchase Price............................. 6
9. Prorations............................................... 6
10. Risk of Loss............................................. 7
11. Employees................................................ 7
12. Intention................................................ 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND
BATES................................................................ 7
1. Organization; Business................................... 7
2. Authorization; Enforceability............................ 8
3. No Violation or Conflict................................. 8
4. Financial Information; Books and Records................. 9
5. Assets................................................... 9
6. Contingent and Undisclosed Liabilities................... 9
7. Taxes.................................................... 9
8. Absence of Certain Changes............................... 10
9. Employee Benefit Plans................................... 11
10. Compliance with Law...................................... 11
11. Litigation............................................... 12
12. Contracts................................................ 12
13. Existing Insurance Policies.............................. 13
14. Environmental Protection................................. 14
15. Labor Matters............................................ 16
16. Labor Relations; Compliance.............................. 16
17. Brokers.................................................. 17
18. Governmental Approvals................................... 17
19. Disclosure............................................... 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
20. Intangible Assets........................................ 17
21. Certain Payments......................................... 18
22. Relationships with Related Parties....................... 18
23. Premises................................................. 18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER................... 19
1. Organization; Business................................... 19
2. Authorization; Enforceability............................ 19
3. No Violation or Conflict................................. 19
4. Brokers.................................................. 19
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE CLOSING.................. 19
1. Carry on in Regular Course............................... 19
2. Use of Assets............................................ 20
3. No Default............................................... 20
4. Existing Insurance Policies.............................. 20
5. Employment Matters....................................... 20
6. Contracts and Commitments................................ 20
7. Preservation of Relationships............................ 20
8. Compliance with Laws..................................... 20
9. Taxes.................................................... 20
ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER........ 20
1. Compliance with Agreement................................ 20
2. Proceedings and Instruments Satisfactory................. 21
3. No Litigation............................................ 21
4. Representations and Warranties of the Sellers............ 21
5. No Adverse Change........................................ 21
6. Deliveries at Closing.................................... 21
7. Other Deliveries......................................... 21
8. Approvals and Consents................................... 22
9. Due Diligence............................................ 22
10. Employment Arrangements.................................. 22
ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SELLER............................................................... 22
1. Compliance with Agreement................................ 22
2. Proceedings and Instruments Satisfactory................. 23
3. No Litigation............................................ 23
4. Representations and Warranties of Buyer.................. 23
5. Deliveries at Closing.................................... 23
6. Other Documents.......................................... 23
7. Delivery of Purchase Price............................... 23
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX. INDEMNITIES.............................................. 23
1. Seller's and Bates' Indemnity............................ 23
2. Buyer's Indemnity........................................ 24
3. Termination of Seller's Rights........................... 25
4. Termination of Buyer's Rights............................ 25
5. Rights on Termination.................................... 25
ARTICLE X. TERMINATION; MISCELLANEOUS................................ 25
1. Termination.............................................. 25
2. Rights on Termination; Waiver............................ 26
3. Survival of Representations and Warranties............... 26
4. Entire Agreement; Amendment.............................. 26
5. Expenses................................................. 26
6. Governing Law............................................ 26
7. Assignment............................................... 27
8. Notices.................................................. 27
9. Counterparts; Headings................................... 27
10. Severability............................................. 28
11. Specific Performance..................................... 28
12. Taxes and Fees........................................... 28
13. Income Tax Position...................................... 28
14. Further Assurances....................................... 28
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of this 20th day of December,
1996 by and among Sunbelt Therapy Management Services, Inc., an Alabama
corporation, or its nominee ("Buyer"), Spine Rehabilitation and Physical Therapy
Center, Inc., a Mississippi corporation ("Seller"), and the sole shareholder of
the Company, Douglas L. Bates ("Bates").
RECITALS
WHEREAS, Seller is engaged in the business of providing rehabilitation
therapy services; and
WHEREAS, Buyer is engaged in the business of providing physical, speech
and occupational therapy services; and
WHEREAS, Seller desires to sell to Buyer, and Buyer, or a nominee of Buyer
who is also a subsidiary of Unison HealthCare Corporation ("Unison"), desires to
purchase from Seller, certain of the assets, rights and properties of Seller
relating to the Business, upon all of the terms and subject to all of the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, conditions and agreements set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I. DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
"Agreement" shall mean this Asset Purchase Agreement, together with the
Exhibits and the Disclosure Schedule attached hereto, as the same may be amended
from time to time in accordance with the terms hereof.
"Assets" shall mean all assets of Seller used in the conduct of the
Business except for any Retained Asset, including, but not limited to the
Contracts, Equipment, Intangible Assets, Miscellaneous Assets and Records.
"Assumed Liabilities" shall mean and be limited to those liabilities and
obligations arising after the Effective Time of Closing pursuant to the
Contracts being assumed by Buyer.
"Bill of Sale" shall mean the Bill of Sale and Assumption of Liabilities
in substantially the form of Exhibit 1 attached to this Agreement.
"Business" shall mean the business of providing rehabilitation therapy
services conducted by Seller prior to the Closing.
<PAGE> 6
"Buyer Closing Certificate" shall mean the Closing Certificate of Buyer in
substantially the form of Exhibit 2 attached to this Agreement.
"Buyer Officer's Certificate" shall mean the Officer's Certificate of
Unison and Buyer in substantially the form of Exhibit 3 attached to this
Agreement.
"Closing" shall mean the conference to be held at 10:00 a.m., local time,
on the Closing Date at the offices of Quarles & Brady, One East Camelback, Suite
400, Phoenix, Arizona 85012, or such other time and place as the parties may
mutually agree to in writing, at which the transactions contemplated by this
Agreement shall be consummated.
"Closing Date" shall mean: (i) January 2, 1997; or (ii) such other date as
the parties may mutually agree to in writing.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be in
effect from time to time.
"Contracts" shall mean all of the contracts, agreements, leases,
relationships and commitments, written or oral, to which Seller is a party or by
which Seller is bound.
"Disclosure Schedule" shall mean the Disclosure Schedule, dated the date
of this Agreement, delivered by Seller to Buyer contemporaneously with the
execution and delivery of this Agreement and as the same may be amended from
time to time after the date of this Agreement and prior to the Closing Date in
accordance with the terms of this Agreement.
"Employee Benefit Plans" shall mean any pension plan, profit sharing plan,
bonus plan, incentive compensation plan, stock ownership plan, stock purchase
plan, stock option plan, stock appreciation plan, employee benefit plan,
employee benefit policy, retirement plan, fringe benefit program, insurance
plan, severance plan, disability plan, health care plan, sick leave plan, death
benefit plan, or any other plan or program to provide retirement income, fringe
benefits or other benefits to former or current employees of the Business.
"Equipment" shall mean all equipment, machinery, furniture, fixtures,
motor vehicles, furnishings, parts, office equipment, computers and other items
of tangible personal property which are owned by Seller and used by or useful to
Seller in the operation of the Business, including but not limited to those
assets which are listed in the Disclosure Schedule.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be in effect from time to time.
"Existing Insurance Policies" shall mean all of the insurance policies
currently in effect and owned by Seller covering the Assets or the Business, all
of which are listed and briefly described on the Disclosure Schedule.
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"Existing Permits" shall mean all permits, licenses, approvals,
qualifications, permissions and governmental authorizations (including
Environmental Permits) required for the conduct of the Business, all of which
are listed and briefly described on the Disclosure Schedule.
"Financial Information" shall mean: (i) the monthly unaudited financial
statements of Seller for months beginning January 1, 1996 through the month
ended October 31, 1996; (ii) the books and records of account of the Business;
and (iii) all other financial information relating to the financial condition of
the Business delivered or to be delivered by Seller to Buyer.
"Intangible Assets" shall mean all of the intangible assets owned or used
by Seller in the Business, including but not limited to trade secrets, know-how,
data, operating methods and procedures, proprietary information, processes,
technical knowledge, advertising formats, logos, United States and foreign
patents, patent applications, trade names, trademarks, service marks, trademark
registrations, service mark registrations, copyrights, copyright applications,
franchise rights, customer lists, telephone numbers and related rights including
goodwill related thereto.
"Law" shall mean any federal, state, local or other law, rule, regulation
or governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
"Lease" shall mean the lease agreement made and entered into on February
18, 1994 by and between 3635 Bienville Blvd., Ltd., a Mississippi General
Partnership, as lessor, and Seller, as lessee.
"Leased Assets" shall mean all items of personal property which Seller
leases and uses in the Business, including but not limited to those assets which
are set forth in the Disclosure Schedule.
"Lien" shall mean, with respect to any asset: (i) any mortgage, pledge,
lien, charge, claim, restriction, condition, easement, covenant, lease,
encroachment, title defect, imposition, security interest or other encumbrance
of any kind; and (ii) the interest of a vendor or lessor under any conditional
sale agreement, financing lease or other title retention agreement relating to
such asset.
"Miscellaneous Assets" shall mean Business-related security deposits,
prepaid expenses, leasehold improvements and those assets set forth in the
Disclosure Schedule.
"Note" shall mean a promissory note by Unison, as maker, payable to the
order of Seller in the form of Exhibit 4 attached hereto.
"Person" shall mean and include a natural person, corporation, trust,
partnership, limited liability company, association, unincorporated
organization, governmental entity, agency or branch or department thereof, or
any other legal entity.
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"Premises" shall mean the buildings which Seller occupies and out of which
it conducts the Business, the location of which is 3635A Bienville Boulevard,
Ocean Springs, Mississippi.
"Purchase Price" shall mean $900,000.
"Records" shall mean such books, documents and records owned or used by
Seller in the conduct of the Business, including personnel, medical and
accounting records, correspondence, governmentally required records, business
plans and forecasts, patient lists, computer media, software and software
documentation, sales literature, catalogues, promotional items, advertising
materials and other written materials.
"Retained Assets" shall mean the following assets of Seller as of the
Closing Date which, although they may relate to the Business, are not Assets and
are to be retained by Seller: (i) Seller's franchise to be a corporation,
articles of incorporation, bylaws, minute books, stock books, corporate seals
and other corporate records having to do with the corporate organization and
capitalization of Seller; (ii) Seller's canceled checks, bank statements and tax
returns; (iii) policies of insurance purchased by Seller; (iv) Seller's cash and
cash equivalents which are derived from services provided by Seller prior to the
Effective Time of Closing; (v) Seller's accounts payable and accounts receivable
which are derived from services provided by Seller prior to the Effective Time
of Closing; (vi) the computer equipment at the home of Douglas L. Bates at the
date of the Letter of Intent between Unison and Seller; and (vii) any other
assets described as "Retained Assets" in the Disclosure Schedule.
"Retained Liabilities" shall mean all obligations and liabilities of
Seller or otherwise arising out of the operation of the Business or the
ownership of the Assets and which are not Assumed Liabilities.
"Seller's Closing Certificate" shall mean the Closing Certificate of
Seller and Bates in substantially the form of Exhibit 5 attached to this
Agreement.
"Seller's Counsel Opinion" shall mean the opinion of Brown, Watt &
Buchanan, P.A., in substantially the form of Exhibit 6 attached to this
Agreement.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act, as amended.
ARTICLE II. PURCHASE AND SALE; PURCHASE PRICE
1. Purchase and Sale. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement:
a. Seller shall sell, assign, convey and deliver to Buyer, and Buyer
shall purchase and accept from Seller, the Assets; and
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b. Buyer shall assume and agree to perform in accordance with and be
bound by all of the covenants, terms and obligations under the Assumed
Liabilities.
2. Payment of Purchase Price. The Purchase Price shall be paid as
follows:
a. At the Closing, Buyer shall pay Seller an amount equal to
$600,000 less the aggregate value of the Credited Benefits as set forth on the
Credited Benefits Schedule by wire transfer of immediately available funds to an
account designated by Seller; and
b. Buyer shall deliver to Seller the Note.
ARTICLE III. OTHER AGREEMENTS
1. Access. Seller shall afford to Buyer and the agents, accountants,
attorneys and representatives of Buyer, full and complete access to all of the
books, records, financial statements, facilities, key personnel and other
documents and materials relating to Seller's financial condition, assets,
liabilities and Business.
2. Disclosure Schedule.
a. Disclosure Schedule. Contemporaneously with the execution and
delivery of this Agreement, Seller is delivering to Buyer the Disclosure
Schedule, which is accompanied by a certificate signed by the President of
Seller, stating that the Disclosure Schedule is being delivered pursuant to this
Agreement and is the Disclosure Schedule referred to in this Agreement.
b. Updates. Prior to the Closing Date, Seller shall update the
Disclosure Schedule as necessary by written notice to Buyer to reflect any
matters which have occurred from and after the date of this Agreement which, if
existing on the date of this Agreement, would have been required to be described
in the Disclosure Schedule. If requested by Buyer, Seller shall meet and discuss
with Buyer any change in the Disclosure Schedule made by Seller which is, in the
reasonable judgment of Buyer, materially adverse in any matter to Buyer (a
"Disclosure Schedule Change"). If the parties cannot resolve any differences
regarding a Disclosure Schedule Change within a reasonable period of time (not
to exceed ten (10) calendar days), Buyer may terminate this Agreement.
3. Public Announcements. Subject to each party's disclosure obligations
imposed by Law, Buyer and Seller will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated by this Agreement and shall not issue any public announcement or
statement with respect thereto prior to consultation with the other party.
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4. Transfer of Intangible Assets. Prior to or at the Closing, Seller
shall take all steps so that Seller shall transfer to Buyer all of its right,
title and interest in and to the Intangible Assets other than the name and trade
dress "Spine Rehabilitation and Physical Therapy Center, Inc."
5. Retained Liabilities. Except as otherwise specifically provided for
herein, Buyer is not assuming any liabilities or obligations of Seller, and
Seller shall pay, perform in accordance with, be bound by and satisfy all of its
Retained Liabilities in the ordinary course of business.
6. Referrals and Deliveries. After the Closing, Seller shall
immediately: (i) deliver to Buyer, in the form received with the addition of any
required endorsements by Seller, any cash, checks or other payments received by
Seller relating to the Business or the Assets except to the extent such payments
are Retained Assets; and (ii) refer to Buyer any and all inquiries relating to
the Business from customers or suppliers of the Business or from other Persons.
7. Effective Time of Closing. The parties agree that, for all financial
statement and accounting purposes, the transactions described in this Agreement
shall be deemed effective as of 12:01 a.m., Phoenix local time, on January 1,
1997 (the "Effective Time of Closing").
8. Allocation of Purchase Price. In accordance with Section 1060 of the
Code, the Purchase Price shall be allocated $55,000 to Assets other than
goodwill and the remainder to goodwill, and the parties agree not to take a
contrary position. Buyer and Seller shall cooperate with each other in the
preparation and filing of I.R.S. Form 8594 in connection with the Purchase Price
allocation.
9. Prorations.
a. All personal property taxes, if any, assessed against the Assets
shall be prorated as of the Effective Time of Closing, based on the applicable
tax rate of the period for which such taxes are assessed or prepaid. Seller
shall be responsible for that portion of the prorated taxes accrued for the
period ending as of the Effective Time of Closing, and Buyer shall be
responsible for that portion of the prorated taxes attributable to the period
beginning as of the Effective Time of Closing.
b. All payments for utilities, and other similar expenses paid or
payable with respect to the Business shall be prorated and settled between Buyer
and Seller so that all such expenses applicable to the period ending as of the
Effective Time of Closing shall be for the account of the Seller, and all such
expenses for the periods after the Effective Time of Closing shall be for the
account of Buyer.
c. To the extent ascertainable, said amounts prorated pursuant to
this Section shall be settled between the parties at Closing.
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10. Risk of Loss. Physical possession of and all risk of loss with
respect to the Assets shall remain with Seller until the Effective Time of
Closing and shall pass to Buyer at the Effective Time of Closing.
11. Employees. On or prior to ten days before the Effective Time of
Closing, or within such shorter period as Buyer and Seller may agree upon, Buyer
shall deliver to Seller a list of employees Buyer desires to hire as employees
of Buyer (the "New Buyer Employees") immediately after the Effective Time of
Closing. Buyer shall not be under any obligation to hire any employees of
Seller. Seller shall, immediately prior to the Effective Time of Closing,
terminate the employment with Seller of all of the employees of Seller employed
in the Business, and Seller shall be responsible for any notice to employees
required under the WARN Act, if any. On or prior to the Effective Time of
Closing, Seller shall make all payments to said employees for wages,
commissions, bonuses, vacation, severance and other similar forms of
compensation, where applicable, owing to or accrued by said employees prior to
and up to the Effective Time of Closing; provided, however, that with respect to
New Buyer Employees, Buyer shall credit such employees with vacation and sick
leave benefits which approximate as near as practicable the vacation and sick
leave accrued while such employees were employed by Seller (the "Credited
Benefits"). Seller shall prepare a schedule of the Credited Benefits as of a
date ten days prior to the Effective Time of Closing, or as of such other date
as Buyer and Seller may agree upon, setting forth the names of the New Buyer
Employees and the value of the Credited Benefits for each New Buyer Employee
(the "Credited Benefits Schedule") based on rates of pay then in effect. At the
Closing, Buyer shall subtract from the Purchase Price the aggregate value of the
Credited Benefits as set forth on the Credited Benefits Schedule. Buyer shall
not be obligated to Seller or any other party for any labor-related obligations
or liabilities arising out of any person's employment with the Seller, and
Seller agrees to satisfy said obligations and/or liabilities, regardless of
whether said persons become employees of Buyer.
12. Intention.
a. It is the intention of the parties that the Assets shall include
all of the tangible and intangible assets owned by Seller and used in or
necessary for the operation of the Business as of the Closing Date, excepting
therefrom only the Retained Assets.
b. It is the intention of the parties that Buyer shall assume no
liabilities or obligations of Sellers relating to the Business except the
Assumed Liabilities.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND BATES
Seller and Bates hereby jointly and Severally represent and warrant to
Buyer that:
1. Organization; Business.
a. Seller is a corporation duly and validly organized and existing
and in good standing under the Laws of the State of Mississippi. Neither the use
of the Assets or the
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operation of the Business require Seller to qualify to do business as a foreign
corporation in any jurisdiction.
b. Seller has the full corporate power and authority and all
franchises, permits, licenses, approvals, authorizations, registrations, grants
and orders necessary to carry on the Business as it is now conducted, to own,
lease and operate the Assets and to perform all of its obligations under the
Contracts.
2. Authorization; Enforceability. The execution, delivery and
performance of this Agreement and all of the documents and instruments required
by this Agreement to be executed and delivered by Seller are within the
corporate power of Seller and have been duly authorized by all necessary
corporate action by Seller. This Agreement is, and the other documents and
instruments required by this Agreement to be executed and delivered by Seller
will be, when executed and delivered by Seller, the legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws generally
affecting the rights of creditors and subject to general equity principles.
3. No Violation or Conflict.
a. The execution, delivery and performance of this Agreement by
Seller do not and will not, directly or indirectly (with or without notice or
lapse of time):
(1) contravene, conflict with or violate the Articles of
Incorporation or Bylaws of Seller;
(2) contravene, conflict with or violate or give any
governmental body or any other Person the right to challenge the consummation of
the transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under any Law or any judgment, order or decree to which Seller
or any of the Assets may be subject;
(3) contravene, conflict with, violate or breach any
provision, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any of the Contracts;
(4) result in the imposition or creation of any Lien upon or
with respect to the Assets; or
(5) disrupt or impair any material relationship with any
supplier, customer, distributor, sales representative or employee of the
Business.
b. Seller is not and will not be required to give any notice or
obtain any consent or approval from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of the
transactions contemplated hereby.
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4. Financial Information; Books and Records.
a. Seller has delivered to Buyer all of the Financial Information.
The financial statements (and notes where applicable) which are part of the
Financial Information are accurate and complete in all material respects and
fairly present the financial condition and the results of operations of the
Business as at the respective dates of and for the periods referred to therein,
all in accordance with the income tax basis of accounting applied on a
consistent basis throughout all periods.
b. The books of account, minute books, and other records of Seller,
as they relate to the Business and all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices.
c. The accounting books and records of the Business: (i) are correct
and complete; (ii) are maintained in a manner consistent with past practice;
(iii) have recorded therein all the properties and assets and liabilities of the
Business; and (iv) reflect all transactions entered into by the Business or to
which the Business is a party.
5. Assets.
a. Seller owns good and valid title to the Assets, free and clear of
any and all Liens. Seller is in sole possession of, and has sole control of, the
Assets. All of Seller's tangible Assets are physically located on the Premises.
Except as set forth on the Disclosure Schedule, none of the Assets is leased,
rented, licensed or otherwise not owned by Seller.
b. The Assets include all assets of Seller which are used in or
necessary for the operation of the Business, excepting therefrom only any
Retained Asset.
c. The Equipment and Leased Assets, taken as a whole, are in good
operating condition and repair and are adequate for the uses for which they are
being put, normal wear and tear excepted. No such asset is in need of
maintenance or repair, except for routine maintenance and repairs that are not
material in nature or cost.
6. Contingent and Undisclosed Liabilities. Except pursuant to the
deposit and collection of checks in the ordinary course of business, Sellers do
not have any liabilities, obligations or indebtedness of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise) in
connection with the Business, other than as set forth in the Financial
Information or as specifically identified in the Disclosure Schedule or as
incurred in the ordinary course of business since the most recent financial
statements.
7. Taxes.
a. Seller has timely and properly filed all federal, state, local
and foreign tax returns (including but not limited to income, franchise, sales,
payroll, employee withholding and
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social security and unemployment) with respect to the Business which were
required to be filed. Seller has delivered to Buyer copies of all such all
income tax and other material tax returns with respect to the Business which
have been filed since December 31, 1990.
b. Seller has paid or made provision for all federal, state, local,
foreign or other governmental charges with respect to the Business and/or the
Assets that may or could follow the Assets or otherwise affect Buyer after the
consummation of the transactions contemplated herein.
c. There are no tax Liens upon any of the Assets, except for Liens
for current taxes not yet due and payable.
8. Absence of Certain Changes.
a. Except as set forth in the Disclosure Schedule, since September
30, 1996, there has not been any:
(1) material adverse change in the financial condition,
properties, liabilities, business, results of operations or prospects of the
Business;
(2) damage, destruction or loss which has materially and
adversely affected the financial condition, properties, business, results of
operation or prospects of the Business and/or the Assets (whether or not covered
by insurance);
(3) transactions by the Business outside the ordinary course
of business, except for the transactions contemplated by this Agreement;
(4) payment or increase of any bonus, salary or other
compensation to any officer or employee of the Business except in the ordinary
course of business or entry into any employment, severance or similar
arrangement with any officer or employee of the Business;
(5) adoption of or increase in the payments to or benefits
under any Employee Benefit Plan;
(6) entry into, termination of, or receipt of notice of
termination of any license, service, joint venture, credit or similar agreement,
or any Contract or transaction involving a total remaining commitment by or to
Seller relating to the Business of at least $10,000;
(7) cancellation or waiver of any claims or rights relating to
the Business with a value in excess of $10,000;
(8) material change in the accounting methods used by Seller;
or
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(9) any agreement, whether oral or written, by Seller to do
any of the foregoing.
b. Seller knows of no facts, circumstances or proposed or
contemplated events which would materially adversely affect the operations,
results or prospects of the Business after the Closing Date.
9. Employee Benefit Plans. Seller has never maintained and does not now
maintain, nor is it bound by, any Employee Benefit Plan. Seller is not
contributing to, nor has Seller contributed to, any multi-employer plan, as
defined in ERISA. Seller is not party to any Employee Benefit Plan or other
agreement (including collective bargaining agreements), arrangements or plans
which would bind or in any way affect Buyer after the Closing Date, regardless
of whether Buyer employs any employees of the Business.
10. Compliance with Law.
a. The present and past operation of the Business, and the Assets is
and has been, in compliance in all material respects with all Existing Permits,
Laws, governmental specifications, authorizations or requirements and any
decree, judgment, order or similar restriction. The Business is not currently
the subject of an inspection or inquiry regarding violations or alleged
violations of any Law by any federal, state, local or other governmental agency.
b. No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) may constitute or result in a violation by
the Business, of, or a failure on the part of the Business to comply in all
material respects with, any Existing Permit, Law, governmental specification,
authorization or requirement or any decree, judgment, order or similar
restriction or (ii) may give rise to any obligation on the part of the Business
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature.
c. With respect to the Business, Seller has not received, at any
time since December 31, 1992, any notice or other communication (whether oral or
written) from any governmental body or any other Person regarding (i) any actual
or alleged violation of, or failure to comply with, any Existing Permit or Law,
or (ii) any actual or alleged obligation on the part of Seller to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature.
d. The Disclosure Schedule contains a complete and accurate list of
each Existing Permit. Each Existing Permit listed or required to be listed in
the Disclosure Schedule is valid and in full force and effect, and such Existing
Permits collectively constitute all of the permits, licenses, approvals,
qualifications, permissions or authorizations necessary to permit Seller to
lawfully conduct and operate the Business in the manner currently conducted and
to permit Seller to own and use the Assets in the manner in which it currently
owns and uses such assets.
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11. Litigation. There is no litigation, arbitration, proceeding,
governmental investigation, citation or action of any kind pending or proposed
or threatened, against or relating to the Business or the Assets, nor is there
any basis known to the Sellers for any such action. There are no actions, suits
or proceedings pending or proposed or threatened, against Seller by any Person
which question the legality, validity or propriety of the transactions
contemplated by this Agreement.
12. Contracts; Performance of Contracts.
a. The Disclosure Schedule contains a complete and accurate list (or
summary of oral Contracts) of, and Seller has delivered to Buyer true and
complete copies of, the Contracts. The Contracts are the only Contracts to which
Seller is a party or by which Seller is bound which:
(1) involves the performance of services by the Business of an
amount or value in excess of $10,000;
(2) involves the performance of services or delivery of goods
or materials to the Business of an amount or value in excess of $10,000;
(3) was not entered into in the ordinary course of business
and involves expenditures or receipts of the Business in excess of $10,000;
(4) is a lease, rental or occupancy agreement, license,
installment and conditional sale agreement, or other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $10,000 and with terms of less than one year);
(5) is a joint venture, partnership, and other Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
the Business with any other Person;
(6) contains covenants that in any way purport to restrict the
business activity of the Business or limit the freedom of the Business to engage
in any line of business or to compete with any Person or otherwise restricts the
right of the Business to use or disclose any information in its possession;
(7) is a power of attorney that is currently effective and
outstanding;
(8) is a management, consulting, employment, personal service,
agency or other contract or contracts providing for employment or rendition of
services and which: (i) is in writing; or (ii) creates other than an at will
employment relationship; or (iii) provides for any commission, bonus, profit
sharing, incentive, retirement, consulting or additional compensation; or (iv)
contains any termination or severance pay obligations or liabilities;
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(9) is an agreement with either Seller or any subsidiary or
affiliate thereof, or with any director, officer, employee or shareholder of
either Seller or any subsidiary or affiliate thereof; or
(10) is any other written or unwritten agreement that is
material, either in amount or significance, to the ongoing operation of the
Business.
b. Each Contract identified or required to be identified on the
Disclosure Schedules is in full force and effect and is valid and enforceable in
accordance with its terms. Except as set forth on the Disclosure Schedule:
(1) the Business is, and at all times since December 31, 1992
has been, in compliance in all material respects with all applicable terms and
requirements of each Contract under which the Business has or had any obligation
or liability or by which the Business or any of the Assets is or was bound;
(2) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give the Business or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract; and
(3) the Business has not given to or received from any other
Person, at any time since September 30, 1996, any notice or other communication
(whether oral or written) regarding any actual or alleged violation or breach
of, or default under, any Contract.
c. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Business under current or completed Contracts with any Person other than in the
ordinary course of business, and no such Person has made written demand for such
renegotiation.
d. The Contracts relating to the provision of services by the
Business have been entered into in the ordinary course of business and have been
entered into without the commission of any act alone or in concert with any
other Person, or any consideration having been paid or promised, that is or
would be in violation of any Law.
13. Existing Insurance Policies.
a. Seller has delivered to Buyer true and complete copies of the
Existing Insurance Policies, all pending applications for an insurance policy to
cover the Assets, the Premises or the Business and any statement by the preparer
of Seller's financial statements with regard to the adequacy of Seller's
insurance coverage with respect to the Assets, the Premises or the Business.
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b. The Existing Insurance Policies: (i) are valid, outstanding and
enforceable; (ii) taken, together, provide adequate insurance coverage for the
Assets, the Premises and the operation of the Business for all risks normally
insured against by a Person carrying on the same business as the Business; and
(iii) are sufficient for compliance with all Laws, the Existing Permits and the
Contracts.
c. The Disclosure Schedule sets forth, by year, for the current
policy year and each of the two preceding policy years in respect of each policy
for liability, property or casualty: (i) a summary of loss experience under each
policy; (ii) a statement describing each claim under each policy for an amount
in excess of $10,000; and (iii) a statement describing the loss experience for
all claims that were self-insured, including the number and aggregate cost of
such claims.
d. Seller has not received: (i) any refusal of coverage or notice
that a defense will not be afforded with reservation of rights; or (ii) any
notice of cancellation or any other indication that any insurance policy is no
longer in full force and effect or will not be renewed or that the issuer of any
such policy is not willing or able to perform its obligations thereunder.
14. Environmental Protection.
a. As used in this Agreement:
(1) "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (i) the presence, or
release into the environment, of any Environmental Hazardous Materials at any
location, whether or not owned by Sellers; or (ii) circumstances forming the
basis of any violation or alleged violation, of any Environmental Law; or (iii)
any and all claims by any Person seeking damages, contribution, indemnification,
cost, recovery, compensation or injunctive relief resulting from the presence or
Environmental Release of any Environmental Hazardous Materials.
(2) "Environmental Laws" shall mean all federal, state, local
or foreign statutes, Laws, rules, ordinances, codes, policy, rule of common law,
regulations, judgments, and orders relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, drinking water, wildlife, plants, land surface or
subsurface strata), including, without limitation, Laws and regulations relating
to Environmental Releases or threatened Environmental Releases of Environmental
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Environmental Hazardous Materials.
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(3) "Environmental Hazardous Materials" shall mean: (i) any
petroleum or petroleum products, radioactive materials, asbestos in any form,
urea formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs)
and radon gas; and (ii) any chemicals, materials or substances which are now
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," extremely hazardous wastes," restricted
hazardous wastes," "toxic substances," "toxic pollutants," or words of similar
import, under any Environmental Law; and (iii) any other chemical, material,
substance or waste exposure to which is now prohibited, limited or regulated by
any governmental authority.
(4) "Environmental Permits" shall mean all environmental,
health and safety permits and governmental authorizations.
(5) "Environmental Release" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or property.
b. The Business: (i) is in compliance with all applicable
Environmental Laws; and (ii) Seller has not received any communication (written
or oral) that alleges that the Business is not or was not in compliance with
applicable Environmental Laws.
c. The Business has obtained all Environmental Permits necessary for
its operations, and all such permits are in good standing and the Business is in
compliance with all terms and conditions of its Environmental Permits, if any.
d. There is no Environmental Claim pending or threatened against the
Business or the Assets or against any Person whose liability for any
Environmental Claim Seller has or may have retained or assumed in connection to
the Business or the Assets either contractually or by operation of Law, or
against any real or personal property or operation which the Business owns,
leases or manages, nor is there any basis for any such Environmental Claim.
e. There have been no Environmental Releases of any Environmental
Hazardous Material by the Business or any employee or agent of the Business, or
by any Person on real property owned, used, leased or operated by the Business.
f. No real property at any time owned, operated, used or controlled
by the Business is currently listed on the National Priorities List or the
Comprehensive Environmental Response, Compensation and Liability Information
System, both promulgated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or on any
comparable state list, and Seller has not received any written notice from any
Person under or relating to CERCLA or any comparable state or local Law.
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g. No off-site location at which the Business has disposed or
arranged for the disposal of any waste is listed on the National Priorities List
or on any comparable state list and Seller has not received any written notice
from any Person with respect to any off-site location, of potential or actual
liability or a written request for information from any Person under or relating
to CERCLA or any comparable state or local Law.
h. There is not and has not been any Environmental Hazardous
Materials used, generated, treated, stored, transported, disposed of, handled or
otherwise existing on, under or about the Premises, except for quantities of any
such Environmental Hazardous Materials stored or otherwise held on, under or
about the Premises in full compliance with all Environmental Laws and intended
to be used in the operation of the Business.
i. Except as listed on the Disclosure Schedule, there is not now and
has not been in the past any underground or above-ground storage tank or
pipeline on the Premises, and there has been no Environmental Release from or
rupture of any such tank or pipeline, including, without limitation, any
Environmental Release from or in connection with the filling or emptying of such
tank.
15. Labor Matters.
a. Except as set forth in the Disclosure Schedule, there has been
provided to Buyer a complete and accurate list of the following information for
each employee of the Business, including each employee on leave of absence or
layoff status: name; job title; current compensation paid or payable; vacation
accrued.
b. Except as set forth on the Disclosure Schedule, no employee of
the Business is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect (i) the
performance of such employee's duties as an employee of the Business, or (ii)
the ability of Buyer to conduct the Business, including any Proprietary Rights
Agreement with the Seller by any such employee. To the knowledge of the Sellers,
no key employee of the Business intends to terminate such employee's employment
with Seller prior to the Closing.
16. Labor Relations; Compliance.
a. Seller has not been and is not a party to any collective
bargaining or other labor Contract.
b. There has not been, there is not presently pending or existing,
and there is not threatened, (i) any strike, slowdown, picketing, work stoppage,
or employee grievance process, (ii) any charge, grievance, proceeding or other
claim against or affecting the Business relating to the alleged violation of any
Law pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor
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Relations Board, the Equal Employment Opportunity Commission, or any comparable
governmental body, organizational activity, or other labor or employment dispute
against or affecting the Business or the Premises, or (iii) any application for
certification of a collective bargaining agent.
c. No event has occurred or circumstance exists that could provide
the basis for any work stoppage or other labor dispute.
d. The Business has complied in all material respects with all Laws
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health and plant
closing. The Business is not liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing Laws.
e. There is no present or former employee of the Business who has
any claim against Seller on account of or for: (i) overtime pay, other than
overtime pay for the current payroll period; (ii) wages or salaries, other than
wages or salaries for the current payroll period; or (iii) vacations, sick
leave, time off or pay in lieu of vacation, sick leave or time off, other than
vacation, sick leave or time off (or pay in lieu thereof) earned in the
twelve-month period.
17. Brokers. Seller has not incurred any brokers', finders' or any
similar fee in connection with the transactions contemplated by this Agreement.
18. Governmental Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement by Seller.
19. Disclosure. Seller has furnished to Buyer complete and accurate
copies of all documents and/or information requested by Buyer. No statement of
fact by Seller contained in this Agreement or the Disclosure Schedule (including
any supplement thereto) contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained, in the light of the
circumstances under which they were made, not misleading.
20. Intangible Assets.
a. The Intangible Assets are all those necessary for the operation
of the Business as currently conducted. Seller owns all of the right, title, and
interest in and to each of the Intangible Assets free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use all of the Intangible Assets without payment to a third
party.
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b. The Business does not infringe on the intellectual property
rights of others.
c. No trade name, registered or unregistered trademark, service mark
or application therefor included in the Intangible Assets has been or is
involved in any opposition, invalidation or cancellation and, to Seller's
knowledge, no such action is threatened with respect to such assets.
d. To the knowledge of Seller, no trade secret or other confidential
or proprietary information has been used, divulged, or appropriated either for
the benefit of any Person (other than Seller) or to the detriment of the
Business.
21. Certain Payments. Neither Seller or any director, officer, agent, or
employee of Seller, nor, to the knowledge of Seller, any other Person associated
with or acting for or on behalf of Seller, has directly or indirectly: (i) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (A) to obtain favorable treatment in securing
business for the Business, (B) to pay for favorable treatment for business
secured for the Business or (C) to obtain special concessions or for special
concessions already obtained, for or in respect of the Business, in each case in
violation of any Law; or (ii) established or maintained any fund or asset that
has not been recorded in the books and records of the Business.
22. Relationships with Related Parties. Except as set forth on the
Disclosure Schedule, no shareholder or any affiliate of any shareholder or of
Seller has, or since December 31, 1992, has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Business. No shareholder or any affiliate of a shareholder
or of Seller owns, or since December 31, 1992 has owned, an equity interest (of
record or as a beneficial owner) or any other financial or profit interest in, a
Person that has (i) had business dealings or a material financial interest in
any transaction with the Business or (ii) engaged in competition with the
Business with respect to any services of the Business (a "Competing Business")
in any market presently served by the Business except for less than one percent
of the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market. Except as
set forth on the Disclosure Schedule, no shareholder or any affiliate of a
shareholder or of Seller is a party to any Contract with, or has any claim or
right against, Seller with respect to the Business.
23. Premises.
a. Seller does not own any real property in connection with the
operation of the Business.
b. The Premises are in good operating condition and repair,
reasonable wear and tear excepted, are insured at normal competitive premium
rates and conform in all respects to applicable Laws.
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c. The Premises: (i) constitute all real property and improvements
used by the Business; (ii) are not in possession of any adverse possessors;
(iii) are not subject to any leases or tenancies of any kind except for the
Lease; (iv) are used in a manner which is consistent and permitted by applicable
zoning ordinances and other Law without special use approvals or permits; (v)
are served by all water, sewer, electrical, telephone, drainage and other
utilities required for normal operations of the Business; (vi) are not located
in a flood plain, wetland or similar restricted area; and (vii) require no work
or improvements to bring them into compliance with any applicable Law.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
1. Organization; Business. Buyer is a corporation duly and validly
organized and existing under the Laws of its jurisdiction of incorporation.
2. Authorization; Enforceability. The execution, delivery and
performance of this Agreement by Buyer and all of the documents and instruments
required by this Agreement to be executed and delivered by Buyer are within the
corporate power of Buyer and have been duly authorized by all necessary
corporate action by Buyer. This Agreement is, and the other documents and
instruments required by this Agreement to be executed and delivered by Buyer
will be, when executed and delivered by Buyer, the valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws generally affecting the
rights of creditors and subject to general equity principles.
3. No Violation or Conflict. The execution, delivery and performance of
this Agreement by Buyer do not and will not conflict with or violate any Law,
the Articles of Incorporation or Bylaws of Buyer or any contract or agreement to
which Buyer is a party or by which Buyer is bound.
4. Brokers. Buyer has not incurred any brokers', finders' or any
similar fee in connection with the transactions contemplated by this Agreement.
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE CLOSING
From and after the date of this Agreement and until the Closing Date:
1. Carry on in Regular Course. Seller shall diligently carry on the
Business in the regular course and substantially in the same manner as
heretofore and shall not make or institute any unusual or novel methods of
purchase, sale, lease, management, accounting or operation relating to the
Business.
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2. Use of Assets. Seller shall use, operate, maintain and repair all of
the Assets in a normal business manner consistent with past practices and shall
not alter or modify any Asset (except to make improvements in the ordinary
course).
3. No Default. Seller shall not do any act or omit to do any act, or
permit any act or omission to act, which will cause a breach of any of the
Contracts.
4. Existing Insurance Policies. Seller shall maintain all of the
Existing Insurance Policies in full force and effect.
5. Employment Matters. Seller shall not: (i) grant any increase in the
rate of pay of any of the employees of the Business; (ii) institute or amend any
Employee Benefit Plan affecting employees of the Business; or (iii) enter into
or modify any written employment arrangement with any Person employed by or
providing services to the Business.
6. Contracts and Commitments. Seller shall not enter into any contract
or commitment or engage in any transaction not in the usual and ordinary course
of the Business and consistent with the normal practices of the Business and
shall not purchase, lease, sell or dispose of any capital asset in connection
with the Business; and shall not cancel, modify or amend any Contract.
7. Preservation of Relationships. Use its best efforts to preserve the
organization of the Business intact, to retain the services of the present
officers and key employees of the Business and to preserve the goodwill of
suppliers, customers, creditors and others having relationships with the
Business.
8. Compliance with Laws. Comply in all respects with all applicable
Laws.
9. Taxes. Timely and properly file all federal, state, local and
foreign tax returns which are required to be filed, and pay or make provision
for the payment of all taxes owed by it.
ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
1. Compliance with Agreement. Seller shall have performed and complied
in all material respects with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.
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2. Proceedings and Instruments Satisfactory. All proceedings, corporate
or other, to be taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to Buyer, and Seller shall have made available to Buyer
for examination the originals or true and correct copies of all documents Buyer
may reasonably request in connection with the transactions contemplated by this
Agreement.
3. No Litigation. No suit, action or other proceeding shall be pending
or threatened before any court in which the consummation of the transactions
contemplated by this Agreement is restrained or enjoined or in which the relief
requested is to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement.
4. Representations and Warranties of the Sellers. The representations
and warranties made by Seller and Bates in: (i) Article of this Agreement shall
be true and correct in all respects when made and as of the Closing Date with
the same force and effect as though said representations and warranties had been
made at such time, without giving effect to any supplement to the Disclosure
Schedule; and (ii) all other Sections of this Agreement shall be true and
correct in all material respects when made and as of the Closing Date with the
same force and effect as though said representations and warranties had been
made at such time, without giving effect to any supplement to the Disclosure
Schedule.
5. No Adverse Change. During the period from the date of this Agreement
to the Closing Date: (i) there shall not have occurred, and there shall not
exist on the Closing Date, any condition or fact which is, or reasonably may be
expected to be, materially adverse to the financial condition, properties,
business, results of operation or prospects of the Business, taken as a whole;
and (ii) neither the Business nor the Assets, taken as a whole, shall have been
materially and adversely affected by reason of any loss, taking, condemnation,
destruction or physical damage, whether or not insured against.
6. Deliveries at Closing. Seller shall have delivered to Buyer the
following documents, each dated the Closing Date and properly executed by
Seller, appropriate officers of Seller or counsel for Seller, as appropriate:
(i) the Bill of Sale; (ii) Seller's Closing Certificate; (iii) the Seller's
Counsel Opinion; and (iv) any assignments necessary to effect the transfer of
the Intangible Assets to Buyer.
7. Other Deliveries. Seller shall have delivered to Buyer:
a. such certificates and documents of officers of Seller and public
officials as shall be reasonably requested by Buyer to establish the existence
of Seller and the due authorization of this Agreement and the transactions
contemplated by this Agreement by Seller;
b. legal title to and legal possession of the Assets;
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c. such other bills of sale, endorsements, assignments or other
instruments of conveyance as shall be effective to vest in Buyer good and
marketable title to the Assets;
d. a landlord estoppel certificate from the owners of the Premises
in form and substance acceptable to Buyer; and
e. such tax clearance certificates or other similar document(s)
which may be required by any state taxing authority in order to relieve Buyer of
any obligation to withhold a portion of the Purchase Price or which may be
necessary or advisable in order to comply with any applicable sales tax
exemption.
8. Approvals and Consents.
a. Sellers shall have filed all notices and obtained, in writing,
and delivered to Buyer, such permissions, approvals, determinations, consents
and waivers, if any, as may be required by Law, regulatory authorities, the
Contracts or the Existing Permits in order to consummate the transactions
contemplated by this Agreement and to vest in Buyer good and marketable title to
the Assets as contemplated by this Agreement.
b. Buyer shall have obtained, at Buyer's expense, all approvals,
authorizations and permits, governmental or otherwise, that it deems necessary
or appropriate to its conduct of the Business on and after the Closing Date.
9. Due Diligence. Buyer shall have completed its legal, financial and
business review of the financial and physical condition, assets, liabilities and
prospects of the Business, including environmental, structural and other
physical inspections and shall have been satisfied that no facts or
circumstances exist which are or are likely to become materially adverse to
Buyer, the Business and its prospects, or the Assets. Buyer's election to close
the transactions contemplated herein shall not be deemed a waiver of any rights
under any covenants, representations or warranties contained herein.
10. Employment Arrangements. Buyer shall have entered into employment
arrangements with Bates on terms and conditions satisfactory to Buyer.
ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
1. Compliance with Agreement. Buyer shall have performed and complied
in all material respects with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.
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2. Proceedings and Instruments Satisfactory. All proceedings, corporate
or other, to be taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to Seller, and Buyer shall have made available to Seller
for examination the originals or true and correct copies of all documents which
Seller may reasonably request in connection with the transactions contemplated
by this Agreement.
3. No Litigation. No suit, action or other proceeding shall be pending
before any court in which the consummation of the transactions contemplated by
this Agreement is restrained or enjoined.
4. Representations and Warranties of Buyer. The representations and
warranties made by Buyer in this Agreement shall be true and correct in all
material respects when made and as of the Closing Date with the same force and
effect as though such representations and warranties had been made at such
times.
5. Deliveries at Closing. Buyer shall have delivered to the Seller the
following documents, each dated the Closing Date and properly executed by Buyer,
or counsel for the Buyer, as appropriate: (i) the Bill of Sale; (ii) the Buyer
Closing Certificate; and (iii) the Buyer Officer's Certificate.
6. Other Documents. Buyer shall have delivered to Seller such
certificates and documents of officers of Buyer and of public officials as shall
be reasonably requested by Seller to establish the existence and good standing
of Buyer and the due authorization of this Agreement and the transactions
contemplated by this Agreement by Buyer.
7. Delivery of Purchase Price. Buyer shall have delivered to Seller the
Purchase Price as described in Section of this Agreement.
ARTICLE IX. INDEMNITIES
1. Seller's and Bates' Indemnity. Seller and Bates hereby, jointly and
severally, indemnify and hold Buyer harmless from and against, and agree to
promptly defend Buyer from and reimburse Buyer for, any and all losses, damages,
costs, expenses, liabilities, obligations and claims of any kind (including,
without limitation, reasonable attorneys' fees and other reasonable legal costs
and expenses, including without limitation, those incurred in connection with
any suit, action or other proceeding) which Buyer may at any time suffer or
incur, or become subject to, as a result of or in connection with:
a. any breach of any of the representations and warranties made by
Seller and Bates in or pursuant to this Agreement;
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b. any failure by Seller to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the documents and materials
required to be delivered by Seller pursuant to this Agreement;
c. the Retained Liabilities;
d. Seller's ownership, occupation or operation of the Business, the
Assets, the Premises or any other property occupied by Seller in connection with
the Business prior to the Effective Time of Closing;
e. noncompliance by Seller or the Assets with any Law;
f. noncompliance with any bulk transfer or plant closing Laws in
connection with the sale of the Assets;
g. any Environmental Release on the Premises, or on any other
property occupied by Seller, prior to the Effective Time of Closing;
h. any Environmental Liability or any other liability arising out of
or in connection with the treatment, storage, transportation, disposal or other
handling prior to the Effective Time of Closing of any Environmental Hazardous
Material by or on behalf of Seller;
i. any suit, action or other proceeding brought by any Person
arising out of, or in any way related to, any of the matters referred to in
Sections IX1.a through IX1.h, inclusive, of this Agreement.
2. Buyer's Indemnity. Buyer hereby indemnifies and holds Seller harmless
from and against, and agrees to promptly defend Seller from and reimburse Seller
for, any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorneys' fees
and other reasonable legal costs and expenses, including, without limitation,
those incurred in connection with any suit, action or other proceeding) which
Seller may at any time suffer or incur, or become subject to, as a result of or
in connection with:
a. any breach of any of the representations and warranties made by
Buyer in or pursuant to this Agreement;
b. any failure by Buyer to carry out, perform, satisfy and discharge
any of its covenants, agreements, undertakings, liabilities or obligations under
this Agreement or under any of the documents and materials required to be
delivered by Buyer pursuant to this Agreement;
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c. Buyer's ownership, occupation or operation of the Business, the
Assets, the Premises or any other property occupied by Buyer after the Effective
Time of Closing (excluding, however, any matters for which Seller and Bates are
required to indemnify Buyer pursuant to Section IX.1 of this Agreement).
d. any suit, action or other proceeding brought by any Person
arising out of, or in any way related to, any of the matters referred to in
Sections IX.2.a through IX.2.c, inclusive, of this Agreement.
3. Termination of Seller's Rights. The right of Seller to receive
indemnity provided by Section IX.2 of this Agreement shall, as to any matter
which has not been noticed to Buyer prior to such time, expire at 11:59 P.M.,
Phoenix, Arizona time, on the third anniversary of the Effective Time of
Closing.
4. Termination of Buyer's Rights. The right of Buyer to receive
indemnity provided by Section IX.1 of this Agreement shall, as to any matter
which has not been noticed to Seller and Bates prior to such time, expire at
11:59 P.M. Phoenix, Arizona time, on the third anniversary of the Effective Time
of Closing.
5. Rights on Termination. The termination of the rights of an
indemnified party to receive indemnity under this Agreement shall not affect
that Person's right to prosecute to conclusion any claim made by that Person
prior to the time that the relevant right of indemnity terminates.
ARTICLE X. TERMINATION; MISCELLANEOUS
1. Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing, as follows:
a. by mutual written agreement of Buyer and Seller;
b. by Buyer if any of the conditions set forth in Article VII of
this Agreement shall not have been fulfilled by the Closing;
c. by Seller if any of the conditions set forth in Article VIII of
this Agreement shall not have been fulfilled by the Closing;
d. by Buyer pursuant to Section III.2.b of this Agreement; or
e. by either Buyer or Seller if the Closing has not occurred on or
before January 31, 1997.
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2. Rights on Termination; Waiver. If this Agreement is terminated
pursuant to Section X.1 of this Agreement, all further obligations of the
parties under or pursuant to this Agreement shall terminate without further
liability of any party to the others, provided that the obligations of the
parties contained in Sections ?, III.3, Article IX, Section X.2 and Section X.5
of this Agreement shall survive any such termination. If any of the conditions
set forth in Article VII of this Agreement have not been satisfied, Buyer may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement, and if any of the conditions set forth in
Article VIII of this Agreement have not been satisfied, Seller may nevertheless
elect to proceed with the consummation of the transactions contemplated by this
Agreement. Any such election to proceed shall be evidenced by a certificate
signed on behalf of the waiving party by an officer of that party.
3. Survival of Representations and Warranties. All representations and
warranties of the parties contained in this Agreement or made pursuant to this
Agreement shall survive the Closing Date and the Effective Time of Closing and
the consummation of the transactions contemplated by this Agreement and shall
terminate and be of no further force and effect at 11:59 P.M. Phoenix, Arizona
time on the third anniversary of the Effective Time of Closing. The termination
of the representations and warranties contained in the immediately preceding
sentence shall not affect a party's right to prosecute to conclusion any claim
made by such party prior to such time.
4. Entire Agreement; Amendment. This Agreement and the documents
referred to in this Agreement and required to be delivered pursuant to this
Agreement constitute the entire agreement among the parties pertaining to the
subject matter of this Agreement, and supersede the Letter of Intent dated as of
November 8, 1996 by and among Buyer and Seller and all prior and contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement, except as specifically set forth in this Agreement. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by Buyer and Seller. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
5. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties to this Agreement shall pay the
fees and expenses of its respective counsel, accountants, brokers, consultants,
investment bankers and other experts incident to the negotiation and preparation
of this Agreement and consummation of the transactions contemplated by this
Agreement.
6. Governing Law. This Agreement shall be construed and interpreted
according to the internal Laws of the State of Arizona without regard to the
conflicts of laws principles thereof.
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7. Assignment. This Agreement shall not be assigned by Seller except
with the prior written consent of Buyer. Buyer may assign this Agreement to a
subsidiary of Unison without the prior written consent of Seller and to any
other party with the prior written consent of Seller.
8. Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by personal
delivery or telephonic facsimile transmission or when deposited in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this Section of a change of address:
If to Seller: Spine Rehabilitation and Physical Therapy Center, Inc.
Attention: Douglas L. Bates
3635A Bienville Boulevard
Ocean Springs, Mississippi 39564
Telephone No.: (601) 875-1898
Facsimile No.: (601) 875-1991
with a copy to: Brown, Watt & Buchanan, P.A.
Attention: W. Lee Watt
3112 Canty Street
Pascagoula, Mississippi 39569-2220
Telephone No.: (601) 762-0035
Facsimile No.: (601) 762-0299
If to Buyer: Unison HealthCare Corporation
Attention: Paul J. Contris
7272 East Indian School Road, Suite 214
Scottsdale, Arizona 85251
Telephone No.: (602) 423-1954
Facsimile No.: (602) 481-6479
with a copy to: Quarles & Brady
Attention: P. Robert Moya
One East Camelback, Suite 400
Phoenix, Arizona 85012
Telephone No.: (602) 230-5500
Facsimile No: (602) 230-5598
9. Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
27
<PAGE> 32
10. Severability. If any provision, clause, or part of this Agreement,
or the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.
11. Specific Performance. The parties agree that the Assets and Business
as a going concern constitute unique property. There is no adequate remedy at
Law for the damage which either party might sustain for failure of the other
party to consummate the transactions contemplated by this Agreement, and
accordingly, each party shall be entitled, at its option, to the remedy of
specific performance to enforce the transactions contemplated by this Agreement.
12. Taxes and Fees. Seller shall pay all transfer taxes of any kind, all
sales and use taxes and all recording and filing fees which arise as a result of
the conveyance of the Assets by Seller to Buyer.
13. Income Tax Position. Neither Buyer nor Seller shall take a position
for income tax purposes which is inconsistent with this Agreement.
14. Further Assurances. From time to time after the Closing Date, upon
the reasonable request of Buyer and without any additional consideration, Seller
shall execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further action
as Buyer may reasonably request in order to more effectively sell, assign,
convey, transfer, reduce to possession and record title to any of the Assets.
Seller agrees to cooperate with Buyer in all reasonable respects to assure to
Buyer the continued title to and possession of the Assets in the condition and
manner contemplated by this Agreement.
28
<PAGE> 33
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Asset Purchase Agreement
to be duly executed as of the day and year first above written.
Buyer:
By:/s/ Phillip R. Rollins
------------------------------------
Name:Phillip R. Rollins
----------------------------------
Title:Secretary
---------------------------------
Seller:
By:/s/ Douglas L. Bates
------------------------------------
Name:Douglas L. Bates
----------------------------------
Title:President
---------------------------------
Bates:
/s/ Douglas L. Bates
------------------------------------
Douglas L. Bates
<PAGE> 34
Exhibit 10.120
Prepared by:
Ronald M. Goldberg, Esq.
Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012
MASTER SUBLEASE AGREEMENT
THIS MASTER SUBLEASE AGREEMENT (this "Agreement") is made and
entered into as of the 19th day of February, 1997, by and between BRITWILL
INVESTMENTS - II, INC., a Delaware corporation ("Lessor") and HASMARK OF TEXAS,
INC., a Texas corporation ("Lessee").
R E C I T A L S
A. WHEREAS, pursuant to a Lease Contract and Agreement dated December 1,
1993, by and between BritWill Investments - Texas, Ltd., a Texas limited
partnership ("BritWill-Texas"), as Lessor, and Lessor, as Lessee, which
Landlord's interest was subsequently assigned to Omega HealthCare Investors,
Inc., a Maryland corporation ("Omega") (collectively, the "Heritage Oaks
Lease"), Lessor acquired a leasehold estate in the property legally described in
Exhibit "A" attached hereto and incorporated herein by reference (the "Heritage
Oaks Premises"); and
B. WHEREAS, pursuant to an Operating Lease dated as of September 2, 1986,
by and between Health Care Property Investors, Inc., a Maryland corporation, as
Lessor, and The Hillhaven Corporation, a Tennessee corporation ("Hillhaven"), as
Lessee, which Lessee's interest was subsequently assigned by a Sublease
Agreement dated as of August 1, 1987, by and between Hillhaven, as Sublessor,
and Oaks/Jones, Inc., an Illinois corporation ("Oak/Jones"), as Sublessee, which
Sublessee's interest was subsequently assigned by a Sub-Sublease dated as of
October 20, 1992, by and between Oak/Jones, as Lessor, and Texas Health
Ventures, Inc., a Texas corporation ("THV"), as Lessee, which Lessee's interest
was subsequently assigned by an Assignment of Sub-Sub-Lease dated November 20,
1993, by and between THV, as Assignor, and BritWill-Texas, as Assignee, which
Assignee's interest was subsequently assigned by a Lease Contract and Agreement
dated December 1, 1993, by and between BritWill-Texas, as Lessor, and Lessor, as
Lessee (collectively, the "Four States Lease"), Lessor acquired a leasehold
estate in the property legally described in Exhibit "B" attached hereto and
incorporated herein by reference (the "Four States Premises"); and
C. WHEREAS, pursuant to a Lease dated as of August 1, 1986, incorporating
a Master Lease Document - General Terms and Conditions dated December 30, 1985,
by and between National Health Properties, a Maryland corporation formerly known
as Beverly
<PAGE> 35
Investment Properties, Inc., as Lessor, and Beverly Enterprises - Texas, Inc., a
California corporation ("Beverly"), as Lessee, which Lessee's interest was
subsequently assigned by an Assignment and Assumption of Lease with Consent of
Lessor dated as of July 16, 1990, by and between Beverly, as Assignor, and W.
Dirk Parish, an individual ("Parish"), as Assignee, which Assignee's interest
was subsequently assigned by an Assignment and Assumption Agreement of Lease
dated as of July 16, 1990, by and between Parish, as Assignor, and Texarkana
Nursing Home, a Texas general partnership ("TNH"), as Assignee, which Assignee's
interest was subsequently assigned by an Assignment and Assumption Agreement of
Lease dated as of July 16, 1990, by and between TNH, as Assignor, and Texarkana
Nursing Center, Inc., a Texas corporation ("TNC"), as Assignee, which Assignee's
interest was subsequently assigned by an Assignment of Lease dated as of
November 30, 1993, by and between TNC, as Assignor, and BritWill-Texas, as
Assignee, which Assignee's interest was subsequently assigned by a Lease
Contract and Agreement dated December 1, 1993, by and between BritWill-Texas, as
Lessor, and Lessor, as Lessee (collectively, the "Texarkana Lease"; and,
together with the Heritage Oaks Lease and the Four States Lease, the "Leases"
and each a "Lease"), Lessor acquired a leasehold estate in the property legally
described in Exhibit "C" attached hereto and incorporated herein by reference
(the "Texarkana Premises"; and, together with the Heritage Oaks Premises and the
Four States Premises the "Leased Premises"); and
D. WHEREAS, in accordance with the provisions of this Agreement, Lessee
desires to acquire all right, title and interest of Lessor in and to each of the
Leases;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and undertakings described hereinbelow, it is agreed as follows:
1. Sublease. Subject to the terms, conditions, covenants and
undertakings hereinafter set forth, and effective March 1, 1997, Lessor does
hereby (a) sublease to Lessee all of Lessor's right, title and interest,
including all rights of possession and occupancy, in and to the Leased Premises
pursuant to the respective Leases and (b) assign to Lessee, subject to Lessor's
right of re-assignment in Section 3 below, any and all rights in any of the
Leases in the nature of a "right of first refusal" or an "option to purchase."
Without in any way limiting or expanding the foregoing, but subject to the
written consent of Omega in its absolute discretion, the Heritage Oaks Lease
will contain an option to purchase the underlying fee for the sum of (A)
$800,000, plus (B) certain costs incurred or to be incurred to repair and
rehabilitate the improvements located on the Heritage Oaks Premises in the
estimated amount of $500,000.
2. Rent.
(a) Except as provided in Section 2(b), from and after the date
hereof Lessee hereby agrees to assume and be responsible for the payment
and discharge of all obligations and liabilities of Lessor pursuant to the
Leases.
- 2 -
<PAGE> 36
(b) As long as no Event of Default as herein defined has occurred
and is continuing, Lessor shall pay on behalf of Lessee to the landlord
under the Heritage Oaks Lease an amount sufficient to decrease the base
rent (excluding any rent or other obligation in the nature of operating or
capital cost contributions or payments) due under the Heritage Oaks Lease
(i) for the first twenty-four (24) months hereof, to the amount of $12,000
per month; (ii) for the next twelve (12) months hereof, to the amount of
$18,000 per month; and (iii) thereafter, Lessor shall not have any
obligation hereunder to subsidize the base rent.
3. Term. This Agreement may terminate with respect to any Lease, or
with respect to all Leases, as set forth in this Section 3.
(a) As set forth more particularly in Section 8, Lessor may
terminate this Agreement with respect to a Lease that is the subject of
Lessee's attempted assignment or sublet in violation of this Agreement, or
Lessor may terminate this Agreement in its entirety.
(b) As set forth more particularly in Section 11, Lessor may
terminate this Agreement with respect to a Lease following a breach,
default or event of default under such Lease or that gives rise to an
Event of Default, or following an Event of Default under and as defined in
that certain Sublease Agreement of even date herewith by and between Emory
Care Center, Inc. and Lessee (the "Emory Sublease"), or Lessor may
terminate this Agreement in its entirety.
(c) This Agreement shall automatically terminate with respect to any
Lease upon the expiration of the initial term of such Lease; this
Agreement shall terminate in its entirety when the last of the Leases has
so expired, or upon termination of the Emory Sublease.
Upon the termination of this Agreement with respect to a Lease, Lessee shall
immediately (A) surrender possession of such Leased Premises in at least as good
order and condition as received, and (B) shall properly prepare, sign and timely
file all claims, cost reports, or other documentation required by the Medicare
Program, the Medicaid Program and any other third party payer for the operations
of the applicable Leased Premises. Upon such termination, the assignments of any
and all rights in the nature of (i) a "right of first refusal" and (ii) an
"option to purchase" as contemplated in Section 1 shall be deemed re-assigned by
Lessee to Lessor without further action.
4. Use. During the term of this Agreement, each of the Leased Premises
is to be used only for the operation of a nursing home. Lessee covenants not to
used any of the Leased Premises for any other purpose without first obtaining
Lessor's written consent, which may be absolutely withheld.
5. Maintenance; Insurance. During the term hereof, with respect to each
Lease:
- 3 -
<PAGE> 37
(a) Lessee shall at all times maintain the Leased Premises in at
least as good order and condition as received.
(b) Lessee shall promptly execute, fulfill and comply with all valid
ordinances, rules, regulations, laws and statutes of applicable
governmental and quasi-governmental authorities (herein "Applicable Law").
Lessee shall at all times maintain and operate the Leased Premises and the
business conducted thereon in strict accordance with such Applicable Law.
(c) Lessee shall maintain all insurance required under each of the
Leases and as otherwise maintained by similarly situated nursing
homes.
6. Lessee's Representations and Warranties. Lessee warrants and
represents that Lessee has all requisite power and authority to enter into and
to deliver this Agreement.
7. Representations and Warranties. Lessor warrants and represents as
follows:
(a) Lessor is the lawful sublessor under each of the Leases.
(b) Lessor covenants and agrees that upon Lessee's payment and
performance of its obligations hereunder and under the Leases, Lessee
shall and may peaceably and quietly have, hold and enjoy each of the
Leased Premises for the term provided in Section 3.
(c) Lessor is not in default under any of the Leases and has no
knowledge of any breach or default or event which, with passage of time or
the giving of notice or both, would constitute a breach or default, by
Lessor under any of the Leases.
(d) All rents due under the Leases have been paid through the last
day of the calendar month immediately preceding the date hereof.
(e) Lessor has obtained all necessary consents required under the
Leases precedent to the effectiveness of the sublease by Lessor
contemplated by this Agreement.
(f) Lessor has all requisite power and authority to enter into and
to deliver this Agreement.
8. No Further or Subsequent Assignment. Neither Lessee nor its
permitted successors or assigns shall assign or sublet all or any part of the
Leases (other than the rental of rooms or beds, or subleases of commercial space
not in violation of the applicable Leases, in either case only in the ordinary
course of business) without the prior written consent of Lessor. Any attempt by
Lessee or its permitted successor or assigns to assign or
- 4 -
<PAGE> 38
sublet the Leases, or any of them, without such consent or consents shall be
void and of no effect and shall, at the option of Lessor, be an Event of Default
hereunder.
9. Prorations. All accounts payable accrued as of the date hereof,
including without limitation accounts payable in respect of contracts assumed by
Lessee and employee benefit obligations incurred by Lessor prior to the date
hereof (including but not limited to accrued bonuses, vacation, holiday or sick
pay), shall continue to be the responsibility of Lessor and Lessor shall pay all
such accounts and benefits to Lessee. Any accounts receivable accrued as of the
date hereof or arising out of the operation of the Leased Premises as of the
date hereof shall remain the property of Lessor, and Lessee shall pay all such
accounts to Lessor. Notwithstanding anything to the contrary herein contained,
Lessor shall indemnify Lessee for and hold Lessee harmless against civil
penalties levied by the State of Texas or the Health Care Financial
Administration with respect to any of the Leased Premises or any of the nursing
homes located thereon, whether or not assessed before or after the date hereof,
but in any event related to the operation of any such nursing home by Lessor
prior to the date hereof.
10. Reports. Lessee shall promptly deliver to Lessor, in the manner
hereinbelow provided, copies of all notices, reports, surveys and other
communications that Lessee is obligated to provide to any landlord under any of
the Leases. Lessee shall, within ten days of each calendar month-end, deliver to
Lessor, in the manner hereinbelow provided, detailed financial statements,
including a balance sheet and statement of income for each month and aggregate
statements on a fiscal quarter-to-date and annual basis.
11. Events of Default. Lessee shall be in default under this Agreement
upon the occurrence of any of the following (herein an "Event of Default"):
(a) Breach, default or noncompliance by Lessee with any covenant or
provision of any of the Leases, following the expiration of any applicable
notice and/or cure period therein; or
(b) Breach, default or noncompliance by Lessee with any covenant or
provision of this Agreement; or
(c) An Event of Default under and as defined in the Emory Sublease
following the expiration of any applicable notice and/or cure period
therein.
Upon an Event of Default, Lessor shall have the right to terminate this
Agreement with respect to either (A) the Lease giving rise to the default, or
(B) all of the Leases, in either case by written notice to Lessee in the manner
hereinbelow provided, and this Agreement shall immediately terminate with
respect to such Lease(s), and Lessor shall have the right to re-enter and
repossess the applicable Leased Premises and remove all administrative or
operational personnel therefrom and as otherwise permitted by applicable law.
Notwithstanding anything to the contrary contained in this Agreement, in
addition to and
- 5 -
<PAGE> 39
without in any way limiting any right or remedy herein contained, Lessor may
also avail itself of each and every right and remedy at law and in equity.
12. Indemnification. Lessee agrees to defend, pay, protect, indemnify,
save and hold harmless Lessor for, from and against any and all liabilities,
losses, damages, penalties, costs, expenses (including without limitation
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature whatsoever, howsoever caused, arising from or
relating to (a) any of the Leased Premises or the use, non-use, occupancy,
condition, design, construction, maintenance, repair or rebuilding of any of the
Leased Premises, and any injury to or death of any person or persons or any loss
of or damage to any property, real or personal, in any manner arising therefrom
connected therewith or occurring thereon, whether or not Lessor has or should
have knowledge or notice of the defect or conditions, if any, causing or
contributing to said injury, death, loss, damage or other claim, (b) any
violation by Lessee of any provision of this Agreement, of any contract or
agreement to which Lessee is a party, or any provisions of any of the Leases, or
(c) any other cause not resulting from the gross negligence or wilful misconduct
of Lessor or its officers, directors, employees or others in privity of contract
in connection with the Leased Premises or this Agreement. In case any proceeding
is brought against Lessor by reason of any such claim, Lessee covenants upon
notice from Lessor to resist or defend Lessor in such action, with the expenses
of such defense paid by Lessee, and Lessor will cooperate and assist in the
defense of such action or proceeding if reasonably requested so to do by Lessee.
The obligations of Lessee under this Section shall survive any termination of
this Agreement.
13. Copies of Leases. Lessee acknowledges that it has received and has
reviewed copies of the Leases described in the Recitals hereto.
14. Notices. All notices required or permitted to be given under this
Agreement shall be given (i) by certified or registered mail, return receipt
requested, postage fully prepaid, or (ii) by a nationally recognized overnight
delivery service, delivery cost prepaid, in either case addressed to the proper
party at the following address:
If to Lessor: BritWill Investors - II, Inc.
c/o Unison HealthCare Corporation
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
Attention: Jerry Walker, President & CEO
Telefacsimile: (602) 481-6479
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<PAGE> 1
Exhibit 10.119
MASTER LEASE AGREEMENT
Master Lease Agreement No. UHC1196 ("MASTER LEASE")
<TABLE>
<CAPTION>
<S> <C>
LESSOR: Pacific Financial Company Date of MASTER LEASE: November 25, 1996
a California General Partner
2900 Bristol Street LESSEE: Unison Healthcare Corporation
Suite D 106
Costa Mesa, CA 92626 a Delaware corporation ("LESSEE")
ADDRESS: 7272 Indian School Road
Suite 214
Scottsdale, AZ 85251
</TABLE>
WHEREAS, LESSOR desires to lease certain equipment to LESSEE; and
WHEREAS, LESSEE desires to lease certain equipment from LESSOR; and
WHEREAS, to facilitate the lease of the equipment, the parties agree to enter
into this MASTER LEASE and to incorporate by reference from time to time in
lease schedules which will be attached hereto and made a part hereof, various
units of equipment.
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the parties hereto agree as follows:
TERMS, CONDITIONS AND COVENANTS OF LEASE
1. LEASE: This MASTER LEASE sets forth the terms and conditions by which
LESSOR agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR
the equipment as listed and described in each lease schedule (hereafter
referred to as "Lease Schedule") executed from time to time pursuant to
this MASTER LEASE. Each Lease Schedule shall be separate and distinct for
all purposes and shall incorporate therein all the terms and conditions
of this MASTER LEASE. If there is a conflict between the Lease Schedule
and this MASTER LEASE, the terms and conditions of this MASTER LEASE
shall govern and control.
2. TERM:
a. The term of this MASTER LEASE shall be on the date of execution by
LESSOR and shall continue in effect thereafter until all of
LESSEE'S obligations and Liabilities under this MASTER LEASE and
every Lease Schedule have been fully performed or otherwise
discharged.
b. The lease term for each Lease Schedule shall commence on the
earlier of the equipment installation, first clinical use, or the
cutover date (hereafter referred to as the "Commencement Date"). If
any equipment under the Lease Schedule is not newly installed, the
Commencement Date shall be the date upon which title to the
equipment passes to LESSOR. The lease term shall continue for the
number of months set forth in the Lease Schedule (hereinafter
referred to as "Initial Term") and continue for any extended or
renewal term. The first payment date of the Initial Term shall be
the first day of the month immediately following the Commencement
Date (or beginning on the Commencement Date if that date is on the
first day of the month).
c. LESSEE shall deliver to LESSOR a Certificate of Acceptance within
five (5) days of the Commencement Date. If Lessee fails to deliver
the Certificate of Acceptance, LESSEE shall
<PAGE> 2
be deemed to have accepted the equipment as installed and
operational as of the Commencement Date unless LESSEE gives LESSOR
written notice of each defect within five (5) days of the
Commencement Date.
3. RENT AND PAYMENTS: LESSEE'S obligation to pay rent under each Lease
Schedule shall begin on the Commencement Date and continue for the term.
The monthly rent (hereinafter referred to as "Monthly Rent") set forth in
the Lease Schedule shall be due and payable in advance on the first day
of each calendar month during the Initial Term without notice or demand
notwithstanding the fact that LESSOR may, as a convenience only, invoice
LESSEE. If the Commencement Date of a Lease Schedule shall be other than
the first day of the month, LESSEE shall make a rental payment
(hereinafter referred to as "Interim Rent") equal to 1/30th of the
Monthly Rent set forth in the Lease Schedule for each day beginning with
the Commencement Date to and including the last day of the month prior to
the beginning of the Initial Term. Any amounts payable by LESSEE under
this MASTER LEASE other than the Monthly Rent and Interim Rent shall be
deemed to be additional rent (hereinafter referred to as "Additional
Rent") and shall be paid within twenty (20) days of invoicing by LESSOR.
Rent shall be paid to LESSOR at the address designated herein or at such
other place as LESSOR designates in writing, or if to an assignee of
LESSOR, at such place as such assignee shall designate in writing. As
used herein, the term "rent" shall mean all Monthly Rent, Interim Rent
and Additional Rent. THIS IS A NONCANCELABLE LEASE. LESSEE shall pay the
total rents for the entire term to LESSOR, or LESSOR'S assignee (as
defined herein), and such payment of rents shall be absolute and
unconditional without right to setoff, reduction, abatement,
counterclaim, recoupment, or defense of any kind whatsoever.
a. SERVICE CHARGE: In the event that any rent is not received by
LESSOR or LESSOR'S assignee within five (5) days of the due date
thereof, LESSEE shall pay a service charge of five percent (5%) of
the past due payment and shall pay interest at the rate of 1.5
percent (1.5%) per month or the maximum legal rate, whichever is
less, until all past due rents are received.
b. LEASE BASIS COST: The term "Lease Basis Cost" as defined herein
means the cost of acquiring, delivering and installing the
equipment including but not Limited to all parts, materials, labor,
services, transportation, taxes, and all other charges of every
kind and nature associated therewith.
c. NON-PERFORMANCE: If LESSEE fails to perform any of its covenants,
warranties, terms or conditions herein, LESSOR may, at its option,
perform on LESSEE'S behalf and all monies advanced by LESSOR shall
be repayable by LESSEE as Additional Rent. However, in no event
shall LESSOR'S performance on behalf of LESSEE be deemed to relieve
LESSEE of its obligations hereunder.
4. LEGAL TITLE, LIENS, TAXES AND QUIET ENJOYMENT: During the term of this
MASTER LEASE, legal title to all equipment shall at all times vest in
LESSOR. LESSEE'S interest in the equipment shall be limited to its
possession and use and LESSEE shall not have or assert any right, title
or interest therein, except as expressly set forth herein, and shall
protect, indemnify and defend, at its expense, LESSOR'S legal title.
LESSEE shall, at its expense, keep the equipment free and clear of any
lien or encumbrance of any kind whatsoever except that of LESSOR arising
hereunder. LESSEE warrants that the equipment will at all times remain
personal property, regardless of how it may be affixed to any real
property. Prior to LESSOR'S acceptance of this MASTER LEASE, LESSEE shall
provide LESSOR with a waiver, in form satisfactory to LESSOR, by the
landlord or mortgagee of the premises in which the equipment is located,
of such landlord's or mortgagee's rights in and to the equipment and/or
the rent due under this MASTER LEASE. In lieu of such waiver, LESSEE
hereby agrees to hold LESSOR harmless and indemnify LESSOR with regard to
any and all claims, actions, damages, costs and attorneys fees asserted
by any landlord or mortgagee against LESSOR or the equipment herein.
LESSEE shall pay all taxes,
<PAGE> 3
assessments or fees assessed against the equipment or payable by LESSOR
or LESSEE with respect to the equipment including any interest or
penalties therein excepting only federal or state taxes based on the net
income of LESSOR and without regard to LESSOR'S agreement to invoice
LESSEE for such amounts. LESSEE agrees to the extent permissible by law,
to prepare and file all required tax returns and other reports (other
than reports regarding LESSOR'S income tax) with any federal, state or
other regulatory authority. To the extent LESSEE is not permitted to file
such returns or reports, LESSEE shall prepare them and provide them to
LESSOR for filing prior to the date such return or report is due. LESSOR
shall have the right to affix a stencil, plate, label or other indicia of
its ownership to the equipment and LESSEE shall not remove or conceal
such identification. LESSEE shall have the right to quiet enjoyment of
the equipment during the term of the Lease Schedule, so long as no event
of default (as herein defined) occurs.
5. LOCATION, USE, MODIFICATIONS AND ALTERATIONS: LESSEE shall not move, or
permit the movement of, the equipment from the location (hereinafter
referred to as "Equipment Location") specified in the Lease Schedule
without LESSOR'S prior written consent. LESSEE shall not use, or permit
the use of, the equipment unless such use is consistent with LESSEE'S
business, by qualified operators under LESSEE'S control and in compliance
with (A) applicable laws and regulations; (B) the specifications of, and
use contemplated by, the manufacturer of the equipment (hereinafter
referred to as "Manufacturer"); (C) the terms of LESSEE'S insurance
coverage and (D) the requirements of LESSEE'S maintenance agreement
regarding the equipment. LESSEE shall not make any modifications,
alterations or additions to the equipment without LESSOR'S prior written
consent (other than manufacturer's changes, as such term is hereinafter
defined) unless said additions (A) are readily removable without causing
any damage to the equipment and (B) do not impair the quality, safety,
function or marketability of the equipment (hereinafter referred to as a
"Permitted Modification"). Any Permitted Modification shall not become
the property of LESSOR and shall not be subject to the Lease Schedule,
provided that upon termination or expiration of the term, LESSEE shall
remove all Permitted Modifications and restore the equipment to its
original condition (ordinary wear and tear excepted), all at no expense
to LESSOR. LESSEE shall permit the Manufacturer, its agents or its
contractors, access to the equipment for the purpose of performing such
upgrades, recall orders or engineering changes as the Manufacturer shall
require to enhance or maintain the equipment's standard of performance
(herein defined as "Manufacturer's Changes), all of which shall
immediately become the property of LESSOR and be subject to the Lease
Schedule.
6. MAINTENANCE AND INSPECTION: THIS IS A NET LEASE. LESSEE shall, at its own
expense, maintain the equipment in good condition and repair and furnish
all necessary repairs, parts, materials and supplies. At all times
herein, LESSEE shall keep in full force and effect a maintenance
agreement with the Manufacturer or, with LESSOR'S consent, with an
equivalent service organization that routinely maintains such equipment
(hereinafter referred to as "Equivalent Service Organization"). During
reasonable business hours and subject to LESSEE'S reasonable security
precautions, LESSEE shall permit LESSOR access to all of the equipment
for the purpose of inspecting the equipment to determine LESSEE'S
compliance with this MASTER LEASE. If LESSEE is not in compliance with
this MASTER LEASE, LESSOR shall notify LESSEE in writing of the acts of
noncompliance. LESSEE shall immediately take steps to rectify said
noncompliance and notify Lessor upon its re-compliance with this MASTER
LEASE.
7. DISCLAIMER OF WARRANTIES: LESSEE has selected at its own risk the
Manufacturer, size and design of the equipment in accordance with the
terms and conditions of the purchase order which LESSEE has issued, or
induced LESSOR to issue. LESSEE acknowledges that LESSOR is not the
Manufacturer, or its agent or distributor, and that LESSOR MAKES NO
REPRESENTATIONS OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO REPRESENTATIONS OR WARRANTIES WITH RESPECT
TO THE MERCHANTABILITY, VALUE, CONDITION, QUALITY, PURPOSE OR USE BY
LESSEE, OR PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT. LESSOR SHALL NOT
BE LIABLE FOR LOSSES OR DAMAGES
<PAGE> 4
THEREFROM, INCLUDING BUT NOT LIMITED TO LOSS OF BUSINESS, OR ACTUAL OR
ANTICIPATED PROFITS, OR OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
OF ANY KIND WHATSOEVER ARISING FROM THIS MASTER LEASE OR THE EQUIPMENT.
So long as no event of default (as herein defined) has occurred and
continues uncured, LESSOR assigns LESSEE all of Manufacturer's warranties
and indemnifications, to the extent said warranties and indemnifications
are assignable.
8. RISK OF LOSS: LESSEE hereby assumes and shall bear the entire risk of
changes to, loss, theft, damage, destruction or seizure (hereinafter
referred to as "Event of Loss") of the equipment from every cause
whatsoever. No Event of Loss shall relieve LESSEE of its obligations to
pay rent or to perform any other obligation under this MASTER LEASE. If
any of the equipment is damaged and repairable, LESSEE shall promptly
notify LESSOR of the occurrence of the Event of Loss and shall, at
LESSEE'S expense within thirty (30) days of such Event of Loss, cause
repairs to be made to the equipment to restore it to the condition
required pursuant to Section 6 herein. If the equipment is damaged beyond
repair, LESSEE shall promptly notify LESSOR of the occurrence of the
Event of Loss and shall, at LESSEE'S expense within thirty (30) days of
the Event of Loss: (A) replace the equipment with like equipment in good
repair and order or (B) pay to LESSOR in cash the following: (1) the
greater of (a) ten percent (10%) of the Lease Basis Cost or (b) the
actual fair market value of the equipment calculated as of the date of
the Event of Loss; and (2) all amounts which have accrued and have not
been paid by LESSEE to LESSOR under this MASTER LEASE through the date of
the Event of Loss; and (3) the present value of the unpaid rent
discounted at a rate of five percent (5%) for the remainder of the
Initial Term for each Lease Schedule covering the affected equipment (the
total amount described in (1), (2), and (3) above is hereinafter
collectively referred to as "Casualty Value").
9. INSURANCE: LESSEE shall provide and maintain, at its sole cost and
expense: (1) all risk property insurance on the equipment for its full
replacement value in an amount no less than the Casualty Value, and (2)
comprehensive public liability and property damage insurance on the
equipment in amounts not less than $1,000,000.00 per occurrence and
$3,000,000.00 in the aggregate, with an insurer reasonably acceptable to
LESSOR considering the risks to be insured. LESSEE shall provide LESSOR
or its assigns (in a form acceptable to LESSOR) with certificates of
insurance and a loss payable endorsement in favor of LESSOR and its
assigns, as loss payee for property damage coverage and as additional
insured for public liability coverage. If specifically requested in
writing by LESSOR, LESSEE shall provide a copy of the insurance policy
under which the certificates are issued. The insurance endorsement shall
provide that the coverage shall not be materially altered or canceled
unless thirty (30) days prior written notice has been given to LESSOR and
its assigns, and that the coverage afforded to LESSOR and its assigns,
shall not be rescinded, impaired or invalidated by any act or omission of
LESSEE. LESSOR may apply proceeds of any such insurance to any of
LESSEE'S obligations hereunder, but shall pay excess proceeds, if any, to
LESSEE upon LESSEE'S full satisfaction of its obligations hereunder.
10. GENERAL INDEMNIFICATION: Except for liability arising from the gross
negligence or willful misconduct of LESSOR, its employees or agents,
LESSEE hereby agrees to indemnify, defend, protect and hold LESSOR, its
agents, employees, directors and assigns harmless from and against any
and all claims, losses, damages, injuries, suits, demands or expenses,
including but not limited to attorneys' fees and costs of whatever kind
and nature, arising in connection with the equipment including without
limitation its selection, purchase, installation, use, deinstallation,
delivery, return or manufacture (including without limitation patent
trademark or other infringement). LESSEE shall promptly notify LESSOR or
its assigns of any matter hereby indemnified against.
11. RETURN OF EQUIPMENT: Upon the expiration of any Lease Schedule or
termination for any other cause, LESSEE at is sole cost and expense,
shall assemble, crate, insure and deliver all of the equipment and all of
the service records relating thereto, subject to the Lease Schedule, to
LESSOR in the same good condition and repair as when received, ordinary
wear and tear excepted, to such reasonable destination within the
continental United States as LESSOR shall designate.
<PAGE> 5
LESSEE shall immediately prior to the return of each unit of equipment,
provide LESSOR a letter from the Manufacturer certifying that each unit
of equipment is in good working order, ordinary wear and tear excepted,
and is eligible for a maintenance agreement by the Manufacturer or
Equivalent Service Organization. LESSEE shall provide LESSOR with at
least one hundred twenty (120) days written notice of the return of the
equipment. Notwithstanding any other rights and remedies of LESSOR, if
LESSEE falls to return the equipment to LESSOR or its designee within ten
(10) days of the time required, then until such time as the equipment is
returned, LESSEE shall pay on demand as liquidated damages, not as a
penalty, and at LESSOR'S election, an amount equal to (A) twelve (12)
months rent; or (B) one hundred twenty percent (120%) of the Monthly Rent
for each month or portion thereof until the equipment is returned to
LESSOR as detailed herein.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES: LESSEE represents and warrants
to LESSOR with regard to this MASTER LEASE and each Lease Schedule to be
appended hereto that:
a. The execution, delivery and performance of this MASTER LEASE and
any Lease Schedule have been duly authorized by all necessary
action on the part of LESSEE and this MASTER LEASE constitutes a
valid and binding obligation of LESSEE enforceable against LESSEE
in accordance with its terms;
b. The individual executing this MASTER LEASE on behalf of LESSEE is
duly authorized;
c. Neither the execution or delivery by LESSEE of this MASTER LEASE,
nor the performance thereof by LESSEE, conflicts with, results in a
breach of or constitutes a default or violation of LESSEE'S
Certificate of Incorporation, By-Laws, applicable law, court order
or any agreement or other instrument to which LESSEE is a party or
by which it is bound;
d. LESSEE is duly organized and in good standing in its state of
incorporation, is duly qualified to do business in each
jurisdiction where the equipment is located and where such
qualification is required;
e. Upon request by LESSOR, LESSEE shall furnish its most recent
audited annual financial statements prepared in accordance with
generally accepted accounting principles;
f. LESSEE shall provide to LESSOR any other documents reasonably
requested to consummate this transaction or any Lease Schedule or
as reasonably required under this MASTER LEASE;
g. No approval, consent or authorization is required from any
governmental authority with respect to the execution, delivery or
performance of this MASTER LEASE, or if any such approval, consent
or authorization is required, it has been obtained.
13. EVENT OF DEFAULT: The occurrence of any of the following events shall
constitute an event of default by LESSEE or its guarantor (hereinafter
referred to as an "Event of Default"):
a. Failure to pay when due any installment of rent or other sum due
hereunder, and such failure shall continue for more than five (5)
days after notice thereof; or
b. Failure to perform any other term or condition, covenant,
representation or warranty of this MASTER LEASE or any Lease
Schedule, and such failure continues for a period of twenty (20)
days after notice thereof; or
c. If LESSEE or its guarantor ceases doing business as a going
concern, becomes insolvent, admits in writing its inability to pay
its debts as they become due, makes an assignment for the benefit
of its creditors, files a voluntary petition or answer seeking any
reorganization,
<PAGE> 6
arrangement, composition, readjustment liquidation, dissolution or
similar relief under any present or future federal or state
statute, law or regulation, admits, consents to or acquiesces in
the appointment of a receiver or trustee of any of its property,
the commission of any act of dissolution, liquidation or the
bankruptcy or death of the LESSEE'S guarantor in the event that the
guarantor is a natural person; or
d. Failure within sixty (60) days after the commencement of any
proceeding against LESSEE or its guarantor seeking any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution, bankruptcy or similar relief under any
current or future federal or state statute, law or regulation to
obtain the dismissal of such proceeding; or
e. If any warranty, covenant or representation made by LESSEE to
LESSOR is false, incorrect or untrue in any material respect; or if
any equipment subject to a Lease Schedule is attached, levied upon,
encumbered, pledged or seized; or LESSEE defaults under any other
agreement with LESSOR; or defaults under any other material lease,
loan or agreement for the borrowing of money; or
f. There is a material adverse change in the financial condition of
LESSEE or its guarantor.
14. REMEDIES: At any time after an Event of Default, LESSOR shall have the
right to exercise any one or more of the following cumulative remedies:
a. Accelerate without notice to LESSEE all of LESSEE'S obligations
hereunder and to sue for and recover all rents and other amounts
which have accrued or shall accrue under this MASTER LEASE, all of
which shall become immediately due and payable upon demand by
LESSOR;
b. Require that LESSEE assemble the equipment and deliver it to LESSOR
as provided under Section 11 or enter the premises where any
equipment is located without notice or process of law and take
possession of the equipment without incurring any liability to
LESSEE or any other party for any damages arising from such taking
of possession;
c. Sell any or all of the equipment at public or private sale or relet
same;
d. Terminate this MASTER LEASE or any Lease Schedule as to any or all
of the equipment;
e. At law or in equity, enforce any of LESSOR'S rights or pursue any
other remedy now or hereafter arising. LESSOR'S remedies hereunder
are cumulative in nature, not exclusive, and the exercise of any
particular remedy shall not be construed to be an election of
remedies by LESSOR nor shall any waiver or delay by LESSOR of any
of its rights or remedies under this MASTER LEASE be construed as a
waiver of LESSOR'S rights to enforce that, or any other, right or
remedy in the future. Notwithstanding LESSOR'S election of
remedies, LESSEE shall remain liable for the present value of all
rents discounted at a rate of five percent (5%) and other amounts
which have accrued or would have accrued during the Initial Term,
in addition to (A) all of LESSOR'S costs and expenses incurred in
enforcing its rights hereunder, or in taking of possession,
storing, repairing, selling or reletting the equipment, (B) court
costs and reasonable attorneys' fees, and (C) an amount equal to
the greater of (1) ten percent (10%) of the Lease Basis Cost or (2)
the fair market value calculated as of the date of such Event of
Default, less (D) the net proceeds of a public or private sale or
reletting, if any, of the equipment, at the present value, if
necessary, discounted at a rate of five percent (5%) and (E) any
insurance proceeds recovered by LESSOR from insurance coverage
provided by LESSEE. However, in no event shall LESSOR'S exercise of
more than one of its remedies entitle LESSOR to recover from LESSEE
an amount in excess of that referred to in this section.
<PAGE> 7
15. ASSIGNMENT AND SUBLEASE:
a. LESSORS ASSIGNMENT: LESSEE understands and acknowledges that LESSOR
has entered into this MASTER LEASE and shall enter into each Lease
Schedule in anticipation of assigning, mortgaging, or otherwise
transferring its rights and interests thereunder and/or in the
equipment (but not its obligations) to others (hereinafter referred
to as "Assignees") without notice to or the consent of LESSEE.
Accordingly, LESSOR and LESSEE agree that:
(1) LESSEE will, after due notice, acknowledge in writing such notice
of assignment as reasonably requested by LESSOR or its Assignee,
and pay directly to the designated Assignee the amounts which
become due under each assigned Lease Schedule and such payment
shall be absolute and unconditional, without reduction, abatement,
offset or counterclaim of any kind. Notwithstanding the foregoing,
LESSEE reserves its rights to have recourse directly against LESSOR
on account of any claim it may have against LESSOR.
(2) Any Assignee may reassign its rights and interests hereunder with
the same effect as the original assignment.
(3) LESSEE agrees to execute all filings pursuant to the Uniform
Commercial Code as well as any other documents reasonably requested
by LESSOR or its Assignee. Any Assignee shall not be liable to
LESSEE for any obligations of LESSOR hereunder.
b. LESSEE'S ASSIGNMENT AND SUBLEASE: Without LESSOR'S prior written
consent, LESSEE shall not: (A) assign any of its obligations
hereunder, (B) attempt to sublease the equipment or (C) attempt to
sell, transfer, hypothecate, dispose of, lend or abandon the
equipment or any of LESSEE'S rights in it. However, LESSEE may at
its expense, sublease its rights in the equipment to a wholly-owned
subsidiary or affiliate upon thirty (30) days prior written notice
to LESSOR, provided that: (A) such sublease shall not relieve
LESSEE of any of its obligations to LESSOR hereunder, and (B) such
sublease shall be expressly subject and subordinate to the terms of
this MASTER LEASE, and (C) LESSEE and sublessee agree to take such
reasonable steps as LESSOR may request to protect the title of
LESSOR or its Assignee in and to the equipment LESSEE shall pay to
LESSOR the costs and expense of accomplishing any assignment or
sublease.
16. CHOICE OF LAW AND FORUM: This MASTER LEASE and the provisions contained
herein shall be deemed to have been executed at LESSOR'S principal place
of business in Costa Mesa, California and shall be governed in all
respects by the laws of the State of California. LESSOR and LESSEE on
behalf of themselves and their assignees further agree that courts
located in the State of California shall have jurisdiction over any
matters arising out of this MASTER LEASE and hereby submit themselves to
the personal jurisdiction of the California courts.
17. NOTICES: All notices or demands provided for herein shall be in writing
and shall be deemed given when delivered or deposited in the United
States mail, first class, postage prepaid, addressed to the parties at
their respective addresses set forth above, or at such other address as
may be provided from time to time.
18. SURVIVAL OF OBLIGATIONS: All the terms and conditions, representations,
covenants, warranties and agreements contained in this MASTER LEASE and
in any Lease Schedule or in any document in connection herewith shall
specifically survive the expiration or termination of this MASTER LEASE.
19. SEVERABILITY: To the extent any provision of this MASTER LEASE or any
Lease Schedule is deemed partially or wholly invalid or unenforceable
under applicable law, such provision shall be effective to the extent
valid and enforceable, and all other provisions shall remain in full
force and effect.
<PAGE> 8
20. LESSOR'S CONSENT: When LESSOR'S consent is required by the terms of this
MASTER LEASE, such consent shall not be unreasonably withheld.
21. LEASE SCHEDULE REAFFIRMATION: The execution by LESSOR and LESSEE of each
Lease Schedule shall constitute a reaffirmation by LESSEE of its
covenants, representations and warranties herein and that the same are
true, correct and complete with respect to the Lease Schedule as of the
date of execution of each Lease Schedule.
22. HEADINGS: All section headings of this MASTER LEASE are for convenience
only, and shall not in any way limit or affect the meaning or scope of
this MASTER LEASE or its provisions.
23. NO WAIVER: No delay, omission or failure to act by LESSOR at any time to
exercise or enforce any right or remedy herein provided shall be a waiver
of any such right or remedy to which LESSOR is entitled, nor shall it in
any way affect the right of LESSOR to enforce such provisions thereafter.
24. ENTIRE AGREEMENT: This MASTER LEASE constitutes the entire agreement of
the parties hereto and no other written or oral representations or
warranties shall be binding upon the parties hereto. NO AGENT OR EMPLOYEE
OF THE MANUFACTURER OR SELLER OF THE EQUIPMENT IS AUTHORIZED TO BIND
LESSOR TO THIS MASTER LEASE OR ANY OTHER AGREEMENT OR TO WAIVE OR MODIFY
ANY OF THE PROVISIONS HEREOF. Any modification or waiver of any of the
provisions herein shall be effective only if in writing and executed by
all of the parties hereto, provided however that LESSOR may add
applicable equipment serial or identification numbers to Lease Schedules
and financing statements.
25. SUCCESSOR: This MASTER LEASE and each Lease Schedule shall be binding
upon and shall inure to the benefit of LESSOR, LESSEE and their
respective successors, legal representatives and assigns.
26. ADDITIONAL FILINGS: In the event that LESSEE fails or refuses to execute
and/or file Uniform Commercial Code financing statements or other
instruments or recordings which LESSOR or its Assignee reasonably deems
necessary to perfect, or maintain perfection of, LESSOR'S or its
Assignee's interests hereunder, LESSEE hereby appoints LESSOR or its
Assignee as LESSEE'S limited attorney-in-fact to execute and record all
documents reasonably necessary to perfect or maintain the perfection of
LESSOR'S interest hereunder. LESSEE shall pay LESSOR or its Assignee for
any costs and fees relating to the filings including, but not limited to,
costs, fees, searches, document preparation, documentary stamps,
privilege taxes and reasonable attorneys' fees.
27. MULTIPLE LESSEES: If more than one LESSEE is named within this MASTER
LEASE, the liability of each shall be joint and several.
28. LEASE ACCEPTANCE: At no time shall this MASTER LEASE or any Lease
Schedule be deemed to constitute an offer binding upon LESSOR until it is
accepted by execution of LESSOR at its corporate office in Costa Mesa,
California.
<PAGE> 9
LESSOR: LESSEE:
PACIFIC FINANCIAL COMPANY UNISON HEALTHCARE CORPORATION
By: /s/ Anthony K. Ellsworth By: /s/ Jerome L. Joseph
Name (Printed):Anthony K. Ellsworth Name (Printed): Jerome L. Joseph
Title: President Title: VP & Treasurer
Date: Nov. 25, 1996 Date: 11/25/96
<PAGE> 10
LEASE SCHEDULE
LEASE SCHEDULE NUMBER 1 TO MASTER LEASE AGREEMENT NUMBER UHC1196
This Lease Schedule incorporates the terms and conditions of Master Lease
Agreement No. UHC1196 dated as of the 25th day of November, 1996 (the "Master
Lease") by and between Pacific Financial Company ("Lessor") and Unison
Healthcare Corporation ("Lessee")
THIS IS A NON CANCELABLE LEASE SCHEDULE
1. INITIAL TERM: Sixty (60) months commencing with the first day of
the month immediately following the Commencement Date (or beginning
with the Commencement Date if that date is the first day of the
month). Notwithstanding anything to the contrary contained in the
Master Lease Agreement or this Lease Schedule, if Lessee elects to
terminate this Lease Schedule prior to the expiration of the
Initial Term, said early termination will be calculated by
discounting the remaining rental payments at seven percent (7.00%).
If early termination occurs after the fourth year, Lessee agrees to
pay an additional one percent (1.00%) penalty.
2. RENTAL PAYMENTS: $ 21,181.34 per month, plus any and all applicable
taxes, for the first 60 months.
Advance Payments receivable by Lessor as of the Commencement Date:
first, only.
3. EQUIPMENT: (See Equipment Schedule attached hereto and made a part
hereof)
4. COMMENCEMENT DATE: November 25, 1996, as evidenced by the
Certificate of Acceptance, issued in respect to this Lease
Schedule.
5. END OF LEASE OPTIONS: Buyer hereby irrevocably agrees to purchase
the Equipment upon the expiration of the Lease at a price of $1.00
("Purchase Price") plus any applicable taxes, late charges, filing,
documentation costs and any unpaid amounts due under the Lease. In
the event the Lease is terminated in accordance with its terms,
Buyer hereby agrees to pay to Lessor the Purchase Price in addition
to all other amounts payable to Lessor as a result of said
termination. A demand for purchase of the Equipment may be made by
Lessor or its successors and assigns at any time after the
expiration of the Lease in which event, the effective date for
purchase of the Equipment shall be the first (1st) day of the month
after such demand or such other date as may be mutually agreed upon
between Lessor or its successors and assigns and buyer. THE
EQUIPMENT SHALL BE SOLD TO BUYER AND POSSESSION MADE AVAILABLE TO
BUYER "AS-IS WHERE IS": IT BEING EXPRESSLY UNDERSTOOD THAT LESSOR
AND ITS SUCCESSORS AND ASSIGNS MAKE NO REPRESENTATION OF WARRANTY
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF
FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR PATENT
INFRINGEMENT. NOTWITHSTANDING THE FOREGOING, LESSOR OR ITS
SUCCESSORS AND ASSIGNS REPRESENT AND WARRANT THAT IT OR THEY HAVE
GOOD AND MERCHANTABLE TITLE TO THE EQUIPMENT AND CAN CONVEY SAME TO
BUYER, FREE AND CLEAR OF ANY SUPERIOR LIEN OR INCUMBRANCE. BUYER IS
LIABLE FOR ANY TAXES PAYABLE AS A RESULT OF THIS SALE OF EQUIPMENT.
As a precautionary measure and not as an admission of either pam/
as to whether the Lease is a lease or security agreement and as
Security for the obligations contained in said Master Lease and
Lease Schedules, now existing or hereafter arising, under the same,
Lessee hereby presently conveys, warrants, mortgages, assigns,
pledges, and grants to Lessor, its successors and assigns, a first
and prior security interest in said Master Lease and Lease
Schedules, and to the Equipment, and all additions, upgrades,
attachments, accessories, replacements, improvements, and
substitutions thereto, now or hereafter acquired,
<PAGE> 11
together with all rents, issues, income, profits, and proceeds
thereof, including insurance proceeds.
6. ENTIRE AGREEMENT: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED,
RETAINED A COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND
AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS. LESSOR AND LESSEE
AGREE THAT THIS LEASE SCHEDULE, THE MASTER LEASE AND ALL RIDERS
THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT AND SUPERSEDE ALL
PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER
COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY
UNIT OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN Costa Mesa, California.
Accepted on November 25, 1996 at Costa Mesa, California
Pacific Financial Company (Lessor) Unison Healthcare Corporation
By PFR Management, Inc., General Partner (Lessee)
By: /s/ Anthony K. Ellsworth By:/s/ Jerome L. Joseph
Name (Printed): Anthony K. Ellsworth Name (Printed): Jerome L. Joseph
Title: President Title: VP & Treasurer
Date: 11/25/96
<PAGE> 12
EQUIPMENT SCHEDULE
TO
LEASE SCHEDULE NUMBER 1
TO
MASTER LEASE AGREEMENT NUMBER UHC1196
EQUIPMENT LOCATIONS
Unison Healthcare Corporation Unison Healthcare Corporation
7272 Indian School Road 4141 North Scottsdale Road
Suites 107 and 214 Suite 304
Scottsdale, Arizona 85251 Scottsdale, Arizona 85251
VENDOR: Scottsdale Business Systems, Lac.
7745 East Redfield Road 9200
Scottsdale, AZ 85260
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
3 BP SNM Module-ADV STK;
5 BP Jet Direct Printer
8 Multi-Tech V.34 Modem Card
1 Multi-Tech Rack Mount Card Cage
2 Multi-Tech Card Cage Power Supply-AC
120 120 System Engineer (MCNE) - Integration/Installation
5 HP Advance Stack- I OOVG HUB
12 HP Selectable 10/100 VG-6 Pack NIC
1 Novell NetWare 4.11 (100) User
65 Level Two Pentium 133 Systems, Three Year Warranty;
Mitromics 5/100200THRBRD/P 133/CA-PFAN/16MB RAM; @-Tower
Case 200 Watt P.S./1.44MB FD/CARDEX PCI Video; 1MB
Card/Seagate Me@ 1.2GB HD/MS Mouse/ACER I-CB; Windows95
SW/15" GVC Color Monitor/TIOOOTape BU DRV. (5)TR-1
Tapes/Microcom Deskporte 28.8 Fax Modem/Serial & Parallel
Cables Shipping Carton/APC 45OBK LTPS/SBSI; Custom
Configuration, Warehouse & Tracking; HP Laser Jet Printer.
1 HP Netserver LXS PRO w/ Array-Dual Pro
8 HP 4.2GB BD-Hot Swapable SCSI Drives-LX
12 ]HP 64NM S@-LX Specific
2 B:P-LX RackMount
2 HP-19" Cabinet Shelf
1 HP 2 Meter Cabinet
2 HP-Powerwise 2100
1 HP 4 Port Console Switch
2 7' Console Cable Kits
2 HP Surestor 12000E Data Auto Load
4 HP Surestor Magazine w/Tapes
1 Arcada/Seagate Backup Exec-Enterprise
2 Arcada/Seagate Advance Auto
1 HP Router FR 1-WAN/1ENET OPTV.35 Sync CBL
TOTAL SCOTTSDALE BUS. SYSTEMS $418,237.53
<PAGE> 13
VENDOR: Hyperion Software
900 Long Ridge Road
Stamford, CT 06902
DESCRIPTION OF EQUIPMENT
------------------------
(1/2) of the Accounting Software; General Ledger-Version 2.5
including; Graphical Report Writer, Financial Statements,
Hyperion Analyst for Ad Hoc Reporting; Accounts
Payable-Version 2.5; Maintenance Support; Project
Management; Training, Consulting and Database Set-Up
TOTAL HYPERION SOFTWARE $292,992.00
VENDOR: Marktech Systems, Inc.
7500 Flying Cloud Drive, Suite 100
Eden Prairie, MN 55344
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
17 MDS/Clinical Software Application Package;
17 Project Management, Training & Installation; I390
Software/4790*33MDS Network
TOTAL MARKTECH SYSTEMS $101,660.00
VENDOR: CTR Systems, Eac.
553 Keystone Drive
Warrendale, PA 15086
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
Project Management, Installation, Training; Hardware &
Software; Kronos Time & Attendance Systems 460F, TKC
500V8R5485 Comm Ed, etcetra; On-site Professional Services;
Travel Expenses 25 x $1,300.00 6 Full Sets of Hardware &
Software; Annual Maintenance
TOTAL CTR SYSTEMS 130,180.00
TOTAL EQUIPMENT COST $943,069.53
Lessee hereby authorizes Lessor to amend the applicable Uniform Commercial Code
Financing Statement to include serial numbers for the Equipment as they become
available.
<PAGE> 14
LEASE SCHEDULE
LEASE SCHEDULE NUMBER 2 TO MASTER LEASE AGREEMENT NUMBER UHC1196
This Lease Schedule incorporates the terms and conditions of Master Lease
Agreement No. UHC1196 dated as of the 25th day of November, 1996 (the "Master
Lease") by and between Pacific Financial Company ("Lessor") and Unison
Healthcare Corporation ("Lessee").
THIS IS A NON CANCELABLE LEASE SCHEDULE
1. INITIAL TERM: Sixty (60) months commencing with the first day of
the month immediately following the Commencement Date (or beginning
with the Commencement Date if that date is the first day of the
month). Notwithstanding anything to the contrary contained in the
Master Lease Agreement or this Lease Schedule, if Lessee elects to
terminate this Lease Schedule prior to the expiration of the
Initial Term, said early termination will be calculated by
discounting the remaining rental payments at seven percent (7.00%).
If early termination occurs after the fourth year, Lessee agrees to
pay an additional one percent (1.00%) penalty.
2. RENTAL PAYMENTS: $ 19,396.54 per month, plus any and all applicable
taxes, for the first 60 months.
Advance Payments receivable by Lessor as of the Commencement Date:
first, only.
3. EQUIPMENT: (See Equipment Schedule attached hereto and made a part
hereof)
4. COMMENCEMENT DATE: November 25, 1996, as evidenced by the
Certificate of Acceptance, issued in respect to this Lease
Schedule.
5. END OF LEASE OPTIONS: Buyer hereby irrevocably agrees to purchase
the Equipment upon the expiration of the Lease at a price of $1.00
("Purchase Price") plus any applicable taxes, late charges, filing,
documentation costs and any unpaid amounts due under the Lease. In
the event the Lease is terminated in accordance with its terms,
Buyer hereby agrees to pay to Lessor the Purchase Price in addition
to all other amounts payable to Lessor as a result of said
termination. A demand for purchase of the Equipment may be made by
Lessor or its successors and assigns at any time after the
expiration of the Lease in which event, the effective date for
purchase of the Equipment shall be the first (1st) day of the month
after such demand or such other date as may be mutually agreed upon
between Lessor or its successors and assigns and buyer. THE
EQUIPMENT SHALL BE SOLD TO BUYER AND POSSESSION MADE AVAILABLE TO
BUYER "AS-IS WHERE IS": IT BEING EXPRESSLY UNDERSTOOD THAT LESSOR
AND ITS SUCCESSORS AND ASSIGNS MAKE NO REPRESENTATION OF WARRANTY
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF
FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR PATENT
INFRINGEMENT. NOTWITHSTANDING THE FOREGOING, LESSOR OR ITS
SUCCESSORS AND ASSIGNS REPRESENT AND WARRANT THAT IT OR THEY HAVE
GOOD AND MERCHANTABLE TITLE TO THE EQUIPMENT AND CAN CONVEY SAME TO
BUYER, FREE AND CLEAR OF ANY SUPERIOR LIEN OR INCUMBRANCE. BUYER IS
LIABLE FOR ANY TAXES PAYABLE AS A RESULT OF THIS SALE OF EQUIPMENT.
As a precautionary measure and not as an admission of either pam/
as to whether the Lease is a lease or security agreement and as
Security for the obligations contained in said Master Lease and
Lease Schedules, now existing or hereafter arising, under the same,
Lessee hereby presently conveys, warrants, mortgages, assigns,
pledges, and grants to Lessor, its successors and assigns, a first
and prior security interest in said Master Lease and Lease
Schedules, and to the Equipment, and all additions, upgrades,
attachments,
<PAGE> 15
accessories, replacements, improvements, and substitutions thereto,
now or hereafter acquired, together with all rents, issues, income,
profits, and proceeds thereof, including insurance proceeds.
6. ENTIRE AGREEMENT: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED,
RETAINED A COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND
AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS. LESSOR AND LESSEE
AGREE THAT THIS LEASE SCHEDULE, THE MASTER LEASE AND ALL RIDERS
THERETO SHALL CONSTITUTE THE ENTIRE AGREEMENT AND SUPERSEDE ALL
PROPOSALS, ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER
COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY
UNIT OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN Costa Mesa, California.
Accepted on November 25, 1996 at Costa Mesa, California
Pacific Financial Company (Lessor) Unison Healthcare Corporation
By PFR Management, Inc., General Partner (Lessee)
By: /s/ Anthony K. Ellsworth By: Jerome L. Joseph
Name (Printed): Anthony K. Ellsworth Name (Printed): Jerome L. Joseph
Title: President Title: VP & Treasurer
Date: 11/25/96
<PAGE> 16
EQUIPMENT SCHEDULE
TO
LEASE SCHEDULE NUMBER 1
TO
MASTER LEASE AGREEMENT NUMBER UHC1196
EQUIPMENT LOCATIONS
Unison Healthcare Corporation Unison Healthcare Corporation
7272 Indian School Road 4141 North Scottsdale Road
Suites 107 and 214 Suite 304
Scottsdale, Arizona 85251 Scottsdale, Arizona 85251
VENDOR: Scottsdale Business Systems, Lac.
7745 East Redfield Road 9200
Scottsdale, AZ 85260
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
3 HP SNM Module-ADV STK;
5 HP Jet Direct Printer
8 Multi-Tech V.34 Modem Card
120 System Engineer (MCNE) - Integration/-Installation
5 HP Advance Stack- 100VG HUB
12 HP Selectable 10/100 VG-6 Pack NIC
1 Novell NetWare 4.11 (100) User
50 Level Two Pentium 133 Systems, Three Year Warranty;
Mitronics 5/100200THRBRD/P 133/CAPFAN/16MB RAM; Mini-Tower
Case 200 Watt P.S./I.44MB FD/CARDEX PCI Video; 1MB
Card/Seagate Medlist 1.2GB HD/MS Mouse/ACER KB; Windows95
SW/15"GVC Color Monitor/T1OOO Tape BU DRV. (5)TR-1
Tapes/Microcom Deskporte 28.8 Fax Modem/-Serial & Parallel
Cables Shipping Carton/APC 45OBK UPS/SBSI; Custom
Configuration, Warehouse & Tracking; HP Laser Jet Printer.
1 HP Netserver LXS PRO w/ Array-Dual Pro
8 HP 4.2GB HD-Hot Swapable SCSI Drives-LX
12 HP 64MB SIMM-LX Specific
2 HP Powerwise Rack Mount
2 HP-19" Cabinet Shelf
4 HP Surestor Magazine w/Tapes
1 Arcada/Seagate Backup Exec-Enterprise
1 HP Router FR 1-WAN/ 1ENET OPTV.35 Sync CBL
TOTAL SCOTTSDALE BUS. SYSTEMS $338,771.88
<PAGE> 17
VENDOR: Hyperion Software
900 Long, Ridge Road
Stamford, CT 06902
DESCRIPTION OF EQUIPMENT
------------------------
(1/2) of the Accounting Software; General Ledger-Version 2.5
including; Graphical Report Writer, Financial Statements,
Hyperion Analyst for Ad Hoc Reporting; Accounts
Payable-Version 2.5; Maintenance Support; Project
Management; Training, Consulting, and Database Set-Up
TOTAL HYPERION SOFTWARE $292,992.00
VENDOR: Marktech Systems, Inc.
7500 Flying Cloud Drive, Suite 100
Eden Prairie, MN 55344
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
17 MDS/Clinical Software Application Package;
17 Project Management, Training & Installation; I390
Software/4790*33MDS Network
TOTAL MARKTECH SYSTEMS $101,660.00
VENDOR: CTR Systems, Inc.
553 Keystone Drive
Warrendale, PA 15086
QUANTITY DESCRIPTION OF EQUIPMENT
- -------- ------------------------
Project Management, Installation, Training; Hardware &
Software; Kronos Time & Attendance Systems 460F, TKC
500V8R5485 Comm Ed, etcetra; On-site Professional Services;
Travel Expenses 25 x $1,300.00
6 Full Sets of Hardware & Software; Annual Maintenance
TOTAL CTR SYSTEMS $130,180.00
TOTAL EQUIPMENT COST $863,603.88
Lessee hereby authorizes Lessor to amend the applicable Uniform Commercial Code
Financing Statement to include serial numbers for the Equipment as they become
available.
<PAGE> 18
LEASE SCHEDULE
LEASE SCHEDULE NUMBER 3 TO MASTER LEASE AGREEMENT NUMBER UHC1196
This Lease Schedule incorporates the terms and conditions of Master Lease
Agreement No. UHC 1196 dated as of the 25th day of November, 1996 (the "Master
Lease") by and between Pacific Financial Company ("Lessor") and Unison
Healthcare Corporation ("Lessee").
THIS IS A NON CANCELABLE LEASE SCHEDULE
1. INITIAL TERM: Sixty (60) months commencing with the first day of
the month immediately following the Commencement Date (or beginning
with the Commencement Date if that date is the first day of the
month.) Notwithstanding anything to the contrary contained in the
Master Lease Agreement or this Lease Schedule, if Lessee elects to
terminate this Lease Schedule prior to the expiration of the
Initial Term, said early termination will be calculated in
accordance with Rider A to this Lease Schedule No. 3.
2. RENTAL PAYMENTS: $4,019.83 per month; plus any and all applicable
taxes, for the first 60 months.
Advance Payments received by Lessor as of the Commencement Date:
first only.
3. EQUIPMENT: (See Equipment Exhibit "A" attached hereto and made a
part hereof).
4. COMMENCEMENT DATE: _______________________, as evidenced by the
Certificate of Acceptance, issued in respect to this Lease
Schedule.
5. END OF LEASE OPTIONS: Buyer hereby irrevocably agrees to purchase
the Equipment upon the expiration of the Lease at a price of $1.00
("Purchase Price") plus any applicable taxes, late charges, filing,
documentation costs and any unpaid amounts due under the Lease. In
the event the Lease is terminated in accordance with its terms,
Buyer hereby agrees to pay to Lessor the Purchase Price in addition
to all other amounts payable to Lessor as a result of said
termination. A demand for purchase of the Equipment may be made by
Lessor or its successors and assigns at any time after the
expiration of the Lease in which event, the effective date for
purchase of the Equipment shall be the first (1st) day of the month
after such demand or such other date as may be mutually agreed upon
between Lessor or its successors and assigns and buyer. THE
EQUIPMENT SHALL BE SOLD TO BUYER AND POSSESSION MADE AVAILABLE TO
BUYER "AS-IS WHERE IS": IT BEING EXPRESSLY UNDERSTOOD THAT LESSOR
AND ITS SUCCESSORS AND ASSIGNS MAKE NO REPRESENTATION OF WARRANTY
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF
FITNESS FOR ANY PARTICULAR OR OTHER PURPOSE, MERCHANTABILITY, OR
PATENT INFRINGEMENT. NOTWITHSTANDING THE FOREGOING, LESSOR OR ITS
SUCCESSORS AND ASSIGNS REPRESENT AND WARRANT THAT IT OR THEY HAVE
GOOD AND MERCHANTABLE TITLE TO THE EQUIPMENT AND CAN CONVEY SAME TO
BUYER, FREE AND CLEAR OF ANY SUPERIOR LIEN OR INCUMBRANCE. BUYER IS
LIABLE FOR ANY TAXES PAYABLE AS A RESULT OF THIS SALE OF EQUIPMENT.
As a precautionary measure and not as an admission of either pam/
as to whether the Lease is a lease or security agreement and as
Security for the obligations contained in said Master Lease and
Lease Schedules, now existing or hereafter arising under the same,
Lessee hereby presently conveys, warrants, mortgages, assigns,
pledges, and grants to Lessor, its
<PAGE> 19
successors and assigns, a first and prior security interest in said
Master Lease and Lease Schedules, and to the Equipment, and all
additions, upgrades, attachments, accessories, replacements,
improvements, and substitutions thereto, now or hereafter acquired,
together with all rents, issues, income, profits, and proceeds
thereof, including insurance proceeds.
6. ENTIRE AGREEMENT: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED,
RETAINED A COPY OF AND UNDERSTANDS THIS LEASE SCHEDULE AND AGREES
TO BE BOUND BY ITS TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE
THAT THIS LEASE SCHEDULE, THE MASTER LEASE AND ALL RIDERS THERETO
SHALL CONSTITUTE THE ENTIRE AGREEMENT AND SUPERSEDE ALL PROPOSALS,
ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER
COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT TO ANY UNIT
OF EQUIPMENT.
THIS LEASE SCHEDULE IS EFFECTIVE ONLY UPON ACCEPTANCE BY LESSOR AT ITS CORPORATE
OFFICE IN Costa Mesa, California.
Accepted on _______________________ at Costa Mesa, California.
Pacific Financial Company (Lessor) Unison Healthcare Corporation
by PFR Management, Inc., General Partner (Lessee)
By: By: /s/ Jerome L. Joseph
Name (Printed): Name (Printed): Jerome L. Joseph
Title: Title: VP & Treasurer
Date: 1/17/97
<PAGE> 20
RIDER TO LEASE SCHEDULE NO. 3 TO
MASTER LEASE AGREEMENT UHC 1196
DATED NOVEMBER 26, 1996 BETWEEN
UNISON HEALTHCARE CORPORATION, LESSEE
AND
PACIFIC FINANCIAL COMPANY, LESSOR
1. The Lessee shall have the right to prepay the indebtedness due under
the Lease Agreement in whole, but not impart, provided that Lessee
gives Lessor at least 30 days prior written notice of its intention to
prepay and in addition to the payment of all principal, accrued
interest, late charges, and other amounts due under the Lease
Agreement, Lessee pays a prepayment fee equal to:
(a) four percent (4%) of the principal prepaid if such
prepayment occurs during the first lease year;
(b) three percent (3%) of the principal prepaid if such
prepayment occurs during the second lease year;
(c) two percent (2%) of the principal prepaid if such prepayment
occurs during the third lease year;
(d) one percent (1%) of the principal prepaid if such prepayment
occurs during the fourth lease year; and
(e) No additional prepayment fee if prepayment occurs during the
fifth lease year.
2. The term "lease year" as used herein, shall mean a period of twelve
(12) consecutive months. The first lease year shall commence
_________, 1997. Subsequent lease years shall run consecutively, each
commencing on the anniversary of the first lease year.
LESSEE: LESSOR:
By: /s/ Jerome Joseph By:
Title: VP & Treasurer Title:
<PAGE> 21
UNISON HEALTHCARE CORP.
Lease Schedule 3 to Master Lease No. UHC1196
Equipment List
Exhibit "A"
Marktech Systems, Inc.
7500 Flying Cloud Drive - Suite 100
Eden Prairie, MN 55344
Eleven (11) MDS/Clinical Software Application Package &
Eleven (11) Project Management Training, & Installation $65,780.00
Sybase. Inc.
P.O. Box 60000
San Francisco. CA 94160-2364
One (1) #28214 Sybase SQL Server ULTD User, One (1) #98740
Sybase SQL Server NT ULTD Update Subs; Two (2) #98761
Workplace Support New 10 Issues; Two (2) #P60001
PowerBuilder Enterprise 5.0 for WIN; Two (2) #P60013 PBE 5.0
Update Subs and Doc Set; One (1) #P40007 Visual Developer
Suite 1.0; One (1) #P40010 Visual Developer Suite Deal
Update Subs; One (1) #60099 Internet Developer Toolkit; One
(1) #W31125 Powersoft Optima+ Enterprise 1.5; One (1)
#W31163 Optima+ Enterprise Upgrade Subscript; One (1) #14525
Web; One (1) #27454 Netscape Communication Server; One (1)
#98322 Standard Support Fees & One (1) #98402 Standard
Support Contracts (2) $ 51,361.00
Scottsdale Business Systems, Inc.
7745 East Redfield Road #200
Scottsdale. AZ 85260
(70) Microsoft Office 95; (125) Microsoft Plus; (9) PC
Anywhere V. 7.5 (Host) 10 Pak; (1) MCAFEE 51-100 Lic Pack &
(25) WINZIP Lic. $ 42,593.00
Six (6) Fujitsu Lifebook 530T P133 6X 16/1, 3GB 11.3 TFT
WIN95 28.8, MFG Part #FPCO50062 $ 20,100.00
-----------
$179,834.00
The above referenced software is subject to provisions
contained in the licensing agreement between the
manufacturer/vendor and Unison Healthcare Corporation.
Lessee hereby authorizes Lessor to amend the applicable
Uniform Commercial Code Financing Statement to include
serial numbers for the Equipment as they become available.
<PAGE> 1
Exhibit 10.120
Prepared by:
Ronald M. Goldberg, Esq.
Quarles & Brady
One East Camelback Road, Suite 400
Phoenix, Arizona 85012
MASTER SUBLEASE AGREEMENT
THIS MASTER SUBLEASE AGREEMENT (this "Agreement") is made and
entered into as of the 19th day of February, 1997, by and between BRITWILL
INVESTMENTS - II, INC., a Delaware corporation ("Lessor") and HASMARK OF TEXAS,
INC., a Texas corporation ("Lessee").
R E C I T A L S
A. WHEREAS, pursuant to a Lease Contract and Agreement dated December 1,
1993, by and between BritWill Investments - Texas, Ltd., a Texas limited
partnership ("BritWill-Texas"), as Lessor, and Lessor, as Lessee, which
Landlord's interest was subsequently assigned to Omega HealthCare Investors,
Inc., a Maryland corporation ("Omega") (collectively, the "Heritage Oaks
Lease"), Lessor acquired a leasehold estate in the property legally described in
Exhibit "A" attached hereto and incorporated herein by reference (the "Heritage
Oaks Premises"); and
B. WHEREAS, pursuant to an Operating Lease dated as of September 2, 1986,
by and between Health Care Property Investors, Inc., a Maryland corporation, as
Lessor, and The Hillhaven Corporation, a Tennessee corporation ("Hillhaven"), as
Lessee, which Lessee's interest was subsequently assigned by a Sublease
Agreement dated as of August 1, 1987, by and between Hillhaven, as Sublessor,
and Oaks/Jones, Inc., an Illinois corporation ("Oak/Jones"), as Sublessee, which
Sublessee's interest was subsequently assigned by a Sub-Sublease dated as of
October 20, 1992, by and between Oak/Jones, as Lessor, and Texas Health
Ventures, Inc., a Texas corporation ("THV"), as Lessee, which Lessee's interest
was subsequently assigned by an Assignment of Sub-Sub-Lease dated November 20,
1993, by and between THV, as Assignor, and BritWill-Texas, as Assignee, which
Assignee's interest was subsequently assigned by a Lease Contract and Agreement
dated December 1, 1993, by and between BritWill-Texas, as Lessor, and Lessor, as
Lessee (collectively, the "Four States Lease"), Lessor acquired a leasehold
estate in the property legally described in Exhibit "B" attached hereto and
incorporated herein by reference (the "Four States Premises"); and
C. WHEREAS, pursuant to a Lease dated as of August 1, 1986, incorporating
a Master Lease Document - General Terms and Conditions dated December 30, 1985,
by and between National Health Properties, a Maryland corporation formerly known
as Beverly
<PAGE> 2
Investment Properties, Inc., as Lessor, and Beverly Enterprises - Texas, Inc., a
California corporation ("Beverly"), as Lessee, which Lessee's interest was
subsequently assigned by an Assignment and Assumption of Lease with Consent of
Lessor dated as of July 16, 1990, by and between Beverly, as Assignor, and W.
Dirk Parish, an individual ("Parish"), as Assignee, which Assignee's interest
was subsequently assigned by an Assignment and Assumption Agreement of Lease
dated as of July 16, 1990, by and between Parish, as Assignor, and Texarkana
Nursing Home, a Texas general partnership ("TNH"), as Assignee, which Assignee's
interest was subsequently assigned by an Assignment and Assumption Agreement of
Lease dated as of July 16, 1990, by and between TNH, as Assignor, and Texarkana
Nursing Center, Inc., a Texas corporation ("TNC"), as Assignee, which Assignee's
interest was subsequently assigned by an Assignment of Lease dated as of
November 30, 1993, by and between TNC, as Assignor, and BritWill-Texas, as
Assignee, which Assignee's interest was subsequently assigned by a Lease
Contract and Agreement dated December 1, 1993, by and between BritWill-Texas, as
Lessor, and Lessor, as Lessee (collectively, the "Texarkana Lease"; and,
together with the Heritage Oaks Lease and the Four States Lease, the "Leases"
and each a "Lease"), Lessor acquired a leasehold estate in the property legally
described in Exhibit "C" attached hereto and incorporated herein by reference
(the "Texarkana Premises"; and, together with the Heritage Oaks Premises and the
Four States Premises the "Leased Premises"); and
D. WHEREAS, in accordance with the provisions of this Agreement, Lessee
desires to acquire all right, title and interest of Lessor in and to each of the
Leases;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and undertakings described hereinbelow, it is agreed as follows:
1. Sublease. Subject to the terms, conditions, covenants and
undertakings hereinafter set forth, and effective March 1, 1997, Lessor does
hereby (a) sublease to Lessee all of Lessor's right, title and interest,
including all rights of possession and occupancy, in and to the Leased Premises
pursuant to the respective Leases and (b) assign to Lessee, subject to Lessor's
right of re-assignment in Section 3 below, any and all rights in any of the
Leases in the nature of a "right of first refusal" or an "option to purchase."
Without in any way limiting or expanding the foregoing, but subject to the
written consent of Omega in its absolute discretion, the Heritage Oaks Lease
will contain an option to purchase the underlying fee for the sum of (A)
$800,000, plus (B) certain costs incurred or to be incurred to repair and
rehabilitate the improvements located on the Heritage Oaks Premises in the
estimated amount of $500,000.
2. Rent.
(a) Except as provided in Section 2(b), from and after the date
hereof Lessee hereby agrees to assume and be responsible for the payment
and discharge of all obligations and liabilities of Lessor pursuant to the
Leases.
- 2 -
<PAGE> 3
(b) As long as no Event of Default as herein defined has occurred
and is continuing, Lessor shall pay on behalf of Lessee to the landlord
under the Heritage Oaks Lease an amount sufficient to decrease the base
rent (excluding any rent or other obligation in the nature of operating or
capital cost contributions or payments) due under the Heritage Oaks Lease
(i) for the first twenty-four (24) months hereof, to the amount of $12,000
per month; (ii) for the next twelve (12) months hereof, to the amount of
$18,000 per month; and (iii) thereafter, Lessor shall not have any
obligation hereunder to subsidize the base rent.
3. Term. This Agreement may terminate with respect to any Lease, or
with respect to all Leases, as set forth in this Section 3.
(a) As set forth more particularly in Section 8, Lessor may
terminate this Agreement with respect to a Lease that is the subject of
Lessee's attempted assignment or sublet in violation of this Agreement, or
Lessor may terminate this Agreement in its entirety.
(b) As set forth more particularly in Section 11, Lessor may
terminate this Agreement with respect to a Lease following a breach,
default or event of default under such Lease or that gives rise to an
Event of Default, or following an Event of Default under and as defined in
that certain Sublease Agreement of even date herewith by and between Emory
Care Center, Inc. and Lessee (the "Emory Sublease"), or Lessor may
terminate this Agreement in its entirety.
(c) This Agreement shall automatically terminate with respect to any
Lease upon the expiration of the initial term of such Lease; this
Agreement shall terminate in its entirety when the last of the Leases has
so expired, or upon termination of the Emory Sublease.
Upon the termination of this Agreement with respect to a Lease, Lessee shall
immediately (A) surrender possession of such Leased Premises in at least as good
order and condition as received, and (B) shall properly prepare, sign and timely
file all claims, cost reports, or other documentation required by the Medicare
Program, the Medicaid Program and any other third party payer for the operations
of the applicable Leased Premises. Upon such termination, the assignments of any
and all rights in the nature of (i) a "right of first refusal" and (ii) an
"option to purchase" as contemplated in Section 1 shall be deemed re-assigned by
Lessee to Lessor without further action.
4. Use. During the term of this Agreement, each of the Leased Premises
is to be used only for the operation of a nursing home. Lessee covenants not to
used any of the Leased Premises for any other purpose without first obtaining
Lessor's written consent, which may be absolutely withheld.
5. Maintenance; Insurance. During the term hereof, with respect to each
Lease:
- 3 -
<PAGE> 4
(a) Lessee shall at all times maintain the Leased Premises in at
least as good order and condition as received.
(b) Lessee shall promptly execute, fulfill and comply with all valid
ordinances, rules, regulations, laws and statutes of applicable
governmental and quasi-governmental authorities (herein "Applicable Law").
Lessee shall at all times maintain and operate the Leased Premises and the
business conducted thereon in strict accordance with such Applicable Law.
(c) Lessee shall maintain all insurance required under each of the
Leases and as otherwise maintained by similarly situated nursing
homes.
6. Lessee's Representations and Warranties. Lessee warrants and
represents that Lessee has all requisite power and authority to enter into and
to deliver this Agreement.
7. Representations and Warranties. Lessor warrants and represents as
follows:
(a) Lessor is the lawful sublessor under each of the Leases.
(b) Lessor covenants and agrees that upon Lessee's payment and
performance of its obligations hereunder and under the Leases, Lessee
shall and may peaceably and quietly have, hold and enjoy each of the
Leased Premises for the term provided in Section 3.
(c) Lessor is not in default under any of the Leases and has no
knowledge of any breach or default or event which, with passage of time or
the giving of notice or both, would constitute a breach or default, by
Lessor under any of the Leases.
(d) All rents due under the Leases have been paid through the last
day of the calendar month immediately preceding the date hereof.
(e) Lessor has obtained all necessary consents required under the
Leases precedent to the effectiveness of the sublease by Lessor
contemplated by this Agreement.
(f) Lessor has all requisite power and authority to enter into and
to deliver this Agreement.
8. No Further or Subsequent Assignment. Neither Lessee nor its
permitted successors or assigns shall assign or sublet all or any part of the
Leases (other than the rental of rooms or beds, or subleases of commercial space
not in violation of the applicable Leases, in either case only in the ordinary
course of business) without the prior written consent of Lessor. Any attempt by
Lessee or its permitted successor or assigns to assign or
- 4 -
<PAGE> 5
sublet the Leases, or any of them, without such consent or consents shall be
void and of no effect and shall, at the option of Lessor, be an Event of Default
hereunder.
9. Prorations. All accounts payable accrued as of the date hereof,
including without limitation accounts payable in respect of contracts assumed by
Lessee and employee benefit obligations incurred by Lessor prior to the date
hereof (including but not limited to accrued bonuses, vacation, holiday or sick
pay), shall continue to be the responsibility of Lessor and Lessor shall pay all
such accounts and benefits to Lessee. Any accounts receivable accrued as of the
date hereof or arising out of the operation of the Leased Premises as of the
date hereof shall remain the property of Lessor, and Lessee shall pay all such
accounts to Lessor. Notwithstanding anything to the contrary herein contained,
Lessor shall indemnify Lessee for and hold Lessee harmless against civil
penalties levied by the State of Texas or the Health Care Financial
Administration with respect to any of the Leased Premises or any of the nursing
homes located thereon, whether or not assessed before or after the date hereof,
but in any event related to the operation of any such nursing home by Lessor
prior to the date hereof.
10. Reports. Lessee shall promptly deliver to Lessor, in the manner
hereinbelow provided, copies of all notices, reports, surveys and other
communications that Lessee is obligated to provide to any landlord under any of
the Leases. Lessee shall, within ten days of each calendar month-end, deliver to
Lessor, in the manner hereinbelow provided, detailed financial statements,
including a balance sheet and statement of income for each month and aggregate
statements on a fiscal quarter-to-date and annual basis.
11. Events of Default. Lessee shall be in default under this Agreement
upon the occurrence of any of the following (herein an "Event of Default"):
(a) Breach, default or noncompliance by Lessee with any covenant or
provision of any of the Leases, following the expiration of any applicable
notice and/or cure period therein; or
(b) Breach, default or noncompliance by Lessee with any covenant or
provision of this Agreement; or
(c) An Event of Default under and as defined in the Emory Sublease
following the expiration of any applicable notice and/or cure period
therein.
Upon an Event of Default, Lessor shall have the right to terminate this
Agreement with respect to either (A) the Lease giving rise to the default, or
(B) all of the Leases, in either case by written notice to Lessee in the manner
hereinbelow provided, and this Agreement shall immediately terminate with
respect to such Lease(s), and Lessor shall have the right to re-enter and
repossess the applicable Leased Premises and remove all administrative or
operational personnel therefrom and as otherwise permitted by applicable law.
Notwithstanding anything to the contrary contained in this Agreement, in
addition to and
- 5 -
<PAGE> 6
without in any way limiting any right or remedy herein contained, Lessor may
also avail itself of each and every right and remedy at law and in equity.
12. Indemnification. Lessee agrees to defend, pay, protect, indemnify,
save and hold harmless Lessor for, from and against any and all liabilities,
losses, damages, penalties, costs, expenses (including without limitation
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature whatsoever, howsoever caused, arising from or
relating to (a) any of the Leased Premises or the use, non-use, occupancy,
condition, design, construction, maintenance, repair or rebuilding of any of the
Leased Premises, and any injury to or death of any person or persons or any loss
of or damage to any property, real or personal, in any manner arising therefrom
connected therewith or occurring thereon, whether or not Lessor has or should
have knowledge or notice of the defect or conditions, if any, causing or
contributing to said injury, death, loss, damage or other claim, (b) any
violation by Lessee of any provision of this Agreement, of any contract or
agreement to which Lessee is a party, or any provisions of any of the Leases, or
(c) any other cause not resulting from the gross negligence or wilful misconduct
of Lessor or its officers, directors, employees or others in privity of contract
in connection with the Leased Premises or this Agreement. In case any proceeding
is brought against Lessor by reason of any such claim, Lessee covenants upon
notice from Lessor to resist or defend Lessor in such action, with the expenses
of such defense paid by Lessee, and Lessor will cooperate and assist in the
defense of such action or proceeding if reasonably requested so to do by Lessee.
The obligations of Lessee under this Section shall survive any termination of
this Agreement.
13. Copies of Leases. Lessee acknowledges that it has received and has
reviewed copies of the Leases described in the Recitals hereto.
14. Notices. All notices required or permitted to be given under this
Agreement shall be given (i) by certified or registered mail, return receipt
requested, postage fully prepaid, or (ii) by a nationally recognized overnight
delivery service, delivery cost prepaid, in either case addressed to the proper
party at the following address:
If to Lessor: BritWill Investors - II, Inc.
c/o Unison HealthCare Corporation
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
Attention: Jerry Walker, President & CEO
Telefacsimile: (602) 481-6479
- 6 -
<PAGE> 7
If to Lessee: Hasmark of Texas, Inc.
c/o Hasmark Corporation
82 Sixth Street
Apalachicola, Florida 32320
Attention: Harold Stewart, Chief Executive Officer
Telefacsimile: (904) 653-9055
15. Attorneys' Fees. If any party brings any action or proceeding to
enforce, protect, or establish any right or remedy arising under this Agreement,
the prevailing party shall be entitled to recover from the other party the
prevailing party's reasonable attorneys' fees, costs and expenses (including
expert witness fees). Moreover, it any party without fault is made a party to
any litigation instituted by or against another party, the other party shall
indemnify the innocent party against and save it harmless from all reasonable
costs and expenses, including reasonable attorneys' fees, costs and expenses
(including expert witness fees), incurred by it in connection therewith.
16. Waiver of Subrogation. Lessor and Lessee hereby waive, to each
other, all rights of subrogation which any insurance carrier, or either of them,
may have as to the Lessor or Lessee by reason of any provision in any policy of
insurance issued to Lessor or Lessee provided such waiver does not thereby
invalidate the policy of insurance.
17. Choice of Law. The provisions of this Agreement shall be construed
in accordance with and be governed by the laws of the State of Texas.
18. Successors and Assigns. The terms, covenants and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
parties hereto, their legal representatives, successors and assigns.
19. Interpretation; Captions; Severability. References herein to
"Sections " without further attribution are deemed to refer to Sections of this
Agreement. The captions of the various Sections of this Agreement are for
convenience and ease of reference only and do not define, limit, augment or
describe the scope, context or intent of this Agreement or any part or parts
thereof. The invalidity or illegality or any provision of this Agreement shall
not affect the remainder thereof.
20. Counterparts. This instrument may be executed in one or more
counterparts, the aggregate of which, when signed by all parties hereto, shall
be deemed to constitute one original instrument.
[SIGNATURE PAGE FOLLOWS]
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
BRITWILL INVESTMENTS - II, INC., a Delaware
corporation
By:______________________________________
Name:____________________________________
Its:_____________________________________
HASMARK OF TEXAS, INC., a Texas corporation
By:______________________________________
Name:____________________________________
Its:_____________________________________
- 8 -
<PAGE> 9
STATE OF ___________ )
) ss.
County of _________ )
The foregoing instrument was acknowledged before me this day of
_______________________, 199___, by _______________________, the
_______________________________ of BRITWILL INVESTMENTS - II, INC., a Delaware
corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
__________________________________
Notary Public
My Commission Expires:
____________________________
STATE OF ___________ )
) ss.
County of _________ )
The foregoing instrument was acknowledged before me this _____ day of
_________________, 199___, by _______________________, the
_______________________________ of HASMARK CORPORATION, a(n) ______________
corporation, the general partner of HASMARK OF EMORY LIMITED PARTNERSHIP, a
Texas limited partnership, on behalf of that corporation and limited
partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
___________________________________
Notary Public
My Commission Expires:
_____________________________
- 9 -
<PAGE> 10
EXHIBIT "A"
Legal Description of Heritage Oaks Premises
(to be attached)
<PAGE> 11
EXHIBIT "B"
Legal Description of Four States Premises
(to be attached)
<PAGE> 12
EXHIBIT "C"
Legal Description of Texarkana Premises
(to be attached)
<PAGE> 13
COUNTERPART LANDLORD CONSENT TO
MASTER SUBLEASE AGREEMENT
The undersigned, as the landlord or its successor-in-interest under the
___________________ Lease described in the attached Master Sublease Agreement,
does hereby consent and agree to the sublease of the _________________ Premises
contemplated by that Master Sublease Agreement.
LANDLORD:
_______________________________ ____________________________________
By:_________________________________
Name:_______________________________
Its:________________________________
<PAGE> 14
COUNTERPART MORTGAGEE'S CONSENT TO
MASTER SUBLEASE AGREEMENT
The undersigned, as the mortgagee of the Texarkana Lease and the Four
States Lease described in the attached Master Sublease Agreement, does hereby
consent and agree to the sublease of each of the Texarkana Premises and the Four
States Premises contemplated by that Master Sublease Agreement.
MORTGAGEE: OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation
By:_________________________________
Name:_______________________________
Its:_________________________________
<PAGE> 1
Exhibit 10.124
DOUGLAS MANOR LEASE
BY AND BETWEEN
AMERICAN HEALTH PROPERTIES OF ARIZONA, INC.
"LANDLORD"
AND
DOUGLAS MANOR, INC. D/B/A
DOUGLAS MANOR NURSING HOME, INC.
"TENANT"
DATED AS OF JULY 28, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS............................................... 1
ARTICLE II LEASE OF PROPERTY......................................... 12
ARTICLE III TERM OF LEASE............................................. 13
3.1 Term of Lease.................................................. 13
3.2 Option to Extend Term of Lease................................. 13
ARTICLE IV RENT...................................................... 14
4.1 Payment of Landlord's Transaction Expenses..................... 14
4.2 Payment of Base Rent and Additional Charges.................... 14
4.3 Base Rent...................................................... 14
4.4 Rent Adjustment................................................ 15
4.5 Additional Charges............................................. 15
4.6 Triple Net Lease............................................... 15
ARTICLE V IMPOSITIONS............................................... 19
5.1 Payment of Impositions......................................... 19
5.2 Notice of Impositions.......................................... 20
5.3 Adjustment of Impositions...................................... 20
5.4 Utility Charges................................................ 21
5.5 Insurance Premiums............................................. 21
ARTICLE VI TERMINATION OR ABATEMENT OF LEASE......................... 21
ARTICLE VII OWNERSHIP OF PROPERTY..................................... 22
7.1 Ownership of the Property...................................... 22
7.2 Tenant's Personal Property; Security Interest.................. 22
ARTICLE VIII CONDITION AND USE OF PROPERTY............................. 23
8.1 Condition of the Property...................................... 23
8.2 Use of the Property............................................ 24
8.3 Landlord to Grant Easements.................................... 25
8.4 Hazardous Substances........................................... 25
</TABLE>
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<TABLE>
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ARTICLE IX LEGAL REQUIREMENTS AND INSURANCE
REQUIREMENTS.............................................. 29
9.1 Compliance with Legal Requirements, Insurance
Requirements and Instruments................................... 29
9.2 Covenants Regarding Legal Requirements......................... 29
ARTICLE X CONDITION OF THE PROPERTY................................. 29
10.1 Maintenance and Repair......................................... 29
10.2 Encroachments and Restrictions................................. 31
ARTICLE XI CAPITAL ADDITIONS......................................... 32
11.1 Construction of Capital Additions.............................. 32
11.2 Capital Additions Financed or Paid for by Landlord............. 32
11.3 Capital Additions Paid for by Tenant.......................... 34
11.4 Disposition of Capital Additions upon Expiration or
Termination of Lease........................................... 35
11.5 Non-Capital Additions.......................................... 35
11.6 Salvage........................................................ 35
11.7 No Liens on Landlord's Interest................................ 35
ARTICLE XII LIENS..................................................... 35
ARTICLE XIV CONTESTS.................................................. 36
ARTICLE XIV INSURANCE................................................. 37
14.1 Central Insurance Requirements................................. 37
14.2 Replacement Cost............................................... 38
14.3 Additional Insurance........................................... 39
14.4 Waiver of Subrogation.......................................... 39
14.5 Form of Insurance.............................................. 39
14.6 Change in Limits............................................... 39
14.7 Blanket Policy................................................. 40
14.8 No Separate Insurance.......................................... 40
</TABLE>
ii
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<TABLE>
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ARTICLE XV INSURANCE PROCEEDS........................................ 40
15.1 Handling of Insurance Proceeds................................. 40
15.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance.............................. 41
15.3 Reconstruction in the Event of Damage or
Destruction Not Covered by Insurance.......................... 42
15.4 Payment of Proceeds on Tenant's Property and
Capital Additions Paid by Tenant............................... 43
15.5 Handling of Business Interruption Insurance.................... 43
15.6 Restoration of Tenant's Property............................... 43
15.7 Abatement of Rent.............................................. 43
15.8 Damage Near End of Term........................................ 43
15.9 Termination of Option to Purchase.............................. 44
15.10 Waiver....................................................... 44
ARTICLE XVI CONDEMNATION.............................................. .4
16.1 Definitions.................................................... 44
16.2 Parties' Rights and Obligations................................ 45
16.3 Total Taking................................................... 45
16.4 Allocation of Portion of Award................................. 45
16.5 Partial Taking................................................. 46
16.6 Temporary Taking............................................... 46
ARTICLE XVII DEFAULTS AND REMEDIES.................................... 47
17.1 Events of Default.............................................. 47
17.2 Certain Remedies............................................... 49
17.3 Termination.................................................... 50
17.4 Application of Funds........................................... 51
17.5 Landlord's Right to Cure Tenant's Default...................... 51
17.6 NHI's Right to Cure............................................ 51
17.7 Waiver......................................................... 51
ARTICLE XVIII CURE BY TENANT OF LANDLORD DEFAULTS...................... 52
</TABLE>
iii
<PAGE> 5
<TABLE>
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ARTICLE XIX PURCHASE OF PROPERTY BY TENANT............................ 52
19.1 Purchase of the Property....................................... 52
19.2 Failure to Close Purchase...................................... 53
ARTICLE XX HOLDING OVER.............................................. 53
ARTICLE XXI RISK OF LOSS.............................................. 53
ARTICLE XXII LIABILITY OF PARTIES...................................... 54
22.1 Indemnification by Tenant...................................... 54
22.2 Indemnification by Landlord.................................... 55
22.3 Continuing Liability........................................... 55
ARTICLE XXIII ASSIGNMENT................................................ 55
23.1 Assignment and Subletting...................................... 55
23.2 Attornment..................................................... 56
23.3 Sublease Limitation............................................ 56
ARTICLE XXIV INFORMATION FROM TENANT................................... 57
24.1 Officer's Certificates......................................... 57
24.2 Financial Information.......................................... 57
24.3 Licensing Information.......................................... 58
ARTICLE XXV APPRAISALS OF THE PROPERTY AND
OPTIONS.................................................. 58
25.1 Appraiser...................................................... 58
25.2 Method of Appraisal............................................ 59
ARTICLE XXVI OPTIONS TO PURCHASE...................................... 59
26.1 Landlord's Option to Purchase Tenant's Personal
Property; Transfer of Licenses................................. .5
26.2 Tenant's Option to Purchase the Property....................... 60
26.3 Tenant's Right of First Refusal................................ 61
</TABLE>
iv
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<TABLE>
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ARTICLE XXVII FACILITY MORTGAGE......................................... 61
ARTICLE XXVIII LIMITATION OF LIABILITY................................... 62
ARTICLE XXIX ADDITIONAL COVENANTS OF TENANT............................ 62
29.1 Additional Negative Covenants............................... 62
29.2 Additional Affirmative Covenants............................ 64
29.3 Security for the Lease ..................................... 66
ARTICLE XXX MISCELLANEOUS............................................. 67
30.1 Landlord's Right to Inspect................................. 67
30.2 No Waiver................................................... 67
30.3 Remedies Cumulative......................................... 68
30.4 Acceptance of Surrender..................................... 68
30.5 No Merger of Title.......................................... 68
30.6 Conveyance by Landlord...................................... 68
30.7 Quiet Enjoyment............................................. 68
30.8 Notices..................................................... 69
30.9 Survival of Terms; Applicable Law........................... 70
30.10 Exculpation of Landlord's Officers and Agents............... 70
30.11 Transfers Following Termination............................. 70
30.12 Tenant's Waivers............................................ 71
30.13 Memorandum of Lease......................................... 71
30.14 Arbitration................................................. 71
30.15 Modifications............................................... 71
30.16 Attorneys' Fees............................................. 71
30.17 Brokers..................................................... 71
</TABLE>
v
<PAGE> 7
DOUGLAS MANOR LEASE
This DOUGLAS MANOR LEASE (the "Lease") is executed as of July 28, 1995, by
and between AMERICAN HEALTH PROPERTIES OF ARIZONA, INC., an Arizona corporation,
having its principal office at 6400 South Fiddler's Green Circle (Suite 1800),
Englewood, Colorado 80111, as Landlord, ("Landlord") and DOUGLAS MANOR, INC.
d/b/a DOUGLAS MANOR NURSING HOME, INC., a Colorado corporation, having its
principal office at 2105 Clubhouse Drive, Greeley, Colorado 80634, as Tenant
("Tenant").
RECITALS
Signature Health Care Corporation, a Delaware corporation ("Signature")
and Landlord have entered into the Assignment Agreement of even date herewith
(the "Assignment"), pursuant to which Signature has assigned to Landlord all of
Signature's rights under the Purchase and Sale Agreement dated as of July 28,
1995 between Signature and Arizona Income Properties, L.P. to acquire certain
real and personal property utilized in connection with the operations of
"Douglas Manor," a 64 bed long-term care property located in Douglas, Arizona
("Douglas Manor") and "Safford Care Center," a 128 bed long-term care property
in Safford, Arizona ("Safford") (collectively, Douglas Manor and Safford are the
"Arizona Properties"), and related facilities, including, but not limited to,
the Property (as defined in Article II). Landlord desires to lease Douglas Manor
to Tenant who desires to hire the same from Landlord pursuant to this Lease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Lease, unless otherwise expressly provided in
this Agreement or the context in which such term is used indicates a contrary
intent, (a) the terms defined in this Article shall have the meanings ascribed
to them in this Article, (b) all accounting terms not otherwise defined in this
Article shall have the meanings ascribed to them in accordance with generally
accepted accrual method accounting principles at the time applicable, (c) all
references in this Lease to designated "Articles," Sections " and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision.
<PAGE> 8
"ACH TRANSFER" shall mean the method of electronic payment initiated by
Tenant through Tenant's financial institution utilizing the National Automated
Clearinghouse Association system.
"ADDITIONAL CHARGES" shall have the meaning ascribed to such term in
Section 4.5.
"AFFILIATE" of any person or entity (the "Subject") shall mean (a) any
person which, directly or indirectly, controls or is controlled by or is under
common control with the Subject, (b) any person owning, beneficially, directly
or indirectly, ten percent (10%) or more of the outstanding capital stock,
shares or equity interests of the Subject or (c) any officer, director,
employee, general partner or trustee of the Subject or any person controlling,
controlled by or under common control with the Subject (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of the
Subject). As used in this definition, the term "person" means and includes
governmental agencies and authorities, political subdivisions, individuals,
corporations, limited liability companies, general partnerships, limited
partnerships, stock companies or associations, joint ventures, associations,
trusts, banks, trust companies, land trusts, business trusts and any other
entity of any form whatsoever, and "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, through the ownership of voting securities, partnership interests or
other equity interests, or through any other means.
"AHP" shall mean American Health Properties, Inc., a Delaware corporation.
"ARKANSAS MANOR LEASE" shall mean that certain lease entered into between
Landlord and Arkansas Manor, Inc., a Colorado corporation, as of June 13, 1995
with respect to that certain property known as Arkansas Manor, a 120 bed
long-term care property located in the City and County of Denver, Colorado.
"ASSIGNMENT" shall have the meaning ascribed thereto in the Recitals to
this Lease.
"AWARD" shall have the meaning ascribed to such term in Section 16.1(c).
"BASE RENT" shall mean, with respect to the Fixed Term, the amount of
$253,955.66 per year.
"BUSINESS DAY" shall mean any day on which banking institutions in Denver,
Colorado are open for the conduct of normal banking business.
"CAPITAL ADDITIONS" shall mean (a) one or more new buildings located on
the Land or to be used, directly or indirectly, as part of the Facilities, one
or more additional structures annexed to any portion of any of the Improvements,
(c) the material expansion of existing Improvements, (d) the construction of a
new wing or new story on existing Improvements, or
2
<PAGE> 9
(e) any expansion, construction, renovation or conversion of existing
Improvements to (i) increase the bed or service capacity of the Facilities or
(ii) change the purpose for which the Facilities are utilized. Notwithstanding
anything to the contrary contained in Article XI, in the event it is necessary
to abate or otherwise take corrective action with respect to the existence of a
Hazardous Substance (as hereinafter defined) located in, on or under the
Property or in the Improvements, such abatement or corrective action shall not
be deemed to be a Capital Addition and shall be the sole responsibility of
Tenant at its sole cost and expense.
"CAPITAL ADDITIONS COST" shall mean the cost of any Capital Additions made
by Tenant, whether paid for by Tenant or Landlord. Such cost shall include (a)
the costs of constructing the Capital Additions, including site preparation and
improvement, materials, labor, supervision, developer and administrative fees,
the costs of design, engineering and architectural services, the costs of
fixtures, the costs of construction financing (including but not limited to
capitalized interest) and other similar costs approved in writing by Landlord,
(b) if agreed to by Landlord in writing in advance, the purchase price and other
acquisition costs, or applicable ground lease rental payable for any period such
ground lease is in effect to and including the date upon which such Capital
Addition is completed and occupied or in operation, as the case may be, of any
land which is acquired or leased for the purpose of placing thereon all or any
portion of the Capital Additions or for providing means of access thereto, or
parking facilities therefor (including the costs of surveying the same and
recording, title insurance and escrow fees and charges), (c) insurance premiums,
real estate taxes, water and sewage charges and other carrying charges for such
Capital Additions during their construction, (d) fees and expenses of legal
counsel, (e) any documentary transfer or similar taxes, (f) any applicable
regulatory or administrative fees and charges, and any costs, charges, fees or
expenses paid or incurred in connection with obtaining any applicable permits,
licenses, franchises, authorizations, certificates of need, certificates of
occupancy and similar authorizations and entitlements and (g) all other
reasonable costs and expenses of Landlord or Tenant, as applicable, and any
lending institution which has committed to finance the Capital Additions,
including, but not limited to, (i) the fees and expenses of their respective
legal counsel, (ii) any printing, duplicating and messenger expenses, (iii) any
filing, registration and recording taxes and fees, (iv) any documentary transfer
or similar taxes, (v) any title insurance charges and appraisal fees, (vi) any
rating agency fees and (vii) any commitment or similar fees charged by any
lending institution financing or offering to finance any portion of such Capital
Additions.
"CASH FLOW" shall mean, for any period of determination, an amount equal
to the sum of the amounts for such period of (i) net income before income taxes,
(ii) depreciation, amortization and other similar non-cash charges, including
depreciation and interest expense related to the Equipment, (iii) Base Rent and
(iv) Additional Rent.
"CHECK PAYMENT DATE" shall mean that certain day five Business Days prior
to the first day of each calendar month occurring during the Term hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
3
<PAGE> 10
"COMMENCEMENT DATE" shall have the meaning ascribed to such term in
Section 3.1.
"CONDEMNATION" shall have the meaning ascribed to such term in Section
16.1(a).
"CONDEMNOR" shall have the meaning ascribed to such term in Section
16.1(d).
"CONSOLIDATED FINANCIALS" shall mean, for any fiscal year (or other
accounting period) for Tenant and Guarantors and Affiliates thereof statements
of earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, all in reasonable detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year (or period), all of which shall be prepared in
accordance with generally accepted accounting principles.
"CORNERSTONE CARE LEASE" shall mean that certain lease entered into
between Landlord and Cornerstone Care, Inc., a Colorado corporation, as of June
13, 1995 with respect to that certain property known as Cornerstone Care Center,
a 153 bed long-term care property located in Lakewood, Colorado.
"DATE OF TAKING" shall have the meaning ascribed to such term in Section
16. l(b).
"ENCUMBRANCE" shall have the meaning ascribed to such term in Article
XXVII.
"EQUIPMENT" shall have the meaning given to that term in the Purchase
Agreement.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in Section
17. 1.
"EXTENDED TERM" shall have the meaning ascribed to such term in Section
3.2.
"FACILITY" shall mean the health care facility presently operated on the
Land, or with Landlord's consent, such other general health care facility,
general health and rehabilitation hospital, psychiatric hospital, nursing home,
retirement center, congregate living facility, health care related apartments or
hotel, medical office building, or other medical facility with treatment,
diagnostic, or surgical facilities for inpatient or outpatient care (which may
include but is not limited to acute care inpatient facilities, skilled nursing
facilities, intermediate care facilities, home health agencies, ambulatory care
clinics or similar facilities) offering other related health care products and
services being operated or proposed to be operated on the Land from time to time
in accordance with the Provisions of this Lease.
"FACILITY MORTGAGE" shall have the meaning ascribed to such term in
Section 14. 1.
4
<PAGE> 11
"FAIR MARKET ADDED VALUE" shall mean the Fair Market Value (hereinafter
defined) of the Property (including all Capital Additions without regard to the
source of payment for such Capital Additions) less the Fair Market Value of the
Property determined as if no Capital Additions which were paid for by Tenant (to
the extent not reimbursed by Landlord) had been constructed.
"FAIR MARKET RENTAL" shall mean, with respect to the Property (including
any Capital Additions or portions thereof paid for by Landlord) the rental paid
on a net basis as provided in Section 4.6 hereof which a willing tenant not
compelled to rent would pay to a willing landlord not compelled to lease for the
highest and best medical use and occupancy of such property permitted pursuant
to this Lease for the term in question, assuming that Tenant is not in default
under this Lease. For purposes of this Lease, Fair Market Rental shall be
determined in accordance with the appraisal procedures set forth in Article XXV.
"FAIR MARKET VALUE" shall mean, with respect to the Property, including
all Capital Additions, the price that a willing buyer not compelled to buy would
pay to a willing seller not compelled to sell such property, assuming that (a)
this Lease is not in effect, (b) that the Property had been exposed for sale in
the market for a reasonable period of time, (c) that such seller must pay any
closing costs and title insurance premiums with respect to such sale and (d)
that the Property is fully licensed by all governmental agencies having
jurisdiction thereof, is and will continue to be operated for the Primary
Intended Use and is otherwise a going concern. For purposes of this Lease, Fair
Market Value shall be determined in accordance with the appraisal procedures set
forth in Article XXV.
"FAIR MARKET VALUE PURCHASE PRICE" shall mean the Fair Market Value of the
Property less the Fair Market Added Value.
"FISCAL YEAR" shall mean the 12-month period commencing January 1 and
terminating December 31.
"FIXED CHARGES" shall mean the amount equal to the sum of Base Rent plus
principal and interest payments on debt.
"FIXED TERM" shall have the meaning ascribed to such term in Section 3.1.
"FIXTURES" shall have the meaning ascribed to such term in clause (d) of
Article H.
"GUARANTORS" shall mean Signature Health Care Corporation and Yankee Creek
Management Services LLC.
"HAZARDOUS SUBSTANCES" shall mean those substances, materials, and wastes
listed in the United States Department of Transportation Table (49 CFR 172 101)
or by the Environmental Protection Agency as hazardous substances (40 CFR Part
302) and amendments thereto, or such substances, materials and wastes which are
or become regulated under any applicable local, state
5
<PAGE> 12
or federal law including, without limitation, any material, waste or substance
which is (i) hydrocarbons, petroleum and petroleum products, (ii) asbestos,
(iii) polychlorinated biphenyls, (iv) formaldehyde, (v) radioactive substances,
(vi) flammables and explosives, (vii) described as a "hazardous substances
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U. S. C. Section 1321 or listed pursuant to Section 307 of the Clean Water
Act (33 U. S. C. Section 1317), (viii) defined as a "hazardous waste" pursuant
to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq. (42 U.S.C, Section 6903), (ix) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S. C.
Section 9601), as the same may be amended from time to time, or (x) any other
substance, waste or material which could presently or at any time in the future
cause a detriment to or impair the value or beneficial use of the Land or other
Property (which, for purposes of this definition shall include all air, soils,
ground water, surface water and soil vapor) or constitute or cause a health,
safety or environmental hazard on, under or about the Land or other Property or
to any person who may enter on, under, or about the Land or other Property or
require remediation at the behest of any governmental agency.
"IMPACTED FACILITY" shall have the meaning specified in Section 15.2.
"Impositions" shall mean all taxes (including without limitation all real
property taxes imposed upon the Land, Improvements or other portions of the
Property, including, but not limited to all tangible and intangible personal
property, ad valorem, sales, use, single business, gross receipts, transaction
privilege, documentary stamp (if any are associated with this Lease or the
transactions contemplated hereby), rent or similar taxes relating to or imposed
upon Landlord, any portion of the Property, Tenant or its business conducted
upon the Land), assessments (including without limitation all supplemental real
property tax assessments or assessments for public improvements or benefit,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or other rents
and charges, excises, tax levies, fees (including without limitation license,
permit, franchise, inspection, authorization and similar fees) and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character or nature whatsoever
with respect to or connected with the Property or the business conducted thereon
by Tenant (including all interest, penalties and fines thereon due to any
failure or delay in payment thereof) which at any time prior to, during or with
respect to the Term hereof may be assessed or imposed on or with respect to, or
may be a lien upon (a) Landlord's interest in the Property, (b) the Property or
any part thereof or any Rent therefrom or any estate, right, title or interest
therein, (c) Landlord's capital invested in the State as represented by the
Property, or (d) any occupancy, operation, use or possession of, or sales from,
or activity conducted on or in connection with the Property or the leasing or
use of the Property or any part thereof by Tenant. Impositions shall not include
(1) any tax based on net income (whether denominated as a franchise, capital
stock or other tax) imposed upon Landlord or any other person, whether imposed
on "net taxable earned surplus" or otherwise, (2) any transfer tax imposed upon
Landlord or any other person or (3) any tax imposed with respect to the sale,
exchange or other disposition by Landlord of any Property or the proceeds
thereof, nor
6
<PAGE> 13
in lieu thereof, in which case the substitute tax, assessment, tax levy or
charge shall be deemed to be an Imposition.
"IMPROVEMENTS" shall have the meaning ascribed to such term in clause (b)
of Article II.
"INITIAL BASE RENT" shall mean the amount of Base Rent in the initial year
of the Term.
"INITIAL INVESTMENT COST" shall mean $2,621,477.83.
"INSURANCE REQUIREMENTS" shall mean all terms and conditions of any
insurance policy required by this Lease and all requirements of the issuer of
any such insurance policy.
"LAND" shall mean all of that certain real property situated in Douglas,
Arizona and more particularly described in Exhibit A attached hereto and
incorporated herein by reference, and any other parcel of land acquired or
leased and made subject to this Lease in connection with a Capital Addition.
"LANDLORD GROUP" shall mean any one or more of Landlord, AHP, any
Affiliate of Landlord or AHP and any shareholder of AHP.
"LANDLORD'S TOTAL INVESTMENT" shall mean an amount equal to the sum of (y)
the Initial Investment Cost and (z) all Capital Additions Costs pertaining to
the Property paid for by Landlord pursuant to Section 11.2 of the Lease.
"LANDLORD'S TRANSACTION EXPENSES" shall mean all reasonable out-of-pocket
expenses incurred by Landlord in connection with (i) the preparation of this
Lease, the Purchase Agreement and any Substitute Lease and the instruments
contemplated hereunder and thereunder, and any other instruments required to be
executed and delivered by Tenant to Landlord in connection, herewith or
therewith (whether or not the transactions hereby or thereby contemplated shall
be consummated) and (ii) the transactions contemplated to be performed hereunder
and thereunder, including but not limited to the reasonable fees and
disbursements of Landlord's legal counsel, title insurance premiums, recording
taxes and fees, survey fees, valuation or appraisal fees. engineering fees and
architects' fees.
"LEASE" shall mean this document, as the same may be amended from time to
time in accordance herewith.
"LEASE RESERVE FUND" shall have the meaning ascribed thereto in Section
29.3(c).
"LEASE YEAR" shall mean the period commencing on the Commencement Date and
ending on the first anniversary thereof, except that if the Commencement date is
other than the first day of a calendar month, the first Lease Year shall end 12
months from the last day of the calendar month immediately preceding the
Commencement Date. Thereafter, each Lease Year shall be
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the 12 month period beginning on the next day following expiration of the
preceding Lease Year. If the Tenn ends prior to the last day of a Lease Year,
the final Lease Year shall be deemed to end on the day the Term ends.
"LEASES" shall mean the Lease, the Arkansas Manor Lease, the Cornerstone
Care Lease and the Safford Care Lease, collectively.
"LEGAL REQUIREMENTS" shall mean all federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, common law, decrees and injunctions affecting the Property or the
maintenance, construction, use, alteration, occupancy or operation thereof,
whether now or hereafter enacted and in force (including any of the foregoing
which may require repairs, modifications or alterations in or to the Property),
all permits, licenses, certificates, franchises, authorizations, land use
entitlements, zoning and regulations relating thereto, and all covenants,
conditions, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property.
"MINIMUM REPURCHASE PRICE" shall mean the Initial Investment Cost, plus
the Capital Additions Cost of any Capital Additions financed or paid for by
Landlord, less the net amount (after deduction of all reasonable legal fees and
other costs and expenses, including without limitation expert witness fees,
incurred by Landlord in connection with obtaining any such proceeds or awards)
of any proceeds of insurance paid to and retained by Landlord in accordance with
Article XV of this Lease and of any Awards received by Landlord and not applied
to restoration of the Property in accordance with Article XVI of this Lease.
"NM" shall mean National Health Investors, Inc.
"NOTICE" shall mean a notice given pursuant to Section 30.8 hereof.
"OFFICER'S CERTIFICATE" shall mean a certificate of Tenant signed by the
chief financial officer or another officer authorized so to sign by resolutions
adopted by the board of directors or the articles of incorporation or by-laws of
the general partner of the Tenant or by any other person whose power and
authority to act has been authorized by delegation in writing by the chief
financial officer of the general partner of the Tenant.
"OVERDUE RATE" shall mean, as of a specified date, a rate of interest
equal to the Prime Rate plus three percent, but in no event greater than the
maximum rate of interest then permitted under applicable law.
"PAYMENT DATE" shall mean any due date for the payment of any installment
of Base Rent.
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"PERMITTED ENCUMBRANCES" shall mean the matters, if any, set forth in
Exhibit B attached hereto and incorporated herein by reference.
A "PERSON" shall mean any natural person, corporation, limited liability
company, business trust, association, company, partnership or government (or any
agency or political subdivision thereof) or, for purposes of the definition of
"Change of Control" herein, any group acting in concert (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934).
"PRIMARY INTENDED USE" shall mean a long-term care facility licensed by
the State and such additional uses which are licensed or applied for on the date
hereof or are permitted by Landlord from time to time hereunder.
"PROPERTIES" shall mean the Property subject to the Leases, collectively.
"PROPERTY" shall have the meaning ascribed to such term in Article II.
"PURCHASE AGREEMENT" shall have the meaning given to that term in the
Assignment.
"RENT" shall mean the Base Rent and Additional Charges.
"SAFFORD CARE LEASE" shall mean that certain lease entered into between
Landlord and Safford Care, Inc., a Colorado corporation, as of July 28, 1995
with respect to that certain property known as Safford Care Center, a 128 bed
long-term care property located in Safford, Arizona.
"SALE" shall have the meaning specified in Section 26.2.
"SECURITY AGREEMENT" shall mean the Security and Pledge Agreement of even
date between Tenant, as Debtor, and Landlord, as Secured Party.
"SECURITY LETTER OF CREDIT" shall have the meaning ascribed thereto in
Section 29.3.
"SIGNATURE GUARANTY" shall mean that certain Guaranty of even date
herewith executed by Signature Health Care Corporation in favor of Landlord.
"STATE" shall mean the State of Arizona.
"TAKING" shall mean a taking or voluntary conveyance during the Term
hereof of all or any part of the Property, or any interest therein, right with
respect thereto or use thereof, as a result of, incidental to, or in settlement
of any condemnation or other eminent domain proceedings affecting such Property,
regardless of whether such Proceedings shall have actually been commenced.
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"TANGIBLE NET WORTH" shall mean, as of the date of determination, the sum
of the following for Tenant and its consolidated subsidiaries, if any, on a
consolidated basis, determined in accordance with generally accepted accounting
principles (a) the amount of capital or stated capital (after deducting the cost
of any shares held in the applicable entity's treasury); plus (b) the amount of
capital surplus and retained earnings; or (c) in the case of a capital or
retained earnings deficit, minus the amount of such deficit and less (d) the
amount, if any, carried on the books of the entity and any consolidated
subsidiaries of the entity for goodwill, patents, trademarks, copyrights,
licenses, and other assets which are properly classified as intangible assets
under generally accepted accounting principles.
"TENANTS" shall mean Arkansas, Inc., Cornerstone Care, Inc., Douglas
Manor, Inc. and Safford Care, Inc., collectively.
"TENANT'S PERSONAL PROPERTY" shall mean all machinery, equipment,
furniture, furnishings, movable walls or partitions, computers or other personal
property, and consumable inventory and supplies, including, without limiting the
generality of the foregoing, sterilizer units, scrub sinks, mail boxes, desks,
lamps, chairs, beds, bedstands, surgical lamps, water stills, fume hoods,
non-affixed cabinetry, tables, and similar movable equipment, owned by Tenant
and used or useful in Tenant's business on the Land, but in no event any items
included within the definition of Equipment or Fixtures.
"TERM" shall mean the Fixed Term and any Extended Terms, as the context
may require, unless earlier terminated pursuant to the Provisions of this Lease.
"TOTAL RENT" shall mean the sum of Base Rent and Additional Charges.
"TRANSFER PAYMENT DATE" shall mean the first Business Day of each calendar
month occurring during the Tenn hereof.
"UNAVOIDABLE DELAYS" shall mean delays due to strikes, lockouts, inability
to procure materials, power failures, acts of God, governmental restrictions,
enemy action, civil commotion, unavoidable casualty and other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto.
"YANKEE CREEK GUARANTY" shall mean that certain Guaranty of even date
herewith executed by Yankee Creek Management Services LLC in favor of Landlord.
ARTICLE II
LEASE OF PROPERTY
Landlord hereby leases, demises and lets to Tenant, and Tenant hereby
hires, takes and leases from Landlord, upon the terms and subject to the
conditions hereinafter set forth, TO
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HAVE AND TO HOLD, all of Landlord's right, title and interest in and to all of
the following (the "PROPERTY"):
(a) the Land;
(b) all buildings, structures and other improvements of every kind,
including but not limited to the Facility, all buildings and structures
hereafter constructed upon the Land and all alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas, roadways and other related on-site and off-site improvements appurtenant
to such buildings and structures presently or hereafter situated upon the Land,
and any and all Capital Additions paid for by Landlord pursuant to Section 11.2
of this Lease (the "IMPROVEMENTS");
(c) all machinery and equipment and all other tangible personal property,
fittings, appliances, apparatus, furniture, furnishings now and hereafter
located on, affixed to or used in connection with the Facility;
(d) all easements, licenses, rights-of-way and appurtenances relating to
the Land and the Improvements); and
(e) all "fixtures" as that term is defined in the State now and hereafter
located in, on or used and incorporated into the Land or Improvements (the
"Fixtures").
ARTICLE III
TERM OF LEASE
3.1 TERM OF LEASE. The initial term of this Lease shall commence on July
28, 1995 ("COMMENCEMENT DATE"), and, unless extended or terminated earlier in
accordance with the provisions of this Lease, shall remain in effect until June
30, 2005 (the "FIXED TERM"). Notwithstanding the foregoing, if, for any reason,
through no fault of Landlord, Landlord cannot deliver possession of the Property
to Tenant on the Commencement Date, Landlord shall not be subject to any
liability, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder or extend the Term hereof, but in such case,
Tenant shall not be obligated to pay Rent or to perform any other obligation of
Tenant under this Lease until possession of the Property is tendered to Tenant.
3.2 OPTION TO EXTEND TERM OF LEASE.
(a) Subject to the provisions of Paragraph (c) below, Landlord
hereby grants to Tenant an option to extend the term of the Lease, for three
additional consecutive ten-year renewal terms (each, an "EXTENDED TERM," and
collectively, the "EXTENDED TERMS"). Each of the Extended Terms shall be upon
the same terms and conditions as those set forth for the Fixed Term except that
Base Rent shall be the then current Fair Market Rental which, unless otherwise
mutually agreed to by Landlord and Tenant, shall be determined by appraisal
pursuant
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to the provisions of Article XXV; provided that the annual Base Rent for each
Extended Term shall not be less than 102 1/2% of the sum of Base Rent payable
during the last year of the Fixed Term or preceding Extended Term, as the case
may be. The Base Rent for the Extended Term provided for herein for the second
and each subsequent Lease Year of the Extended Term shall be increased to an
amount equal to one hundred two and one-half percent (102 1/2%) of the Base Rent
for the preceding twelve month period, calculated by applying such percentage
increases on a cumulative basis to the Base Rent payable during each of the
preceding Lease Years. Each such option may only be exercised by Tenant if, at
the time such option is exercised, an Event of Default shall not exist and be
continuing, and shall be exercised by Tenant by delivery of Notice to that
effect to Landlord not less than 180 days but not more than 360 days prior to
the date upon which this Lease otherwise would terminate. Tenant's exercise of
any option to extend the term of this Lease for an extended term pursuant to
this Section 3.2 shall constitute Tenants' irrevocable and binding commitment to
lease the Property on the terms stated in this Lease for the whole of such
Extended Term. If Tenant is unable to exercise any option due to the provisions
of this Lease, the time during which such option may be exercised shall not be
extended or enlarged. The failure of Tenant to exercise any of the options for
the Extended Terms within the respective times specified in this Section shall
thereby terminate any remaining such options.
(b) Time is strictly of the essence with respect to the requirement
that Tenant gives timely Notice of its exercise of any options hereunder,
including, but not limited to, the options for the Extended Terms, and Tenant's
failure timely to exercise any option strictly in accordance with its terms
shall constitute a material, irredeemable and incurable failure to satisfy a
condition precedent to the vesting of any rights in Tenant pursuant to such
option, and Tenant hereby expressly waives any right to claim relief from
forfeiture, or any other form of equitable relief, from consequences of an
untimely exercise of any such option strictly in accordance with its terms. The
implied covenant of good faith and fair dealing under this Lease shall not be
construed to impose upon Landlord any obligation to notify Tenant in advance of
the impending deadline for the exercise of any option hereunder, nor shall it
obligate Landlord to excuse the tardy exercise of any option however slight.
(c) Unless Landlord shall otherwise consent in its sole discretion,
Tenant's right to extend the Term of the Lease is subject to the condition that
upon any such extension, the terms of all of the other Leases will be extended
concurrently.
ARTICLE IV
RENT
4.1 PAYMENT OF LANDLORD'S TRANSACTION EXPENSES. On the Commencement Date,
Tenant shall pay to Landlord all Landlord's Transaction Expenses. Landlord shall
furnish Tenant with reasonable documentation concerning Landlord's Transaction
Expenses.
4.2 PAYMENT OF BASE RENT AND ADDITIONAL CHARGES. During the Term, Tenant
shall pay to Landlord at the times specified herein, in lawful money of the
United States of America,
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without right of abatement, deduction, counterclaim, defense, reduction,
recoupment or offset, by wire transfer or ACH Transfer of Federal Funds to such
account or accounts as Landlord may designate from time-to-time in a Notice or
by check delivered to Landlord at the address in Section 30.8, or at such other
place as Landlord may designate in writing, the Base Rent and the Additional
Charges.
4.3 BASE RENT. Commencing on the first Business Day of the first full
calendar month occurring coincident with or after the Commencement Date, and
thereafter, for any Base Rent payment by wire transfer or ACH Transfer on the
Transfer Payment Date, and if by check, Base Rent payment is due on the Check
Payment Date, for the period beginning on the first Business Day and ending on
the last day of the Term hereof, Tenant shall pay to Landlord an amount
calculated by dividing (x) Base Rent by (y) 12, provided that the first payment
of Base Rent shall include an additional payment for any partial calendar month
occurring between the Commencement Date and the date of the first payment of
Base Rent. Any payment of Base Rent for a period of less than one calendar month
shall be prorated based upon the number of days for which such Base Rent is due
divided by 30.
4.4 RENT ADJUSTMENT. The Base Rent provided for herein for the second and
each subsequent Lease Year of the Term shall be increased to an amount equal to
one hundred two and one-half percent (1 02 1/2 %) of the Base Rent for the
preceding twelve month period, calculated by applying such percentage increases
on a cumulative basis to the Base Rent payable during each of the preceding
Lease Years.
4.5 ADDITIONAL CHARGES. Subject to Article XIII hereof, Tenant shall pay
and discharge as and when due and payable all Impositions and other amounts,
liabilities and obligations which Tenant assumes or agrees to pay under this
Lease. If Tenant fails or refuses to pay any of the items referred to in the
immediately preceding sentence, Tenant shall promptly pay and discharge every
fine, penalty, interest and cost which may arise or accrue for the non-payment
or late payment of such items. The aforementioned amounts, liabilities,
obligations, Impositions, fines, penalties, interest and costs are referred to
herein as "ADDITIONAL CHARGES." The Additional Charges shall constitute Rent
hereunder. If any Rent (but as to Additional Charges, only those which are
payable directly to Landlord) shall not be paid on its due date, Tenant shall
pay to Landlord on demand, as an Additional Charge, a late charge to the extent
permitted by law, computed at the Overdue Rate on the amount of such Rent from
the due date of such Rent to the date such Rent is paid. Any payment by Tenant
of Additional Charges to Landlord pursuant to any requirement of this Lease
shall relieve Tenant of its obligation to pay such Additional Charges to the
entity to which they would otherwise be paid.
4.6 TRIPLE NET LEASE.
(a) TRIPLE NET LEASE. This Lease is what is commonly called a "net
net net lease", it being understood that Landlord shall receive all Rent as
provided in this Article free and clear of any and all Impositions,
encumbrances, charges, obligations or expenses of any nature whatsoever in
connection with the ownership and operation of the Property. In addition
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to the Rent reserved by this Article, except as expressly provided herein to the
contrary, Tenant shall pay to the parties respectively entitled thereto all
Impositions, insurance premiums, operating charges, maintenance charges,
construction costs and any other charges, costs and expenses which arise or may
be contemplated under any provisions of this Lease during the Term hereof. All
of such charges, costs and expenses shall constitute Rent, and upon the failure
of Tenant to pay any such costs, charges or expenses, Landlord shall have the
same rights and remedies as otherwise provided in this Lease for the failure of
Tenant to pay Rent and Landlord shall be indemnified and saved harmless by
Tenant from and against the same. It is the intention of the parties hereto that
this Lease shall not be terminable for any reason by the Tenant and that Tenant
shall in no event be entitled to any abatement of or reduction in Rent payable
under this Lease except as herein expressly provided. Any present or future law
to the contrary shall not alter this agreement of the parties.
(b) BANKRUPTCY. Tenant covenants and agrees that it shall remain
obligated under this Lease in accordance with its terms, and that Tenant shall
not take any action to terminate, rescind or avoid this Lease, notwithstanding
the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting Landlord or
any assignee of Landlord in any such proceeding and notwithstanding any action
with respect to this Lease which may be taken by any trustee or receiver of
Landlord or any such assignee in any such proceeding or by any court in any such
proceeding.
(i) In the event that Tenant shall file a petition, or an
order for relief is entered against Tenant, under Chapter 7, 9, 11 or 13 of the
Bankruptcy Code, 11 U. S. C. S. 101 et seq. (the "BANKRUPTCY CODE") and the
trustee of Tenant shall elect to assume this Lease for the purpose of assigning
the same, such assumption or assignment may only be made if all the conditions
of subsections (ii) and (iii) of this Section 4.8(b) are satisfied. If the
trustee or debtor-in-possession, as the case may be, shall fail to elect to
assume this Lease within 60 days after such trustee shall have been appointed,
or the date of filing of the petition, at Landlord's election (and in its sole
and absolute discretion) this Lease shall be deemed to have been rejected and,
in such event, Landlord shall thereupon immediately be entitled to possession of
the Property without further obligation to the trustee or Tenant, and this Lease
shall be cancelled, but Landlord's right to be compensated for damages in the
bankruptcy proceedings shall survive such cancellation.
(ii) No election to assume this Lease shall be effective
unless in writing and addressed to Landlord and unless, in Landlord's business
judgment, all the following conditions, which Landlord and Tenant acknowledge to
be commercially reasonable, have been satisfied:
(A) The trustee (or Tenant, as debtor-in-possession) has
cured or has provided Landlord adequate assurance that:
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(I) within ten days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all monetary
defaults under this Lease; and
(II) within 30 days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all non-monetary
defaults under this Lease or commence to cure within 30 days and thereafter
diligently pursue to completion.
(B) The trustee (or debtor-in-possession) has
compensated, or has provided to Landlord adequate assurance that within ten days
from the date of assumption Landlord will be compensated, for any pecuniary loss
incurred by Landlord arising from the default of the Tenant or the trustee (or
the debtor-in-possession) as recited in Landlord's written statement of
pecuniary loss sent to the trustee (or debtor-in-possession);
(C) The trustee (or debtor-in-possession) has provided
Landlord with adequate assurance of the future performance of each of Tenant's
obligations under this Lease, provided that:
(I) the trustee (or debtor-in-possession) shall
also deposit with Landlord, as security for the timely payment of Rent, an
amount equal to (w) three months' Base Rent and (x) the last quarterly payment
of Percentage Rent and (y) the other monetary charges accruing under this Lease;
and
(II) the obligations imposed upon the trustee (or
debtor-in-possession) shall continue with respect to Tenant after completion of
bankruptcy proceedings.
(D) Landlord has determined that the assumption of the
Lease will not:
(I) breach any provision in any agreement by which
Landlord is bound relating to the Property; or
(II) disrupt, in Landlord's reasonable judgment,
the reputation and profitability of the Property.
(E) For purposes of this subsection, "adequate
assurance" shall mean:
(I) Landlord shall determine that the trustee (or
debtor-in-possession) has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative expenses
to assure Landlord that the trustee (or debtor-in-possession) will have
sufficient funds to fulfill the obligations of Tenant under this Lease; and
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(II) an order shall have been entered segregating
sufficient cash payable to Landlord, or there shall have been granted a valid
and perfected first lien and security interest in property of the Tenant or
trustee (or debtor-in-possession), acceptable as to value and kind to Landlord,
to secure to Landlord the obligation of the Trustee (or debtor-in-possession) to
cure the monetary or nonmonetary defaults under this Lease within the time
periods set forth above.
(iii) If the trustee (or debtor-in-possession) has assumed the
Lease pursuant to all the provisions of subsections (i) and (ii) of this Section
4 8(b), for the purpose of assigning (or electing to assign) Tenant's interest
under this Lease or the estate created thereby to any other person, such
interest or estate may be so assigned only if Landlord shall acknowledge in
writing that the intended assignee has provided adequate assurance of future
performance of all the terms, covenants and conditions of this Lease to be
performed by Tenant. For purposes of this subsection (iii), "adequate assurance
of future performance" means that Landlord shall have ascertained that each of
the following conditions has been satisfied:
(A) the assignee has submitted a current financial
statement audited by a certified public accountant which shows tangible net
worth and working capital in amounts determined to be sufficient by Landlord to
assure the future performance by such assignee of Tenant's obligations under
this Lease;
(B) if requested by Landlord, the assignee shall have
obtained guarantees in form and substance satisfactory to Landlord from one or
more persons who satisfy Landlord's standards of creditworthiness;
(C) Landlord has obtained all consents to waivers from
any third parties required under any lease, mortgage, financing arrangement or
other agreement by which Landlord is bound to enable Landlord to permit such
assignment;
(D) the assignee has deposited an adequate security
deposit with Landlord; and
(E) the assignee has demonstrated that its intended use
of the Property is consistent with the terms of this Lease and will not diminish
the reputation of the Facility, or violate any "exclusive" which has been
granted by Tenant to any permitted subtenant in the Property.
(iv) When, pursuant to the Bankruptcy Code, the trustee (or
debtor-in-possession) shall be obligated to pay reasonable use and occupancy
charges for the use of the Property or any portion thereof, such charges shall
not be less than the Rent.
(v) Neither Tenant's interest in the Lease, nor any lesser
interest of Tenant herein, nor any estate of Tenant hereby created, shall pass
to any trustee, receiver, assignee for the benefit of creditors or any other
person by operation of law or otherwise unless
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Landlord shall consent to such transfer in writing. No acceptance by Landlord of
rent or any other payments from any such trustee, receiver, assignee or person
shall be deemed to have waived, nor shall it waive the need to obtain Landlord's
consent to, or Landlord's right to terminate this Lease for, any transfer of
Tenant's interest under this Lease without such consent.
(vi) Any person to whom this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all the obligations arising under this Lease on or after the date
of such assignment. Any such assignee shall, upon demand, execute and deliver to
Landlord an instrument confirming such assumption.
ARTICLE V
IMPOSITIONS
5.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, or cause to be paid, all
Impositions prior to delinquency and before any fine, penalty, interest or cost
may be added for non-payment (subject to Tenant's rights of contest pursuant to
the provisions of Article XIII). Such payments shall be made directly to the
authorities levying such Impositions, if possible. Tenant shall, promptly upon
request by Landlord, furnish to Landlord original or certified copies of
receipts or other reasonably satisfactory evidence of such payments. Tenant's
obligation to pay Impositions shall be deemed absolutely fixed upon the date
such Impositions become a lien upon the Property or any part thereof.
Notwithstanding the foregoing, if any such Imposition may, at the option of the
payor, lawfully be paid in installments (whether or not interest shall accrue on
the unpaid balance of such Imposition), and so long as no Event of Default shall
have occurred hereunder and be continuing, Tenant may pay the same (and shall
pay any accrued interest on the unpaid balance of such Imposition) in
installments, and in such event shall pay such installments (subject to Tenant's
right of contest pursuant to the provisions of Article XIII) as the same become
due and before any fine, penalty, premium, further interest or cost is added
thereto. Landlord shall, at its expense and to the extent required or permitted
by applicable laws and regulations, prepare and file all returns with respect to
Landlord's net income, gross receipts, sales, use, single business, transaction
privilege, rent, ad valorem and franchise taxes, and with respect to taxes on
Landlord's capital stock. Tenant shall, at its expense, and to the extent
required or permitted by applicable laws and regulations, prepare and file all
other tax returns and reports with respect to any Imposition as may be required
of Tenant by governmental agencies or authorities. If any refund shall be due
from any taxing authority with respect to any Imposition paid by Tenant, the
same shall be paid over to and retained by Tenant unless an Event of Default
shall have occurred hereunder and be continuing, in which case such refund shall
be paid over to and retained by Landlord. Any such funds retained by Landlord
due to an Event of Default shall be applied as provided in Article XVII.
Landlord and Tenant shall, each upon a request by the other, provide such
information as is maintained by the party to whom the request is made with
respect to the Property as may be reasonably necessary to prepare any required
returns or reports. If any governmental agency or authority classifies any
property covered by this Lease personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may legally so file.
Landlord, to the extent it possesses the same,
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and Tenant, to the extent it possesses the same, will provide to the other
party, promptly upon request, cost and depreciation records reasonably necessary
for filing returns for any property so classified as personal property. If
Landlord is legally required to file any personal property tax returns, Landlord
shall provide Tenant with copies of any assessment notices with respect thereto
in sufficient time for Tenant to file a protest with respect thereto if it so
elects pursuant to Article XIII. If no Event of Default is then continuing,
Tenant may at its option and sole cost and expense, upon written notice to
Landlord, protest, appeal or institute such other proceedings as Tenant
reasonably may deem appropriate to effect a reduction of real estate or personal
property assessments so long as such action is conducted in good faith and with
due diligence. In such event, Landlord, at Tenant's sole cost and expense, shall
fully cooperate with Tenant in such protest, appeal, or other action. Tenant
hereby agrees to indemnify, defend, save and hold Landlord harmless from and
against any and all losses, demands, claims, obligations and liabilities against
or incurred by Landlord in connection with such cooperation by Landlord.
Billings by either party to the other for reimbursement of personal property
taxes shall be accompanied by copies of a bill therefor and evidence of payments
thereof which identify the personal property with respect to which such payments
have been made.
5.2 NOTICE OF IMPOSITIONS. Landlord shall give prompt Notice to Tenant of
all Impositions payable by Tenant hereunder of which Landlord at any time has
knowledge. Notwithstanding the foregoing, however, Landlord's failure to give
any such Notice shall in no way diminish Tenant's obligations hereunder to pay
such Impositions, but Landlord shall be responsible for any fine, penalty or
interest resulting from its failure to give such notice and any default by
Tenant hereunder shall be obviated for a reasonable time after Tenant receives
Notice of any Imposition which it is obligated to pay.
5.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed with respect to the tax
period during which the Term expires or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such expiration or termination, so that Tenant is only obligated
to pay that portion of such Imposition(s) pertaining to the tax period within
the Term. The obligation of Tenant to pay its prorated share of Impositions
shall survive expiration or earlier termination of this Lease.
5.4 UTILITY CHARGES. Tenant shall pay or cause to be paid all charges for
all utilities, including but not limited to electricity, power, gas, oil and
water, used in the Property during the Term.
5.5 INSURANCE PREMIUMS. Tenant shall pay or cause to be paid all premiums
for insurance coverage required to be maintained pursuant to Article XIV.
ARTICLE VI
TERMINATION OR ABATEMENT OF LEASE
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Without limiting the generality of Section 4.6, Tenant, to the full extent
permitted by law, shall remain bound by this Lease in accordance with its terms.
Tenant shall not take any action without the prior written consent of Landlord
to modify, surrender or terminate this Lease. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements, and
Rent and all other sums shall continue to be payable by Tenant hereunder in any
event unless the obligation of Tenant to pay the same terminates pursuant to the
express provisions of this Lease or by termination of this Lease (other than by
reason of an Event of Default). Without limiting the generality of the
immediately preceding sentence, Tenant shall not seek or be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off against Rent,
nor shall the respective obligations of Landlord and Tenant be otherwise
affected by reason of: (a) any damage to, or destruction of, all or any portion
of the Property from whatever cause or any Taking of all or any portion of the
Property; (b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of all or any portion of the Property, or the interference with
such use or with Tenant's quiet enjoyment of the Property by any person or
entity other than Landlord, or by reason of eviction by paramount title; (c) any
claim which Tenant has or may have against Landlord by reason of any default or
breach of any warranty by Landlord under this Lease or under any other agreement
between Landlord and Tenant or to which Landlord and Tenant are parties; (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceeding affecting Landlord or any assignee
or transferee of Landlord; or (e) any other cause, whether similar or dissimilar
to any of the foregoing (other than a discharge of Tenant from any such
obligations as a matter of law). Tenant hereby specifically waives all rights,
arising from any occurrence whatsoever, which (i) may now or hereafter be
conferred upon it by law to modify, surrender or terminate this Lease or quit or
surrender all or any portion of the Property or (ii) entitle Tenant to any
abatement, reduction, suspension or deferment of Rent or other sums payable by
Tenant hereunder.
ARTICLE VII
OWNERSHIP OF PROPERTY
7.1 OWNERSHIP OF THE PROPERTY. As between Landlord and Tenant the Property
is, and throughout the Term shall continue to be, the property of Landlord.
Tenant has only the right to the exclusive possession and use of the Property,
upon the terms and subject to the conditions set forth in this Lease.
7.2 TENANT'S PERSONAL PROPERTY; SECURITY INTEREST. Tenant may, at its
expense, install, affix, assemble or place on the Property any items of Tenant's
Personal Property and may, subject to the conditions set forth below, remove
Tenant's Personal Property upon the expiration or earlier termination of this
Lease or in the ordinary course of business (other than a termination upon an
Event of Default) so long as any damage caused by such removal shall be promptly
repaired by Tenant. Notwithstanding the foregoing, in order to secure the
payment and the performance of all of Tenant's obligations under this Lease,
Tenant hereby grants to Landlord a security interest in (and hereby pledges and
collaterally assigns to Landlord) all of Tenant's rights, title and interest in
and to Tenant's Personal Property, all whether now existing
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or hereafter acquired and hereby further agrees to execute and deliver to
Landlord, forthwith after demand by Landlord from time to time, any security
agreement in a reasonable form determined by Landlord and such additional
writings and instruments, including without limitation financing statements, as
may be reasonably required by Landlord for the purpose of effectuating the
intent of this sentence and Tenant agrees that Landlord shall have with respect
to all Personal Property all rights and remedies of a secured party under the
Uniform Commercial Code as adopted in the State, including, but not limited to,
the right after the occurrence of an Event of Default to use or sell Tenant's
Personal Property, and Landlord shall not be required to remove any of such
Personal Property from the Property and in no event shall Landlord be liable to
Tenant for use of such Personal Property. Pending disposition of such Personal
Property by Landlord, Landlord shall be entitled to use such Personal Property
in connection with the operation (if any) of the Facility. Tenant shall not
permit the Property or Personal Property to become subject to any liens or
encumbrances of any kind without first obtaining the prior written consent of
Landlord, except for liens or encumbrances permitted by Section 29. 1 (a). This
Lease and the security interest granted Landlord hereby shall be subordinate to
any purchase money security interest or capital lease permitted under Section
29. 1 (a). Landlord further agrees that Tenant may lease Personal Property, and
Landlord shall execute and deliver such agreements as may be reasonably required
by any permitted equipment lessor or the holder of a permitted purchase money
security interest to confirm that Landlord's lien on the Personal Property in
question is subordinate to the rights of such equipment lessor or lender and in
each case Tenant shall use its best efforts to obtain from the holder of the
purchase money debt or lessor of Personal Property, as the case may be, its
agreement to (i) notify Landlord or its successors and assigns of any default by
Tenant, (ii) allow Landlord or its successors and assigns an opportunity to cure
any default, (iii) recognize Landlord or its successors and assigns as
succeeding to Tenant's rights under the agreement in question and to the
undisturbed use of the equipment, provided that Landlord fully complies with the
terms of such agreement. Tenant shall provide and maintain on the Property
during the entire Term such Tenant's Personal Property as shall be necessary to
operate the Facility in compliance with all licensure and certification
requirements, in substantial compliance with all Legal Requirements and
Insurance Requirements and otherwise in accordance with customary practice in
the health care industry with respect to the Primary Intended Use or other uses
then conducted on the Property by Tenant and permitted hereunder. All Tenant's
Personal Property not removed by Tenant within thirty days following the
expiration or earlier termination of this Lease shall be considered abandoned by
Tenant and may be appropriated, sold, destroyed or otherwise disposed of by
Landlord without first giving Notice thereof to Tenant and without any payment
or obligation to account to Tenant. Tenant shall, at its sole cost and expense,
restore the Property to the condition required by Section 10.1(d), including
repair of all damage to the Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant or Landlord, except that caused by the
gross negligence or willful misconduct of Landlord.
ARTICLE VIII
CONDITION AND USE OF PROPERTY
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8.1 CONDITION OF THE PROPERTY. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AND SHALL BE SUBJECT TO NO LIABILITY WITH
RESPECT TO, NOR SHALL THE VALIDITY OF THIS LEASE BE AFFECTED BY ANY CLAIM,
DEMAND OR CAUSE OF ACTION REGARDING THE PROPERTY OR ANY PART THEREOF, EITHER AS
TO ITS DESIGN, CONDITION OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT
OR PATENT. TENANT ACKNOWLEDGES AND AGREES THAT THE PROPERTY HAS BEEN INSPECTED
BY TENANT, HAS BEEN APPROVED FOR OCCUPANCY BY ALL GOVERNMENT AGENCIES HAVING
JURISDICTION THEREOVER AND IS SATISFACTORY TO IT IN ALL RESPECTS, INCLUDING FOR
ITS PRIMARY INTENDED USE, AND THAT TENANT IS LEASING THE PROPERTY "AS IS" IN ITS
PRESENT CONDITION, AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS, LICENSES, LEGAL REQUIREMENTS,
MORTGAGES, DEEDS OF TRUST, ASSIGNMENTS OF LEASES, FIXTURE FILINGS AND OTHER
FINANCING INSTRUMENTS AND ANY AND ALL OTHER MATTERS OF RECORD AND OTHERWISE
EXCEPT TO THE EXTENT ANY OF THE FOREGOING WERE CAUSED OR CREATED BY
LANDLORD, AND (B) MATTERS WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE
PROPERTY OR BY AN ACCURATE SURVEY OF THE LAND. TENANT WAIVES ANY AND ALL CLAIMS,
DEMANDS AND CAUSE OR CAUSES OF ACTION HERETOFORE OR HEREAFTER ARISING AGAINST
LANDLORD WITH ]RESPECT TO THE CONDITION OF THE PROPERTY.
8.2 USE OF THE PROPERTY.
(a) Tenant has obtained or duly applied for and shall maintain in
effect all permits, licenses, authorizations and approvals needed to use and
operate the Property and the Facility for Tenant's Primary Intended Use in
accordance with all Legal Requirements.
(b) Throughout the entire Term, Tenant shall use or cause to be used
the Property in accordance with its Primary Intended Use and for such other uses
as may be necessary in connection with or incidental to such use. Tenant shall
not use the Property or any portion thereof for any other purpose whatsoever
without the prior written consent of Landlord. The parties agree that Landlord's
consent will not be deemed to be unreasonably withheld if, in the reasonable
opinion of Landlord, the Tenant's proposed use of the Property will
significantly alter the character or purpose or detract from the value or
operating efficiency of the Property, or significantly impair the
revenue-producing capability of the Property. No use shall be made or permitted
to be made of the Property and no acts shall be done which violate any Legal
Requirements or Insurance Requirements or which will cause the cancellation of
any insurance policy covering the Property or any part thereof, nor shall Tenant
sell or otherwise provide to patients therein, or permit to be kept, used or
sold in, about or under the Property any Hazardous Substance (except in strict
compliance with all Legal Requirements, but only as may
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be necessary to the operation of the Facility, with respect to such substances
other than asbestos and hydrocarbons) or any other article which may be
prohibited by the Legal Requirements or Insurance Requirements. Tenant shall, at
its sole cost, comply with all of the requirements pertaining to the Property of
any insurance board, association, organization or company necessary for the
maintenance of the insurance required pursuant to this Lease,
(c) Tenant shall not commit or suffer to be committed any waste nor
shall Tenant cause or permit any nuisance on the Property.
(d) Tenant shall neither suffer nor permit all or any portion of
Tenant's Personal Property or the Property, including any Capital Addition
whether or not financed or paid for by Landlord, to be used in such a manner as
(i) may impair the owner's title thereto or to any portion thereof or (ii) may
make possible a claim or claims of adverse usage, adverse possession or implied
dedication of all or any portion of the Property to the public, except as is
necessary in the ordinary and prudent operation of the Property.
8.3 Landlord to Grant Easements. Subject to the provisions of this Section
8.3, Landlord shall, from time to time so long as no Event of Default has
occurred and is continuing, at the request of Tenant and at Tenant's sole cost
and expense (but subject to the approval of Landlord, which approval shall not
be unreasonably withheld or delayed), (a) grant easements and other rights in
the nature of easements burdening the Property for the benefit of real property
adjacent to the Land or for the exclusive use and enjoyment of persons or
entities specified by Tenant in such request but only as may be necessary for
the operations of the Facility; (b) dedicate or transfer unimproved portions of
the Property for road, highway or other public purposes but only as may be
necessary for the operation of the Facility; (c) execute petitioner to have the
Property annexed to any municipal corporation or utility district; and (d)
execute amendments to any covenants, conditions, restrictions and equitable
servitudes affecting the Property, but only if each such grant, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of the
business of Tenant on the Property and does not materially reduce the value of
the Property in Landlord's reasonable discretion.
8.4 HAZARDOUS SUBSTANCES.
(a) All operations or activities upon, or any use or occupancy of
the Property, or any portion thereof, by Tenant, or any agent, contractor,
employee or subtenant of Tenant shall at all times during the Term be in all
respects in strict compliance with any and all Legal Requirements and Insurance
Requirements relating to Hazardous Substances, including, but not limited to,
the discharge and removal of Hazardous Substances. Tenant will keep the Property
free and clear of all Hazardous Substances other than those Hazardous Substances
which are necessary for the operation of the Facility (which Hazardous
Substances shall be handled, used and disposed of in strict compliance with the
Legal Requirements and Insurance Requirements) and Tenant shall pay all costs
required properly to use, handle and dispose of all Hazardous Substance and
shall keep the Property free and clear of any lien relating to Hazardous
Substances which may be imposed pursuant to the Legal Requirements and Insurance
Requirements.
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Neither Tenant, nor any agent, contractor, employee or subtenant of Tenant shall
allow the manufacture, storage, voluntary transmission or presence of any
Hazardous Substances over or upon the Property (except in strict compliance with
the Legal Requirements and Insurance Requirements). Landlord shall have the
right at any time with notice to Tenant to conduct an environmental audit of the
Property and Tenant shall cooperate in the conduct of such environmental audit
Furthermore, neither Tenant, nor any agent, contractor, employee or any
subtenant of Tenant shall install or permit to be installed in or on the
Property friable asbestos or any substance containing asbestos or similarly
deemed hazardous by governmental authorities or the Legal Requirements
respecting such materials, and with respect to any such materials currently
present in the Property, shall promptly either, subject to the terms of the
letter agreement of even date herewith between Landlord and Tenant, (x) remove
any material which such Legal Requirements deem hazardous and require be
removed, at its sole cost and expense, or (y) otherwise comply with the Legal
Requirements. Tenant shall promptly notify Landlord in writing of any order,
receipt of any notice of violation or noncompliance with any applicable law,
rule, regulation, standard or order, any threatened or pending action by any
regulatory agency or other governmental authority or any claims made by any
third party relating to Hazardous Substances on, emanations on or from, releases
on or from, or threats of releases on or from any of the Property and shall
promptly furnish Landlord with copies of any correspondence, notices or legal
pleadings in connection therewith. Landlord shall have the right, but shall not
be obligated, to notify any governmental authority of any state of facts which
may come to its attention with respect to Hazardous Substances on, released from
or emanating on or from any part of the Property.
(b) Without limiting Section 22.1, Tenant shall, with the right to
participate in the applicable proceedings, indemnify, protect, defend (with
counsel reasonably approved by Landlord) and hold Landlord, and the directors,
officers, shareholders, employees and agents of Landlord, harmless from any
claims (including, but not limited to, third party claims for personal injury or
real or personal property damage), or natural resources damage, actions,
administrative proceedings (including informal proceedings), judgments, damages,
punitive damages, penalties, fines, costs, liabilities (including sums paid in
settlements of claims), interest or losses, including reasonable attorneys' and
paralegals' fees and expenses (including any such fees and expenses incurred in
enforcing the covenants and obligations of Tenant under this Lease or collecting
any sums due hereunder), consultant fees, and expert fees, together with all
other costs and expenses of any kind or nature ("Costs") that arise directly or
indirectly from or in connection with the presence, suspected presence, release
or threatened release of any Hazardous Substance in or into or at, on, about,
under or within the Property, to the extent that such Costs are not attributable
to the gross negligence or willful misconduct of Landlord. The indemnification
provided in this Section 8.4(b) shall specifically apply to and include claims
or actions brought by or on behalf of employees or contractors of Tenant or
employees or contractors of Tenant, and Tenant hereby expressly waives any
immunity to which Tenant may otherwise be entitled under any industrial workers'
compensation laws. In the event Landlord shall suffer or incur any such Costs,
Tenant shall pay to Landlord the total of all such Costs suffered or incurred by
Landlord upon demand therefor by Landlord. Without limiting the generality of
the foregoing, the indemnification provided by this Section 8.4(b) shall
specifically
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cover Costs, including capital, operating and maintenance costs, incurred in
connection with any investigation or monitoring of site conditions, any cleanup,
containment, remedial, removal or restoration work required or performed by any
federal, state or local governmental agency or political subdivision or
performed by any non-governmental entity or person because of the presence,
suspected presence, release or suspected release of any Hazardous Substance in
or into the air, soil, groundwater, surface water or soil vapor at, on, about,
under or within the Property (or any portion thereof), and any claims of third
parties for loss or damage due to such Hazardous Substance, to the extent that
such Costs are not attributable to the gross negligence or willful misconduct of
Landlord. In addition, such indemnification shall include, but not be limited
to, all loss or -damage sustained by Landlord or any third party to whom
Landlord may be liable due to any Hazardous Substance (i) that is present or
suspected to be present on, about, under or within the Property or (ii) that
migrates, flows, percolates, diffuses or in any way moves onto, into or under
the air, soil, groundwater, surface water or soil vapor at, on, about, under or
within the Property, irrespective of whether such Hazardous Substance shall be
present or suspected to be present on, about, under or within the Property as a
result of any release, discharge, disposal, dumping, spilling or leaking
(accidental or otherwise) onto the Property or caused by any person or entity;
provided, however, that the indemnification obligation arising out of clauses
(i) and (ii) above shall apply solely to the extent that such loss or damage is
not attributable to the gross negligence or willful misconduct of Landlord.
(c) In the event any investigation or monitoring of site conditions
or any clean-up, containment, restoration, removal or other such work ("REMEDIAL
WORK") is required under any applicable Legal Requirements, including, but not
limited to, any judicial order or order of any governmental entity, or in order
to comply with any agreements affecting the Property because of, or in
connection with, any occurrence or event described in Section 8.4(b), Tenant
shall perform or cause to be performed the Remedial Work in compliance with such
law, regulation, order or agreement and subject to the formal review and
approval of Landlord, which approval shall not be unreasonably withheld or
delayed; provided, however, that Tenant may withhold such performance pursuant
to a good faith dispute regarding the application, interpretation or validity of
the law, regulation, order, or agreement, subject to the requirements of Section
8.4(d); provided, further, however, that Landlord shall reasonably cooperate
with Tenant to the extent necessary to deliver such authorizations as may be
required in order for Tenant to perform its obligations under this Section
8.4(c). All Remedial Work shall be performed by one or more contractors,
selected by Tenant and approved in advance in writing by Landlord, which
approval shall not be unreasonably withheld or delayed, and under the
supervision of a consulting engineer, selected by Tenant and approved in advance
in writing by Landlord, which approval shall not be unreasonably withheld or
delayed. All costs and expenses of Remedial Work shall be paid by Tenant,
including, but not limited to, the charges of such contractors and consulting
engineer, and Landlord's reasonable attorneys' and paralegals' fees and other
costs incurred in connection with the monitoring or review of such Remedial
Work. In performing its obligations hereunder, Tenant shall be subrogated to any
rights Landlord may have under any indemnifications or warranties from any
present, future or former owners, tenants or occupants or users of the Property,
to the extent available. In the event Tenant shall fail timely to commence,
diligently to prosecute to completion or to complete to Landlord's
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reasonable satisfaction any necessary Remedial Work, Landlord may, but shall not
be required to, cause such Remedial Work to be performed, and all costs and
expenses thereof paid or incurred by Landlord in connection therewith shall be
Costs within the meaning of Section 8.4(b). Landlord's disapproval of or
dissatisfaction with any Remedial Work shall be deemed to be reasonable so long
as Landlord's requirements for any Remedial Work are consistent with the then
current requirements and standards imposed by prudent institutional investors in
connection with their management of real property. All such Costs shall be due
and payable upon demand therefor by Landlord. If Tenant fails to perform its
obligations hereunder, Landlord shall be subrogated to any rights Tenant may
have under any indemnifications from any present, future or former owners,
tenants or other occupants or users of the Property relating to the matters
covered by this Section 8.4.
(d) Notwithstanding any provision of this Section 8.4 to the
contrary, but without limiting the provisions of Article XIII, Tenant shall be
permitted to contest or cause to be contested, subject to compliance with the
requirements of this Section 8.4(d) and Article XIII, by appropriate action any
Remedial Work requirement, and Landlord shall not perform such requirement on
its behalf, so long as Tenant has given Landlord written notice that Tenant is
contesting or shall contest or cause to be contested the same, and Tenant
actually contests or causes to be contested the application, interpretation or
validity of the law, regulation, order or agreement pertaining to the Remedial
Work by appropriate proceedings conducted in good faith with due diligence,
provided that such contest shall not subject Landlord to civil liability nor
jeopardize Landlord's interest in the Property or affect in any way the payment
of any sums to be paid to Landlord. Tenant shall give such security or
assurances as may be reasonably required by Landlord to insure compliance with
the Legal Requirements pertaining to the Remedial Work (and payment of all
costs, expenses, interest and penalties in connection therewith) and to prevent
any sale, forfeiture or loss by reason of such nonpayment or noncompliance.
(e) The provisions of this Section may be enforced by Landlord
without regard to any other rights and remedies Landlord may have against Tenant
under this Lease and without regard to any limitations on Landlord's recourse as
may be otherwise provided in this Lease Tenant agrees that, notwithstanding any
provision in this Lease to the contrary, a separate action or actions to enforce
Tenant's obligations under this Section 8.4 may be brought and prosecuted
against Tenant. Any costs and other payments required to be paid by Tenant to
Landlord under this Section 8.4 which are not paid on demand therefor shall
thereupon be considered delinquent Tenant shall pay to Landlord immediately upon
demand therefor interest on such overdue amounts, from the date when due until
paid, at the Overdue Rate.
ARTICLE IX
LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
INSTRUMENTS. Subject to the rights of Tenant as provided in Article XIII
relating to permitted contests, Tenant, at its sole cost and expense, shall
promptly (a) comply with all applicable
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Legal Requirements and Insurance Requirements with respect to the use,
operation, maintenance, repair and restoration of the Property, whether or not
compliance therewith shall require structural change in any of the Improvements
or interfere with the use and enjoyment of the Property, and (b) procure,
maintain and comply with all appropriate licenses, certificates of need,
provider agreements and other permits, licenses, franchises and authorizations
required for any use of the Property and Tenant's Personal Property then being
made, and for the proper erection, installation, operation and maintenance of
the Property or any part thereof, including without limitation any Capital
Additions.
9.2 COVENANTS REGARDING LEGAL REQUIREMENTS. Tenant covenants and agrees
that it shall not use the Property or Tenant's Personal Property for any purpose
which violates the Legal Requirements. Tenant has obtained or duly applied for
and shall maintain all appropriate licenses, certificates, permits, provider
agreements, franchises, authorizations and approvals necessary to operate the
Property in its customary manner for the Primary Intended Use, and any other use
conducted on the Property by Tenant and permitted by Landlord hereunder Tenant
may, however, contest the legality or applicability of any such Legal
Requirement as provided in Article XIH hereof.
ARTICLE X
CONDITION OF THE PROPERTY
10.1 MAINTENANCE AND REPAIR.
(a) Tenant, at its sole cost and expense, shall keep the Property
and all private roadways, sidewalks and curbs appurtenant thereto and which are
under Tenant's control in good order, condition and repair and, except as
otherwise expressly provided to the contrary in Article XIV, XV, or XVI with
reasonable promptness, shall make all necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, patent or latent,
foreseen or unforeseen, or arising by reason of a condition existing prior to
the commencement of the Term of this Lease and regardless of the cause
necessitating repair. Tenant shall also be obligated at its expense to make all
repairs, modifications and renovations necessary to comply with all licensing,
safety and health and building code, regulations applicable to the Property so
that it can be legally operated for its Primary Intended Use. All repairs by
Tenant shall, to the extent reasonably achievable, be at least equal in quality
to the original work. Tenant shall not take or omit to take any action, the
taking or omission of which might materially impair the value or the usefulness
of all or any portion of the Property for the Primary Intended Use. Tenant shall
give Landlord ten days prior written notice of any repair, replacement,
modification or renovation pursuant to this Section the cost of which exceeds
$200,000 and, prior to commencing any such repair, replacement, modification or
renovation, shall provide to Landlord either (i) a lien payment and completion
bond in form and substance and issued by a surety reasonably acceptable to
Landlord or (ii) a payment and completion guaranty in form and substance and
executed by a guarantor reasonably acceptable to Landlord, as Tenant may elect.
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(b) Landlord shall not under any circumstances be required to make
any repairs, replacements, alterations, restorations or renewals of any nature
or description to the Property, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, patent or latent, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, nor shall Landlord under any circumstances be
required to maintain the Property in any other way, except as specifically
provided herein. Tenant hereby waives, to the fullest extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law or
equitable principle in effect at the time of the execution of this Lease or
hereafter enacted. Landlord shall have the right to give, record and post, as
appropriate, notices of non-responsibility under any mechanic's lien laws now or
hereafter existing, and any other notices of a similar nature that Landlord may
reasonably elect to give, record or post from time to time during the Term.
(c) Nothing contained in this Lease, and no action or inaction by
Landlord, shall be deemed or construed in any manner as (i) constituting the
consent or request of Landlord, expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to all or any
portion of the Property or (ii) giving Tenant any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such a manner as would permit
the making of any claim against Landlord with respect thereto, or to make any
agreement that may create, or in any way may be the basis for the assertion of
any right, title, interest, lien, claim or other encumbrance upon the estate of
Landlord in all or any portion of the Property.
(d) Unless Landlord conveys title to any of the Property to Tenant
pursuant to the provisions of this Lease, Tenant shall, upon the expiration or
earlier termination of this Lease, vacate and surrender the Property to Landlord
in the condition in which the Property was originally received from Landlord,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Lease, and except for ordinary wear and tear
(but subject to the obligation of Tenant under this Section to maintain the
Property in good order, condition and repair during the entire Term of this
Lease) and except for damage or destruction by casualty or condemnation which
Tenant is not required to repair by the provisions of this Lease.
10.2 ENCROACHMENTS AND RESTRICTIONS. If any of the Improvements shall at
any time during the Term violate any agreement or condition contained in any
lawful covenant, condition, restriction, equitable servitude or other agreement
affecting all or any portion of the Property, or shall impair the rights of
others under any easement or right-of-way burdening the Property, provided that
such agreement, covenant, condition, restriction or easement has not been
created by Landlord, then promptly upon the request of Landlord, or at the
behest of any person affected by violation or impairment and in such case, in
the event of an adverse final determination, Tenant shall either (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same
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shall affect Landlord or Tenant, provided that Landlord shall consent to all
such settlements or waivers or (b) make such changes in the Improvements and
take such other actions as Tenant in the reasonable and good faith exercise of
its judgment deems practicable to remove such encroachment and to end such
violation or impairment, including, if necessary, the alteration of any of the
Improvements provided that Landlord shall consent to all such alterations and
the changes are not the result of any condition created solely by Landlord. With
respect to any encroachments identified on the ALTA surveys of the Property
delivered by Tenant to Landlord pursuant to the Purchase Agreement, Landlord
agrees that it shall not require Tenant to obtain a waiver of or otherwise
correct any such encroachment unless and until an affected third party notifies
Landlord of its objection to any such encroachment. In any event Tenant shall,
subject to Landlord's consent, take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or impairment. Tenant shall
not be responsible for any claims covered by Landlord's title insurance policy,
and Landlord agrees that any proceeds recovered under such title insurance
policy shall be made available to Tenant to remedy the claimed violation or
restriction.
ARTICLE XI
CAPITAL ADDITIONS
11.1 CONSTRUCTION OF CAPITAL ADDITIONS.
(a) If no Event of Default shall have occurred and be continuing,
Tenant may, subject to the terms and conditions contained in this Article,
construct or install Capital Additions on the Property with the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed as expressly provided herein. Tenant shall not be permitted to create
any Encumbrance on the Property in connection with any such Capital Addition.
(b) Prior to commencing construction of any Capital Addition, Tenant
shall submit to Landlord in writing a proposal setting forth in reasonable
detail any proposed Capital Addition and shall provide to Landlord such plans
and specifications, permits, licenses, contracts and other information
concerning the proposed Capital Addition as Landlord may reasonably request.
Without limiting the generality of the foregoing, such proposal shall indicate
the approximate projected cost of constructing such Capital Addition, the use or
uses to which it will be put and a good faith estimate of the change, if any, in
the Gross Revenues that Tenant anticipates will be caused by such Capital
Addition.
(c) No Capital Addition shall be made which would tie in or connect
any Improvements with any other improvements on property adjacent to the
Property (and not part of the Property), including without limitation, tie-ins
of buildings or other structures or utilities unless Tenant shall have obtained
the prior written consent of Landlord, which consent Landlord may grant,
withhold or delay in its sole discretion. All proposed Capital Additions shall
be architecturally integrated and consistent with the Property.
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11.2 CAPITAL ADDITIONS FINANCED OR PAID FOR BY LANDLORD.
(a) Tenant shall be required to request that Landlord provide or
arrange financing for any Capital Addition by providing to Landlord such
information about such Capital Addition as Landlord may reasonably request.
Landlord may, but shall be under no obligation to, meet the request, and within
60 days of receipt of such information, Landlord shall notify Tenant as to
whether it will finance the proposed Capital Addition and, if so, the terms and
conditions upon which it would do so, including the terms of any amendment to
this Lease (including, without limitation, the increase in Base Rent described
in clause (iii) of subparagraph (b), below to compensate Landlord for the
additional funds advanced by it). Notwithstanding the foregoing, Landlord shall
not finance the cost of any proposed Capital Addition if such cost is less than
$25,000. In no event shall the portion of the material, labor charges and
fixtures of the Capital Additions Cost be less than seventy-five percent (75%)
of the total amount of such cost. Tenant shall, within thirty (30) days of
Tenant's receipt of Landlord's affirmative notice that Landlord will finance the
proposed Capital Addition, give Landlord a notice accepting or rejecting
Landlord's proposed financing.
(b) If Landlord finances the Capital Additions Cost of the proposed
Capital Addition, Tenant shall provide Landlord with the following (unless
waived by Landlord in writing):
(i) prior to any disbursement of funds, such information,
certificates, licenses, permits, authorizations, evidence of zoning and other
documents reasonably requested by Landlord, or by any third party lender with
whom Landlord has agreed or may agree to provide financing, as necessary to
confirm that Tenant will be able to use the Capital Addition upon completion
thereof in accordance with the Primary Intended Use for such Capital Addition,
including all required federal, state or local government licenses, permits,
authorizations and approvals;
(ii) prior to any disbursement of funds, an Officer's
Certificate and, if requested, a certificate from Tenant's architect, setting
forth in reasonable detail the projected (or actual, if available) Capital
Additions Cost;
(iii) prior to or coincident with the first disbursement of
funds, an amendment to this Lease (together with a memorandum thereof in
recordable form), duly executed and acknowledged, in form and substance
reasonably satisfactory to Landlord, providing for an increase in the Base Rent
equal to the product of (x) the Capital Additions Cost of such Capital Addition
and (y) 350 basis points in excess of the Ten-Year Treasury Rate, along with the
legal description of any land obtained in connection with such Capital Addition
and such other provisions as may be necessary or appropriate;
(iv) prior to or coincident with the first disbursement of
funds, a construction and development agreement setting forth the terms for
Landlord's financing and Tenant's construction of such Capital Additions;
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(v) prior to or coincident with payment for any land obtained
in connection with such Capital Addition, a deed conveying to Landlord title to
such land, or, if applicable, a ground lease on terms acceptable to Landlord,
which title or leasehold shall be free and clear of any liens, encumbrances or
other exceptions to or matters affecting title except those approved by
Landlord, and, upon completion of the Capital Addition, a final as-built survey
thereof reasonably satisfactory to Landlord;
(vi) during construction and following completion of the
Capital Addition, endorsements to any outstanding policy of title insurance
covering the Property, or commitments therefor reasonably satisfactory in form
and content to Landlord (x) updating the same without any additional exception
except such as may be reasonably permitted by Landlord and (y) adding to its
coverage any land acquired or leased in connection with such Capital Addition
and increasing the coverage thereof by an amount equal to the Fair Market Value
of the Capital Addition (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (vii) below);
(vii) following the advance of funds, if appropriate, (x) an
extended coverage owner's policy of title insurance insuring fee simple title to
any land conveyed to Landlord pursuant to subparagraph (v), free and clear of
all liens and encumbrances except those approved by Landlord, and (y) a lender's
policy of title insurance reasonably satisfactory in form and substance to
Landlord and to any Lender with whom Landlord has agreed or may agree to provide
financing; and
(viii) during or following the advancement of funds, prints of
architectural and engineering drawings relating to the Capital Addition and such
other certificates (including, but not limited to, endorsements increasing the
insurance coverage, if any, at the time required by Section 14. 1), documents,
opinions of counsel, appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of Tenant authorizing the execution and
delivery of the lease amendment, construction and development agreement and any
other instruments as may be reasonably required by Landlord and any lender from
whom Landlord has agreed or may agree to obtain financing.
(c) Any new mortgage or supplement to any existing mortgage entered
into by Landlord with any lending institution covering the Property or any land
referred to in subparagraph (iv) above shall be subject to the rights of Tenant
under this Lease, as this Lease may be amended from time to time.
11.3 CAPITAL ADDITIONS PAID FOR BY TENANT. If Landlord does not finance
the cost of a Capital Addition under the terms of Section 11.2 and Tenant elects
nevertheless to construct or cause to be constructed such Capital Addition, (i)
Tenant shall not commence any construction with respect to such Capital Addition
without first obtaining the prior written consent of Landlord (which Landlord
shall not unreasonably withhold so long as the proposed Capital Addition will
not, in Landlord's reasonable opinion, either (x) diminish the value of the
property or (y) impair the Facility's ability to produce Gross Revenues and
which consent shall be
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delivered to Tenant within 60 days of receipt by Landlord of Tenant's written
proposal with respect to such Capital Addition), and (ii) Tenant shall pay the
cost of such Capital Addition, and there shall be no adjustment in the Rent by
reason of any such Capital Addition.
11.4 DISPOSITION OF CAPITAL ADDITIONS UPON EXPIRATION OR TERMINATION OF
LEASE. Upon the expiration or earlier termination of this Lease, all Capital
Additions shall pass to and become the property of Landlord, free and clear of
all encumbrances.
11.5 NON-CAPITAL ADDITIONS. Tenant shall have the right to make additions,
modifications or improvements to the Property which are not Capital Additions
from time to time as it, in its reasonable discretion, may deem to be desirable
for the Property's uses and purposes permitted hereunder, provided that such
action does not (i) significantly and adversely alter the character or purpose
or detract in any manner from the value or operating efficiency of the Property,
(ii) significantly impair the revenue-producing capability of the Property,
(iii) materially and adversely affect the ability of Tenant to comply with the
provisions of this Lease, or (iv) result in a violation of any of the provisions
of this Lease (including, but not limited to Articles XII or XXIX), and provided
that, if the cost of such non-capital additions, modifications or improvements
exceed $200,000 in any 12-month period, Tenant gives Landlord ten days' prior
Notice of such addition, modification or improvement. The cost of such
non-capital additions, modifications or improvements to the Property shall be
paid by Tenant, and all such non-capital additions, modifications and
improvements shall, without payment by Landlord at any time, be included under
the terms of this Lease, and upon expiration or earlier termination of this
Lease shall pass to and become the property of Landlord.
11.6 SALVAGE. All materials which are scrapped or removed in connection
with the construction of either Capital Additions permitted by Section I 1. 1,
non-capital additions permitted by Section II. 5, or repairs required by Article
X shall be or become the property of the party which paid for, or provided the
financing for such work.
11.7 NO LIENS ON LANDLORD'S INTEREST. In no event shall the interest of
Landlord be subject to liens for improvements made by Tenant, whether under
Article 10, this Article 11, Article 15 or otherwise, and Tenant shall notify
any and all contractors making any improvements, repairs or additions to any
portion of the Property that any lien to which such contractor may be entitled
pursuant to the laws of the State shall not extend to the interest of Landlord
in the Property.
ARTICLE XII
LIENS
Subject to the provisions of Article XIII relating to permitted contests,
Tenant shall not directly or indirectly create or allow to remain and shall
promptly discharge at its expense any lien, encumbrance, security interest,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance in respect of Rent, not including,
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however, (a) this Lease, (b) Permitted Encumbrances, (c) restrictions, liens and
other encumbrances which are consented to in writing by Landlord or expressly
permitted under Section 29.1(a) hereof, (d) liens for those taxes of Landlord
which Tenant is not required to pay hereunder, (e) subleases permitted by
Article XXIII, (f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as the same are not yet payable or
are payable without the addition of any fine or penalty and are in the process
of being contested as permitted by Article XIII, (g) liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either disputed or not yet
due, provided that (i) the payment of such sums shall not be postponed for more
than five days after the completion of the action giving rise to such lien and
such reserve or other appropriate provisions as shall be required by law or
generally accepted accounting principles shall have been made therefor or (ii)
any such liens are in the process of being contested as permitted by Article
XIII, and (h) any liens which are the responsibility of Landlord pursuant to the
provisions of Article XXVII or are directly created or permitted by Landlord.
ARTICLE XIII
CONTESTS
If no Event of Default has occurred and is then continuing, Tenant, on its
own or on Landlord's behalf (or in Landlord's name ), but at Tenant's sole cost
and expense, upon ten days' prior Notice to Landlord, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
without prejudice to Landlord's rights hereunder the amount, validity or
application, in whole or in part, of any Imposition, Legal Requirement,
Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim not
otherwise permitted by Article XII, provided that (a) in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Property, (b) neither the Property nor any
Rent therefrom nor any part thereof or interest therein would be subject to any
risk of being sold, forfeited, attached, foreclosed, or lost, (c) in the case of
a Legal Requirement, Landlord would not be in any danger of incurring any lien,
charge, fine, penalty, or other civil or criminal liability for failure to
comply therewith pending the outcome of such proceedings, (d) in the event that
any such contest shall involve a sum of money or potential loss in excess of
$100,000 then, in any such event, Tenant shall deliver to Landlord an Officer's
Certificate to the effect set forth in clauses (a), (b) and (c), to the extent
applicable, (e) in the case of a Legal Requirement or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security as may be
demanded by Landlord to insure ultimate payment of the same and to prevent any
loss or injury to Landlord, including but not limited to any sale or forfeiture
of the affected portion of the Property or the Rent by reason of such
non-payment or non-compliance; provided, however, the provisions of this Article
shalt not be construed to permit Tenant to contest the payment of Rent (except
as to contests concerning the method of computation or the basis of levy of any
Imposition) or any other sums payable by Tenant to Landlord hereunder, (f) in
the case of an Insurance Requirement, the coverage required by Article XIV shall
be maintained, and (g) if such contest be finally resolved against Landlord or
Tenant, Tenant shall, as
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Additional Charges due hereunder, promptly pay the amount required to be paid,
together with all interest and penalties accrued thereon, or comply with the
applicable Legal Requirement or Insurance Requirement. Landlord, at Tenant's
expense, shall execute and deliver to Tenant such authorizations and other
documents as may reasonably be required in any such contest and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant shall indemnify and save Landlord harmless against any
liability, cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.
ARTICLE XIV
INSURANCE
14.1 CENTRAL INSURANCE REQUIREMENTS. Tenant shall at all times maintain
policies of insurance insuring the Property, and all property located in or on
the Property, against the kind of risks and in the amounts of coverage described
below. All such insurance shall be written by companies of recognized
responsibility authorized to conduct an insurance business in the State. All
such insurance (other than insurance with respect to Tenant's Personal Property)
shall name Landlord as an additional insured. Proceeds of insurance policies
payable to compensate any loss shall be payable to Landlord or Tenant as
provided in Article XV. All such insurance shall name as an additional insured
or loss payee, as appropriate, the holder (a "FACILITY MORTGAGEE") of any
mortgage, deed of trust or other security agreement establishing any Encumbrance
placed on the Property in accordance with the provisions of Article XXVII
("FACILITY MORTGAGE") by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment or other settlement in excess of $250,000 shall
require the written consent of Landlord and each Facility Mortgagee and any
other lender of Landlord or its Affiliates ("LANDLORD LENDER") having any
contractual insurance requirements which would impact on the insurance
requirements of this Lease to the extent so required and Landlord has given
Tenant written notice thereof. Originals or certified copies of all insurance
policies obtained pursuant to this Article shall be deposited with Landlord and,
if requested, with any Facility Mortgagee(s) or Landlord Lender(s). The policies
on the Property, including the Improvements, Fixtures and Tenant's Personal
Property, shall insure against the following risks:
(a) loss or damage by fire, vandalism and malicious mischief,
extended coverage perils, and all physical loss perils insurance including but
not limited to sprinkler leakage, in an amount not less than 100% of the then
full replacement cost thereof (as defined below in Section 14.2) or such lesser
amount as is approved by Landlord in writing;
(b) loss or damage by explosion of steam boilers, pressure vessels
or similar apparatus, now or hereafter installed in either of the Facility in
such amounts with respect to any one accident as may be reasonably requested by
Landlord from time to time;
(c) business interruption or loss of rental under a rental value
insurance policy covering risk of loss during the lesser of the first 12 months
of reconstruction or the actual
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reconstruction period necessitated by the occurrence of any of the hazards
described in Sections 14.1(a) or 14.1(b), in an amount sufficient to prevent
Landlord from becoming a coinsurer:
(d) claims for personal injury or property damage under a policy of
comprehensive general public liability insurance, in an amount not less than one
million dollars per occurrence with respect to bodily injury and death and three
million dollars with respect to property damage;
(e) claims arising out of medical malpractice in an amount not less
than one million dollars for each person and three million dollars for each
occurrence:
(f) flood (when the Property is located in whole or in part within
an area designated by an appropriate agency or authority of the United States as
a flood plain) and such other hazards and in such amounts as may be customary
for comparable properties in the area and as may be available from insurance
companies, insurance pools, or other appropriate companies authorized to do
business in the State; and
(g) During any period during which any Capital Addition is under
construction, course of construction insurance and all risks insurance in such
amounts as Landlord shall reasonably require.
14.2 REPLACEMENT COST. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Property requiring replacement
from time to time, less exclusions provided in a normal fire insurance policy.
If either party believes that full replacement cost (the then replacement cost
less such exclusions) has increased or decreased at any time during the Lease
Term, it may have such full replacement cost redetermined by the insurer then
providing the largest amount of fire insurance coverage carried on the Property.
14.3 ADDITIONAL INSURANCE. In addition to the insurance described in
Section 14.1, throughout the Term Tenant shall maintain such additional
insurance as may be required from time to time by Landlord provided that the
types and amounts of any such additional insurance required by Landlord is then
customarily maintained by the operators of similar health care facilities in the
region in which the Facility is located. Tenant shall further maintain adequate
workers' compensation insurance coverage for all persons employed by Tenant on
the Property. Such workers' compensation insurance shall be in accordance with
the requirements of applicable local, state and federal law.
14.4 WAIVER OF SUBROGATION. All insurance policies carried by Landlord or
Tenant covering the Property, the Fixtures, the Facility or Tenant's Personal
Property shall expressly waive any right of subrogation on the part of the
insurer against the other party. Landlord and Tenant agree that the respective
policies of insurance carried by them will include such waiver clauses or
endorsements so long as the same are obtainable without extra cost. If such
clauses and endorsements are only available upon the payment of an extra charge,
the other party, at its election, may pay the same, but shall not be obligated
to do so; provided that the Tenant shall
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at all times be obligated to carry the policies of insurance required under this
Article regardless of whether the waiver of subrogation required under this
Section 14.4 is available.
14.5 FORM OF INSURANCE. All of the policies of insurance referred to in
this Article shall be written in a form, and issued by insurance companies,
satisfactory to Landlord. Landlord agrees that it will not unreasonably withhold
or delay its approval as to the form of the policies or the insurance companies
selected by Tenant. Tenant shall pay all of the premiums therefor, and shall
deliver an original or certified copy of any policy, or renewal thereof, to
Landlord, any Facility Mortgagee and any Landlord Lender at least 10 days prior
to the expiration of the existing policy to which such renewal policy relates.
If Tenant either fails to effect such insurance as herein required or to pay the
premiums therefor, or to deliver such policies or certified copies thereof to
Landlord at the times required, Landlord shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be repayable to Landlord upon demand therefor in a Notice, and
failure by Tenant to repay the same shall constitute an Event of Default within
the meaning of Section 17.1(d). Each insurer mentioned in this Article shall
agree, by endorsement on the policy or policies issued by it, or by independent
instrument furnished to Landlord, that it will give to Landlord (and to any
Facility Mortgagee and Landlord Lender of which Tenant has notice, if required)
30 days prior written notice before such policy or policies expire, are altered
or are cancelled.
14.6 CHANGE IN LIMITS. If either party shall at any time deem the limits
of the personal injury or property damage public liability insurance or
malpractice insurance then carried by Tenant to be insufficient or excessive,
the parties shall endeavor in good faith to agree promptly upon the proper and
reasonable limits for such insurance to be carried, and such insurance shall
thereafter be carried with the limits thus agreed upon until further change
pursuant to the provisions of this Section.
14.7 BLANKET POLICY. Notwithstanding anything to the contrary contained
in this Article, Tenant's obligations to carry the insurance provided for herein
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant so long as (a) the coverage afforded
to Landlord is not reduced or diminished or otherwise altered from that which
would exist under a separate policy meeting all other requirements of this Lease
by reason of the use of such blanket policy of insurance and (b) the
requirements of this Article are otherwise satisfied.
14.8 NO SEPARATE INSURANCE. Tenant shall not obtain separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article XIV to be furnished by, or which may reasonably be required to be
furnished by Tenant, nor shall Tenant increase the amount of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Landlord and all Facility Mortgagees, are named therein
as additional insureds, and the loss is payable under said insurance in the same
manner as losses are payable under this
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Lease. Tenant shall immediately notify Landlord of the obtaining of any such
separate insurance or of the increasing of any of the amounts of the then
existing insurance.
ARTICLE XV
INSURANCE PROCEEDS
15.1 HANDLING OF INSURANCE PROCEEDS. Subject to Section 15.4 hereof, all
proceeds from any policy of insurance required by Article XIV of this Lease
(except Sections 14.1(d) and (e)) shall be paid to Landlord and held in trust by
Landlord (subject to the provisions of Section 15.7) and shall be made available
for reconstruction, repair or replacement, as the case may be, of any damage to
or destruction of all or any portion of the Property to which such proceeds
relate, and shall be paid out by Landlord from time to time subject to the
provisions hereof for the cost of such reconstruction, repair or replacement.
Any unused portion shall be retained by Landlord free and clear upon completion
of such repair and restoration but shall be applied by Landlord against Tenant's
obligations for Rent next coming due under this Lease. If neither Landlord nor
Tenant is required or elects to repair and restore, and the Lease is terminated
without purchase by Tenant as described in Section 15.2(a), then all such
insurance proceeds shall be retained by Landlord. All salvage resulting from any
risk covered by insurance shall belong to Landlord, except that any salvage
relating to Tenant's Personal Property shall be the property of Tenant.
15.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE.
(a) Except as provided in Section 15.7, if during the Term a portion
of the Property is totally or substantially destroyed by a risk covered by the
insurance described in Article XIV so that the Facility thereby is rendered
unsuitable for its Primary Intended Use (taking into account all relevant
factors, including but not limited to the number of useable beds, the amount of
square footage reasonably available for use by Tenant and the type and amount of
Gross Revenues lost) (the "IMPACTED FACILITY"), Tenant shall at its option
either (i) restore the Impacted Facility to substantially the same condition as
existed immediately before the damage or destruction or (ii) acquire the
Property from Landlord for a purchase price equal to the greater of the Minimum
Repurchase Price or the Fair Market Value Purchase Price of the Property
immediately prior to such damage or destruction, or (iii) terminate the Lease
with respect to the Property effective upon Landlord's receipt of the insurance
proceeds and any "SHORTFALL" (as hereinafter defined) and in such event Landlord
shall be entitled to retain or collect for its own benefit the insurance
proceeds, provided that, in the event the amount of the insurance proceeds
received by Landlord are less than the amounts which would be payable in the
aggregate under the insurance policies specified in Section 14.1(a) such
termination shall not be effective until Tenant pays Landlord the amount of such
shortfall ("Shortfall") in cash. If Tenant restores the Impacted Facility, the
insurance proceeds shall be paid out by Landlord to Tenant or its designee from
time to time as reasonably requested by Tenant to pay for the reasonable costs
of such restoration and any excess proceeds remaining after such restoration
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shall be retained by Tenant. If Tenant acquires the Property, all applicable
insurance proceeds shall be the property of Tenant.
(b) Except as provided in Section 15.7, if during the Term, the
Improvements or Fixtures are partially destroyed due to a risk covered by the
insurance described in Article XIV but the Impacted Facility is not thereby
rendered unsuitable for the Primary Intended Use (taking into account all
relevant factors, including but not limited to the number of useable beds, the
amount of square footage reasonably available for use by Tenant and the type and
amount of Gross Revenues lost), Tenant shall restore the Impacted Facility to
substantially the same condition as existed immediately before the damage or
destruction. Such damage or destruction shall not terminate this Lease;
provided, however, that if Tenant cannot, with reasonable diligence and within a
reasonable time, obtain all government approvals, including building permits,
licenses, conditional use permits and any certificates of need, necessary to
perform all required repair and restoration work and to operate the Impacted
Facility in substantially the same manner and for the Primary Intended Use,
Tenant shall either (i) offer to purchase the Property for a purchase price
equal to the greater of the Minimum Repurchase Price or the Fair Market Value
Purchase Price immediately prior to such damage or destruction or (ii) continue
to operate under the Lease which shall remain in full force and effect and
Landlord shall be entitled to retain the insurance proceeds, less the amount
needed to restore the Property so that the portion of the Facility unaffected by
the casualty can be used as a complete architectural unit. If Tenant shall make
such offer and Landlord does not accept the same within 120 days of Landlord's
receipt of such offer, Tenant may either (x) withdraw such offer, in which case
this Lease shall remain in full force and effect and Tenant shall proceed to
restore the Impacted Facility as soon as reasonably practicable to substantially
the same condition as existed immediately before such damage or destruction, or
(y) terminate this Lease after recovery by Landlord of all insurance proceeds
and the payment by Tenant of any Shortfall in cash. If Tenant so restores the
Impacted Facility, insurance proceeds shall be paid out by Landlord from time to
time as reasonably requested by Tenant to pay for the reasonable costs of such
restoration, and any excess proceeds remaining after such restoration shall be
retained by Tenant.
(c) If Tenant elects to repair or restore any damage or destruction
to the Property and the cost of any such repair or restoration exceeds the
amount of proceeds received by Landlord from the insurance required under
Article XIV, Tenant shall contribute any and all excess amounts necessary to
repair or restore the Facility.
(d) If Landlord accepts Tenant's offer to purchase the Property this
Lease shall terminate as to the Property upon payment of the purchase price
therefor and Landlord shall thereupon remit to Tenant all insurance proceeds
pertaining to the Property less Landlord's reasonable expenses, including
attorneys' fees, and assign Landlord's rights in any uncollected insurance
proceeds to Tenant.
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15.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED BY
INSURANCE. Except as provided in Section 15.7 below, if during the Term either
of the Facility is totally destroyed or materially damaged (i) from a risk not
covered by insurance described in Article XIV but that would have been covered
if Tenant carried the insurance customarily maintained by, and generally
available to, the operators of reputable health care facilities in the region in
which the Facility is located, (ii) from a risk for which insurance coverage is
voided due to any act or omission by Tenant, or (iii) as result of an
earthquake, whether or not such damage or destruction renders the Impacted
Facility unsuitable for their Primary Intended Use (taking into account all
relevant factors, including but not limited to the number of useable beds, the
amount of square footage reasonably available for use by Tenant and the type and
amount of Gross Revenues lost), Tenant shall restore the Impacted Facility to
substantially the same condition as existed immediately before such damage or
destruction and not terminate this Lease. Otherwise, if the Facility is totally
destroyed or materially damaged by a risk not covered by insurance such that the
Facility shall be unusable for its Primary Intended Use, this Lease shall
terminate within 90 days of such destruction or damage, provided that the Tenant
may elect to restore the Impacted Facility, in which event, this Lease shall
continue in full force and effect. If such damage or destruction does not render
the Impacted Facility unusable for its Primary Intended Use, Tenant shall also
restore the Facility to substantially the same condition as existed immediately
before the damage or destruction.
15.4 PAYMENT OF PROCEEDS ON TENANT'S PROPERTY AND CAPITAL ADDITIONS PAID
BY TENANT. Notwithstanding any provision herein, all insurance proceeds payable
by reason of any loss of or damage to any of Tenant's Personal Property or
Capital Additions paid for by Tenant shall be paid to Tenant and Tenant shall
hold such insurance in trust to pay the cost of repairing or replacing damaged
Tenant's Personal Property or Capital Additions paid for by Tenant provided,
however, that if the damaged Tenant's Personal Property or Capital Additions
paid for by Tenant were no longer useful to Tenant's operations prior to their
destruction, Tenant shall not be obligated to repair or replace them.
15.5 HANDLING OF BUSINESS INTERRUPTION INSURANCE. Notwithstanding any
provision of this Article XV, proceeds from any policy of insurance required by
Section 14. 1 (c) shall be paid to the Landlord, and Landlord shall apply the
proceeds against any currently unpaid obligation or obligations of Tenant
hereunder in such amount or amounts as Landlord reasonably shall decide. Any
remaining proceeds from such insurance, after giving effect hereto, shall be
paid to Tenant.
15.6 RESTORATION OF TENANT'S PROPERTY. Upon any restoration of the
Impacted Facility as provided in Section 15.2 or 15.3, Tenant shall either (i)
at Tenant's sole cost and expense, restore all alterations and improvements made
by Tenant, Tenant's Personal Property and all Capital Additions paid for by
Tenant, or (ii) at Tenant's sole cost and expense, replace such alterations and
improvements, Tenant's Personal Property or Capital Additions with improvements
or items of the same or better quality and utility in the operation of the
Property; provided, however, that if the damaged Tenant's Personal Property or
Capital Additions paid
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for by Tenant were no longer useful to Tenant's operations prior to their
destruction, Tenant shall not be obligated to replace them.
15.7 ABATEMENT OF RENT. Unless and until Tenant shall pay the purchase
price for the Property to Landlord in accordance with this Article XV (and this
Lease is thereby terminated or otherwise terminated as provided in this Article
XV), in the event of any damage or destruction of the Property, this Lease shall
remain in full force and effect and Tenant's obligation to make rental payments
and to pay all other charges required by this Lease shall not be abated by
reason of any damage or destructions to the Property or the subsequent loss of
Landlord's entitlement to the Property.
15.8 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of this
Article XV to the contrary, if damage to or destruction of the Facility occurs
during the last 12 months of the then applicable term (whether Fixed or
Extended), if Tenant has not elected to extend such term, and if such damage or
destruction cannot be fully repaired and restored within six months immediately
following the date of loss, then Tenant shall have the right to terminate this
Lease by giving written Notice thereof to Landlord within 30 days after the date
of such damage or destruction, in which event, Landlord shall collect any
insurance proceeds to which it is entitled, and Tenant shall assign Tenant's
rights in any additional insurance proceeds. In the event that the Facility is'
totally destroyed or damaged (i) from a risk not covered by insurance described
in Article XIV but that would have been covered if Tenant carried the insurance
customarily maintained by, and generally available to, the operators of
reputable health care facilities in the region in which the Facility is located,
(ii) from a risk for which insurance coverage is voided due to any act or
omission by Tenant, or (iii) as a result of an earthquake, whether or not such
damage or destruction renders the Facility unsuitable for its Primary Intended
Use (taking into account all relevant factors, including but not limited to the
number of useable beds, the amount of square footage reasonably available for
use by Tenant and the type and amount of Gross Revenues lost), then Tenant shall
pay to Landlord a sum equal to the amount reasonably necessary to repair such
damage or destruction.
15.9 TERMINATION OF OPTION TO PURCHASE. Any termination of this Lease
pursuant to this Article shall cause any option to purchase granted to Tenant
under this Lease and the right to extend the Term by any Extended Term to be
terminated and to be without further force or effect.
15.10 WAIVER. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Facility which
Landlord is obligated to restore or may restore under any of the provisions of
this Lease.
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ARTICLE XVI
CONDEMNATION
16.1 DEFINITIONS.
For purposes of this Article XVI the following terms have the meanings
specified in this Section 16. 1.
(a) "CONDEMNATION" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor, or (b) a voluntary
sale or transfer by Landlord with Tenant's consent (provided no Event of Default
has occurred and is continuing at such time) to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.
(b) "DATE OF TAKING" means the first date the Condemnor has the
right to immediate possession of the property being condemned.
(c) "AWARD" means all compensation, sums and any other value
awarded, paid or received on a total or partial condemnation.
(d) "CONDEMNOR" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation
16.2 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Property or of any interest in this Lease by
Condemnation, the rights and obligations of the parties with respect to such
Condemnation shall be determined by this Article.
16.3 TOTAL TAKING. If title to the whole of Tenant's interest in the
Property shall be taken or condemned by any Condemnor, this Lease shall cease
and terminate as of the Date of Taking. If title to less than the whole of the
Property shall be so taken or condemned, which nevertheless renders the Property
unsuitable for its Primary Intended Use (taking into account all relevant
factors, including but not limited to the number of useable beds, the amount of
square footage reasonably available for use by Tenant, and the type and amount
of Gross Revenues lost), Tenant and Landlord each shall have the option by
Notice to the other, at any time prior to the taking of possession by, or the
date of vesting of title in, such Condemnor, whichever first occurs, to
terminate this Lease as of such earlier to occur date. Upon such earlier to
occur date, if such Notice has been given, this Lease shall cease and terminate.
In either of such events, all Rent paid or payable by Tenant hereunder shall be
apportioned as of the date the Lease shall have been so terminated as aforesaid.
16.4 ALLOCATION OF PORTION OF AWARD. Subject to the rights of any Facility
Mortgagee, the total Condemnation Award made with respect to all or any portion
of the Property shall be distributed to Landlord and Tenant ratably in
accordance with the value of their respective interests in and to such Property
as hereafter set forth in this Section 16.4. All of the Award
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shall be the sole and exclusive property of Landlord and shall be payable to
Landlord, subject to the rights of any Facility Mortgagee; provided that any
portion of such Condemnation Award which is expressly allocated by the Condemnor
to the taking of Tenant's leasehold interest in the Property, the taking of any
Capital Additions (or any portion thereof) paid for by Tenant, any loss of
business by Tenant during the remaining Term of this Lease, the taking of
Tenant's Personal Property, or any removal and relocation expenses of Tenant in
any such proceedings shall be the sole property of and payable to Tenant. In any
Condemnation proceedings Landlord and Tenant each shall seek their own Award in
conformity herewith, at their own expense.
16.5 PARTIAL TAKING. If title to less than the whole of the Property shall
be taken or condemned, and the Property is still suitable for its then Primary
Intended Use, or if Tenant or Landlord shall be entitled (but shall not elect)
to terminate this Lease as provided in Section 16.3 hereof, Tenant at its own
cost and expense shall with all reasonable diligence restore the untaken portion
of any Improvements so that such improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Improvements existing immediately
prior to such Condemnation or Taking. Landlord and Tenant shall each contribute
to the cost of restoration that part of their Award specifically allocated to
such restoration, if any (or if no such specific allocation is made, a just,
fair and reasonable portion of its Award as reasonably determined by Landlord
and Tenant or by arbitration in accordance with Section 28.14 if Landlord and
Tenant are unable to agree within 30 days of the Award), together with any and
all severance and other damages awarded for any taken Improvements; provided,
however, the amount of such contribution shall not exceed such cost. If such
amounts are not sufficient to cover the cost of restoration Landlord and Tenant
shall contribute any additional amounts needed for restoration in proportion to
the amounts already contributed by them, provided that in no event shall
Landlord contribute any amount to such restoration in excess of its Award.
Thereafter, any excess restoration cost shall be borne solely by Tenant.
Landlord agrees that Tenant shall be entitled to an equitable abatement of Base
Rent in the event of a partial taking of the Property, but such abatement shall
be strictly limited to any amount of excess Award paid to Landlord after the
restoration cost has been paid.
16.6 TEMPORARY TAKING. If the whole or any part of the Property or of
Tenant's interest under this Lease shall be taken or condemned by any Condemnor
for its temporary use or occupancy for a period of not more than one
hundred-eighty (180) days, this Lease shall not terminate, and Tenant shall
continue to pay, in the manner and at the times herein specified, the full
amounts of Base Rent, Additional Rent, if any, and Additional Charges, provided
that during any such Temporary Taking Tenant shall pay Additional Rent at a rate
equal to the average Additional Rent during the three immediately preceding
Fiscal Years (or if three Fiscal Years shall not have elapsed, the average
during the last preceding Fiscal Years occurring during the Term). Except to the
extent Tenant may be prevented from so doing pursuant to the terms of the order
of the Condemnor, Tenant shall continue to perform and observe all of the other
terms, covenants, conditions and obligations hereof on the part of the Tenant to
be performed and observed as though such Taking or Condemnation had not
occurred. Upon any such Taking or Condemnation described in this Section, the
entire amount of any such Award made for such
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Taking or Condemnation allocable to the Term of this Lease, whether paid by way
of damages, Rent or otherwise, shall be paid to Tenant. Tenant covenants that
upon the termination of any such Taking or Condemnation set forth in this
Section, Tenant will, at its sole cost and expense (subject to any contribution
by Landlord as set forth in Section 16.5), restore the Property as nearly as may
be reasonably possible to the condition in which the same was immediately prior
to such Taking or Condemnation, unless such period of temporary use or occupancy
shall extend beyond the expiration of the Term, in which case Tenant shall not
be required to make such restoration.
ARTICLE XVII
DEFAULTS AND REMEDIES
17.1 EVENTS OF DEFAULT. Any one or more of the following events shall be
deemed an "EVENT OF DEFAULT" hereunder:
(a) Tenant shall fail to pay Rent payable by Tenant under this Lease
when the same becomes due and payable and such failure continues for 5 days
after notice of such failure (except that Landlord shall not be required to give
more than one such notice in any 12-month period);
(b) Tenant shall violate the covenant described in Section 29.3(c)
hereof;
(c) Any representation or warranty made by the Tenant in connection
with this Lease or the Security Agreement, or in any report, certificate,
financial statement or other instrument furnished in connection herewith or
therewith, from time to time, whether under Article XXIV of this Lease or
otherwise, shall prove to be false or misleading in any material respect and
shall not be remedied within 30 days after Tenant receives notice thereof;
(d) Tenant shall fail to observe or perform any other term, covenant
or condition of this Lease and such failure is not cured by Tenant within a
period of 30 days after Notice thereof from Landlord, unless such failure cannot
with due diligence be cured within a period of 30 days, in which case such
failure shall not be deemed to continue if Tenant proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof;
(e) Tenant or either of Guarantors shall: (i) admit in writing its
inability to pay its debts generally as they mature, (ii) make a general
assignment for the benefit of its creditors, (iii) have appointed a trustee,
receiver or liquidator pursuant to an order of a court of competent jurisdiction
of itself or of the whole or any part of its property which is not discharged in
sixty (60) days, (iv) terminate or suspend its business, (v) have any of its
assets executed upon, attached or judicially seized and such execution,
attachment or seizure is not vacated or set aside within sixty (60) days;
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(f) Tenant or either of Guarantors shall: (i) file a voluntary case
under any applicable bankruptcy, insolvency, debtor relief or other similar law
or statute of the United States of America or any State thereof now or
hereinafter in effect ("BANKRUPTCY LAWS"), (ii) consent to or acquiesce in the
appointment of a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or similar official of itself or of the whole or any part of its
property) which is not discharged in thirty (30) days, or (iii) fail generally
to pay its debts as they mature or become due;
(g) Tenant or either of Guarantors shall, on a petition filed under
any applicable Bankruptcy Laws against any of them, be adjudicated a bankrupt or
have an order for relief thereunder entered against it or fail to oppose any
such proceeding or if a court of competent jurisdiction shall enter an order or
decree appointing, without its consent, a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of itself or of the
whole or any part of its property and such judgment, order or decree shall not
be vacated or set aside or stayed within sixty (60) days from the date of the
entry thereof; or
(h) Tenant or either of Guarantors shall be liquidated or dissolved,
or shall voluntarily begin proceedings toward such liquidation or dissolution,
or shall, in any manner, permit the sale or divestiture of substantially all of
its assets;
(i) an Event of Default under the terms of the Security Agreement
shall occur and be continuing;
(j) Tenant or either of Guarantors shall fail to make when due any
scheduled payment with respect to indebtedness (other than indebtedness which is
subordinated to this Lease), unless such failure is being diligently contested
in accordance with the requirements of this Lease or any lease pursuant to which
it enjoys the use of any real or personal property and such failure shall
continue for five days following its receipt of written advice with respect
thereto, if the effect of such failure is (i) to accelerate the maturity of such
indebtedness or to require the prepayment thereof, (ii) to permit the holder or
obligee thereof (or any trustee on behalf of such holder or obligee) to cause
such indebtedness to become due prior to its stated maturity, (iii) to give the
lessor the right to terminate such lease or (iv) to have a material adverse
effect on the business, operations, properties or condition (financial or
otherwise) of Tenant or Guarantor; provided, however, that such effect in (i),
(ii) or (iii) hereto has a material adverse effect on the business, operations,
properties or condition (financial or otherwise) of Tenant or Guarantor.
(k) any Notification Event described in Section 29.2(c) shall occur,
which is reasonably likely to result in liability to the Tenant or either of
Guarantors having a material adverse effect on the business, operations,
properties or condition (financial or otherwise) of Tenant or either of
Guarantors;
(l) an Event of Default under the terms of the Arkansas Manor Lease,
Cornerstone Lease or the Safford Lease shall occur and be continuing; or
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(m) either Tenant or Signature sells, assigns or transfers a
controlling interest in Tenant or Signature or a controlling interest in
Tenant's operations of the Property (other than as permitted by Section 23 and
Section 29.1(d)) without the prior written consent of Landlord, which consent
shall not unreasonably be withheld.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (d) above during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Tenant immediately shall remedy such default.
Tenant shall immediately notify Landlord and NHI of the occurrence of any
event set forth in subsections 17.1(b) through (m). Landlord shall provide
identical notice to NHI as it provides to Tenant of any event set forth in
subsection 17.1(a) through (m).
17.2 CERTAIN REMEDIES. Upon any Event of Default, Landlord shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease, at common law or in equity, or by statute or otherwise. Tenant
expressly acknowledges and agrees that the Landlord will also have the right of
injunction in accordance with applicable law.
Without limiting the foregoing, if an Event of Default occurs, is not
cured within the period, if any, for any such cure provided in Section 17.1, and
is continuing, Tenant shall, to the extent permitted by law and if required by
Landlord so to do, immediately surrender to Landlord the Property and quit the
same. Landlord may enter upon and repossess the Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Tenant and all other
persons and any and all personal property from the Property subject to rights of
any residents or patients and to any requirement of law. No such entry or
repossession by Landlord shall be deemed an election by Landlord to terminate
this Lease unless specifically stated by Landlord in writing from Landlord to
Tenant. Thereafter Landlord shall use reasonable, good faith efforts to relet
the Property or otherwise mitigate Landlord's damages. Landlord may so terminate
Tenant's right of possession and may repossess the Premises without liability
for trespass or conversion, without demand or notice of any kind to Tenant and
without terminating this Lease, in which event Landlord may, but shall be under
no obligation to, relet the same for the account of Tenant for such rent and
upon such terms as shall be satisfactory to Landlord. For the purpose of such
reletting, Landlord is authorized to decorate or to make any repairs, changes,
alterations, or additions in or to the Premises that may be necessary or
convenient. If Landlord exercises the remedies provided in this subparagraph,
Tenant shall pay to Landlord, and Landlord shall be entitled to recover from
Tenant, an amount equal to the total of the following: (A) unpaid Rent, plus
interest at the Overdue Rate, owing under the Lease for all periods of time that
the Premises are not relet (including any period prior to Landlord's
repossession); plus (B) the reasonable costs of recovering possession, and all
of the reasonable costs and expenses of such decorations, repairs, changes,
alterations, and additions, and the reasonable expense of such reletting and of
the collection of the rent accruing therefrom to satisfy the Rent provided for
the Leave to be paid; plus (C) any deficiency in the rentals and
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other sums actually received by Landlord from any such reletting from the Rent
required to be paid under this Lease with respect to the periods the Premises
are so relet, and Tenant shall satisfy and pay any such deficiency upon demand
therefor from time to time. Neither the repossession of the Property, the
failure of Landlord to relet the Property, nor the reletting of all or any
portion of the Property, shall relieve Tenant of its liability and obligation
hereunder, all of which shall survive any such repossession or reletting. Tenant
agrees that Landlord may file suit to recover any sums falling due under the
terms of this subparagraph from time to time; and that no delivery or recovery
of any portion due Tenant hereunder shall be a defense in any action to recover
any amount not theretofore reduced to judgment in favor of Landlord, nor shall
such reletting be construed as an election on the part of Landlord to terminate
this Lease unless specifically stated by Landlord in writing from Landlord to
Tenant. Notwithstanding any such reletting without termination, Landlord may at
any time thereafter elect to terminate this Lease for such previous breach in
accordance with the procedure hereinafter provided.
Without limiting the foregoing, whether or not this Lease has been
terminated, Landlord shall have the right to offset against any Rent, damages,
or other sums of money owed by Tenant any advance Rent applicable to any time
period after the occurrence of the Event of Default.
17.3 TERMINATION. Upon the occurrence of any Event of Default, Landlord
may terminate this Lease by giving Tenant not less than ten days' Notice of such
termination during which time Tenant shall have the opportunity to cure any such
Event of Default. Upon the expiration of the time fixed in such Notice, unless
such Event of Default is cured, the Term shall terminate and all rights of
Tenant under this Lease shall cease. Landlord shall have all rights at law and
in equity available to Landlord as a result of Tenant's breach of this Lease. If
any litigation is commenced with respect to any alleged default under this Lease
whether under this Section 17.3 or under Section 17.2, the prevailing party in
such litigation shall receive, in addition to its damages incurred, its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith. Neither the termination of this Lease pursuant to this Section 17.3,
the repossession of the Property, the failure of Landlord to relet the Property,
nor the reletting of all or any portion of the Property, shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. Upon any such termination, Tenant shall
forthwith pay to Landlord as damages a sum of money equal to the total of (A)
the costs of recovering the Premises, (B) the unpaid Rent due and payable at the
termination, plus interest thereon at the Overdue Rate, (C) the balance of the
Rent for the remainder of the term less the fair market rental value of the
Premises for such period, and (D) any other sum of money rental owed by Tenant
to Landlord and the amount of other damages suffered by Landlord as a result of
Tenant's default.
17.4 APPLICATION OF FUNDS. Any payments normally made to Tenant hereunder
which are made to and received by Landlord under any of the provisions of this
Lease during the continuance of any Event of Default shall be applied to
Tenant's obligations in the order which Landlord may determine or as may be
prescribed by applicable laws.
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17.5 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an Event of Default
occurs under this Lease and is not cured within the time provided under this
Lease with respect to such Event of Default, Landlord, without waiving or
releasing any obligation of Tenant, and without waiving any such Event of
Default, may (but shall be under no obligation to) at any time thereafter cure
such default for the account and at the expense of Tenant, and may, to the
extent permitted by law, enter upon the Property for such purpose and take all
such action thereon as, in Landlord's sole judgment, may be necessary or
appropriate with respect thereto. No such entry by Landlord on the Property
shall be deemed an eviction of Tenant. All sums so paid by Landlord and all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) so incurred, together with a late charge thereon
computed at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Landlord until the date reimbursed, shall be reimbursed by
Tenant to Landlord on demand. The obligations of Tenant and rights of Landlord
contained in this Article shall survive the expiration or earlier termination of
this Lease.
17.6 NHI'S RIGHT TO CURE. If an Event of Default occurs under this Lease,
NHI may (but shall be under no obligation to) at any time thereafter cure such
default for the account and at the expense of Tenant.
17.7 WAIVER. If this Lease is terminated pursuant to the provisions of
this Article, Tenant waives, to the extent permitted by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to trial by jury in
the event of summary proceedings to enforce the remedies set forth in this
Article, and (c) the benefit of any laws now or hereafter enforced exempting
property from liability for rent or for debt.
ARTICLE XVIII
CURE BY TENANT OF LANDLORD DEFAULTS
Landlord shall be in default of its obligations under this Lease if
Landlord shall fail to observe or perform any term, covenant or condition of
this Lease on its part to be performed, and such failure shall continue for a
period of 30 days after Notice thereof from Tenant (or such shorter time as may
be necessary in order to protect the health or welfare of any patient or other
resident of the Property), unless such failure cannot be cured with due
diligence within a period of 30 days, in which case such failure shall not be
deemed to continue if Landlord, within said 30 day period, proceeds promptly and
with due diligence to cure the failure and diligently completes the curing
thereof. The time within which Landlord shall be obligated to cure any such
failure shall also be subject to extension of time due to the occurrence of any
Unavoidable Delay. If Landlord fails to commence or complete such cure as
provided herein, Tenant may cure such default, and for so long as Tenant
continues to pay Rent, Tenant shall have the right by separate and independent
action to pursue any claim it may have against Landlord for Landlord's failure
to cure such default.
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ARTICLE XIX
PURCHASE OF PROPERTY BY TENANT
19.1 PURCHASE OF THE PROPERTY. If Tenant purchases the Property from
Landlord pursuant to any of the terms of this Lease, Landlord shall, except as
otherwise expressly provided, upon receipt from Tenant of the applicable
purchase price, together with full payment of any unpaid Rent due and payable
with respect to any period ending on or before the date of such purchase,
deliver to Tenant an ALTA Owner Policy of Title Insurance or such equivalent
policy of title insurance as may be available in the State, together with such
endorsements, reinsurance agreements and direct access agreements as Tenant may
reasonably request, together with an appropriate special warranty deed or other
conveyance conveying marketable fee simple title in and to the Property to
Tenant in the condition set forth in Article XXVI, except that the Property
shall be free and clear of all mortgages and encumbrances other than (a) those
Tenant has agreed hereunder to pay or discharge, (b) those mortgages which
Tenant has agreed in writing to accept and to take title subject to on the date
the Property was originally conveyed to Landlord and which are not in default,
(c) encumbrances required to be imposed on the Property under Section 8.3, and
(d) any other encumbrances permitted to be imposed on the Property under the
provisions of Article XXVII which are assumable at no cost or expense to Tenant
or to which Tenant may take subject without cost or expense to Tenant. The
difference between the applicable purchase price and the total amount of the
encumbrances assumed or taken subject to, if a positive number, shall be paid in
cash to Landlord or as Landlord may direct, in federal or other immediately
available funds, unless otherwise mutually agreed by Landlord and Tenant;
provided, Landlord shall be obligated to pay to Tenant in cash any negative
difference between the applicable purchase price and the total amount of the
encumbrances so assumed or taken subject to by Tenant. All reasonable expenses
of conveying the Property to Tenant, including, without limitation, the cost of
the aforementioned title insurance and attorneys' fees incurred by Landlord in
connection with such conveyance and release, and documentary transfer and
similar taxes, recording fees and expenses of Tenant's counsel, shall be paid by
Tenant.
19.2 FAILURE TO CLOSE PURCHASE. The closing of any such sale shall be
contingent upon and subject to Tenant obtaining all required governmental
consents and approvals for such transfer. If such sale shall fail to be
consummated by reason of the inability of Tenant to obtain all such approvals
and consents, then this Lease shall remain in effect on a month-to-month basis
until the consummation of the purchase or until Tenant's inability to obtain the
approvals and consents is confirmed.
ARTICLE XX
HOLDING OVER
If Tenant for any reason remains in possession of the Property after the
expiration or earlier termination of the Term, such possession shall be a
month-to-month tenancy during which time Tenant shall pay to Landlord as rental
each month one and one half (1-1/2) times the
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aggregate of (i) one-twelfth of the aggregate total Base Rent payable with
respect to the last 12-month period of the Term just expired or terminated, (ii)
all Additional Charges accruing during the month with respect to which such
payment relates, and (iii) all other sums, if any, payable by Tenant pursuant to
the provisions of this Lease with respect to the Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of the Term.
ARTICLE XXI
RISK OF LOSS
During the Term of this Lease, Tenant shall bear the risk of loss or of
decrease in the enjoyment and beneficial use of the Property resulting from the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or any other cause, or resulting from foreclosures, attachments, levies or
executions (other than those caused by Landlord and those claiming from, through
or under Landlord) and, in the absence of the gross negligence, willful
misconduct or breach of this Lease by Landlord, Landlord shall in no event be
responsible therefor nor shall any of the events mentioned in this Section
entitle Tenant to any abatement of Rent except as specifically provided in this
Lease.
ARTICLE XXII
LIABILITY OF PARTIES
22.1 INDEMNIFICATION BY TENANT. Notwithstanding the existence of any
insurance provided for in Article XIV, and notwithstanding the policy limits of
any such insurance, Tenant shall indemnify, defend, save and hold Landlord
harmless from and against any and all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses ("Claims") (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted by
law, imposed upon, incurred by or asserted against Landlord arising out of,
connected with or incidental to:
(a) any Hazardous Substance located at, in, on, under or about the
Property due to the act or omission of Tenant, including any improvements,
repairs, handling, removal or other actions taken by Landlord in order to comply
with all rules and regulations promulgated by any applicable federal, state, or
local government rule and regulation with respect to any such Hazardous
Substance or related problems that Landlord becomes aware of;
(b) any accident, injury to or death of persons, or loss of or
damage to property, occurring on or about the Property or adjoining sidewalks,
alleys or roadways, including without limitation any claims of malpractice;
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(c) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant of the Property or Tenant's Personal
Property and any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or other participant
related to the Property or Tenant's Personal Property or such use, misuse,
non-use, condition, management, maintenance or repair thereof, including but not
limited to any failure to perform obligations (other than condemnation
proceedings) to which Landlord is made a party;
(d) any Impositions which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease:
(e) any failure on the part of Tenant to perform or comply with any
of the terms of this Lease; and
(f) the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by Tenant
thereunder.
22.2 INDEMNIFICATION BY LANDLORD. Landlord shall indemnify, defend, save
and hold Tenant harmless from and against any and all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) imposed upon,
incurred by or asserted against Tenant arising out of, connected with or
incidental to the sole or gross negligence or willful misconduct of Landlord;
provided, however, that Tenant's right to indemnification as provided herein,
shall be subject to the limitation set forth in Article XXVIII.
22.3 CONTINUING LIABILITY. Tenant's and Landlord's liability under this
Article shall survive any termination of this Lease and shall continue for the
term provided herein or as permitted by the laws of the State, whichever is
longer.
ARTICLE XXIII
ASSIGNMENT
23.1 ASSIGNMENT AND SUBLETTING. Subject to the provisions of Section 23.3
below and any other express conditions or limitations set forth in this Lease,
Tenant may, without the consent of Landlord, (i) sublet up to an aggregate of
25% of the rentable square footage of the Facility, to concessionaires or other
third party users or operators thereof, provided that any subletting to any
party shall not individually as to any one such subletting, or in the aggregate,
materially diminish the actual or potential Additional Rent payable under this
Lease or (ii) assign its rights hereunder to a joint venture or partnership in
which Tenant holds a controlling interest and, in the case of a partnership,
Tenant is a general partner. Except as otherwise permitted in the immediately
preceding sentence, a conveyance, transfer, assignment or subletting of all or
any portion of the Property shall not be permitted unless the consent of
Landlord is first
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obtained; provided, however, that Landlord hereby acknowledges notice that NHI
has a lien on Tenant's leasehold estate under this Lease, and hereby consents to
NHI or any nursing home affiliate thereof becoming the Tenant hereunder upon any
foreclosure of such lien. Such consent by Landlord will not be unreasonably
withheld if (x) the assignee assumes all obligations of Lessee under the Lease
in a writing in form and content reasonably acceptable to Landlord, (y) such
assignee meets the financial covenants applicable to Tenant hereunder and
demonstrates such fact to Landlord's reasonable satisfaction, and (z) no Event
of Default is in effect and continuing hereunder. Landlord shall not
unreasonably withhold its consent to any subletting or assignment, provided that
the assignee or sublessee has a financial condition comparable to the greater of
(i) Tenant's financial condition as of the Commencement Date or (ii) Tenant's
financial condition as of the date of the proposed assignment or subletting and
(w) in the case of a subletting the sublessee shall comply with the provisions
of Section 23.2, (x) in the case of an assignment, (i) the assignee assumes in
writing and agrees to keep and perform all of the terms of this Lease on the
part of Tenant to be kept and performed, (ii) the assignee complies with the
covenants set forth in Section 28 hereof, (iii) the assignment causes no
violation of any other covenants under this Lease by Tenant or the assignee, and
(iv) the assignee becomes jointly and severally liable with Tenant for the
performance thereof, (y) an original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Landlord, is
delivered promptly to Landlord, and (z) in case of either an assignment or
subletting, Tenant remains primarily liable, as principal rather than as surety,
for the prompt payment of Rent and for the performance and observance of all
covenants and agreements to be performed by Tenant hereunder. Tenant shall not,
without Landlord's approval, which Landlord may not unreasonably withhold,
permit any person other than its Affiliates, to own at any time 50% or more of
the beneficial interest in Tenant.
23.2 ATTORNMENT. Tenant shall insert in each sublease permitted under
Section 23.1 provisions reasonably satisfactory to Landlord which provide for
the benefit of Landlord that (a) such sublease is subject and subordinate to all
of the terms and provisions of this Lease and to the rights of Landlord
hereunder, (b) in the event this Lease shall terminate before the expiration of
such sublease, the sublessee thereunder will, at Landlord's option, either
attorn to Landlord and waive any right the sublessee may have to terminate the
sublease or surrender possession under such sublease, and (c) in the event the
sublessee receives Notice from Landlord or Landlord's assignees, if any, stating
that Tenant is in default under this Lease, the sublessee shall thereafter be
obligated to pay all rentals accruing under said sublease directly to the party
giving such Notice, or as such party may otherwise direct. All rentals received
from the sublessee by Landlord or Landlord's assignees, if any, as the case may
be, shall be credited against the amounts owed to Landlord under this Lease.
23.3 SUBLEASE LIMITATION. Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not sublet the Property on any basis such that the
rental to be paid by the sublessee thereunder would be based, in whole or in
part, on either (a) the income or profits derived by the business activities of
the sublessee, or (b) any other formula such that any
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portion of the sublease rental would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.
ARTICLE XXIV
INFORMATION FROM TENANT
24.1 OFFICER'S CERTIFICATES. At any time and from time to time, upon not
less than 20 days Notice by Landlord, Tenant shall furnish to Landlord an
Officer's Certificate certifying that this Lease is unmodified and in full force
and effect (or that this Lease is in full force and effect as modified and
setting forth the modifications), the date to which the Rent has been paid,
whether there exists any Event of Default or any situation which, with the
giving of notice, passage of time, or both, would constitute an Event of Default
hereunder based upon Tenant's current knowledge, whether Tenant contends that
Landlord is in default hereunder, and if Tenant so contends, the basis for such
contention, the date upon which the Term terminates, and such other information
as Landlord reasonably may request. Any such certificate furnished pursuant to
this Section 24.1 may be relied upon by Landlord, any prospective purchaser of
the Property, and any Facility Mortgagee or Landlord Lender.
24.2 FINANCIAL INFORMATION. Tenant shall furnish, the following statements
to Landlord:
(a) within 120 days after the end of each Fiscal Year, a balance
sheet and statements of revenues and expenses and changes in retained earnings
and cash flows for Tenant, certified by independent public accountants of
recognized standing acceptable to Landlord, such statements to be prepared in
accordance with generally accepted accounting principles consistently applied,
to be for such Fiscal Year and the immediately preceding Fiscal Year and to be
in comparative columnar form; within 90 days after the end of each Fiscal Year,
Tenant shall provide unaudited preliminary financial statements similar to those
referred to above;
(b) within 120 days after the end of each Fiscal Year, a schedule of
capital expenditures or reserves therefor of Tenant for such Fiscal Year as
required by Section 29.2(a)(i) hereof;
(c) within 45 days after the end of each of the first three fiscal
quarters of each Fiscal Year, financial statements similar to those referred to
in clause (a) above, but only certified by the principal financial or other
appropriate officer of Tenant, as having been prepared in accordance with
generally accepted accounting principles consistently applied (but which may
exclude footnote disclosures), such financial statements to be for the period
from the beginning of such Fiscal Year (and immediately preceding Fiscal Year)
to the end of such quarter (and comparable quarter);
(d) concurrent with the statements furnished pursuant to clauses (a)
and (b) above, an Officer's Certificate stating that, after making due inquiry,
Tenant is not in default in the performance or observance of any of the terms of
this Lease, or if Tenant shall be in
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default to its knowledge, specifying all such defaults, the nature of such
defaults, and the steps being taken to remedy the same;
(e) within 30 days after the end of each month, financial statements
similar to those referred to in clause (a) together with operating statistics
but only certified by the principal financial or other appropriate officer of
Tenant, as having been prepared in accordance with generally accepted accounting
principles consistently applied; and
(f) with reasonable promptness, such other information respecting
the financial condition and affairs of Tenant as Landlord may reasonably request
from time to time.
24.3 LICENSING INFORMATION. Tenant shall promptly furnish to Landlord
complete copies of all surveys, examinations, inspections, compliance
certificates and similar reports of any kind issued to Tenant by any
governmental agencies or authorities having jurisdiction over the licensing of
the operation of the Property which are material to the Property or the
Facility, their ownership or operation.
ARTICLE XXV
APPRAISALS OF THE PROPERTY AND OPTIONS
25.1 APPRAISERS. If at any time it becomes necessary to determine the Fair
Market Value, Fair Market Value Purchase Price or Fair Market Rental of the
Property for any purpose under this Lease, and the parties are unable to agree
thereupon, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a person selected to act
as appraiser on its behalf. Within ten days after such Notice, Landlord or
Tenant, as the case may be, shall by Notice to Tenant or Landlord, as the case
may be, either agree to the appointment of the appraiser identified in such
initial Notice, in which case such appraiser shall be the sole appraiser for
purposes of determining the Fair Market Value, Fair Market Value Purchase Price
or Fair Market Rental, as the case may be, or shall appoint a second person as
an appraiser on its behalf. Any appraiser appointed pursuant to this Section
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto). The appraiser(s) thus appointed shall, within
45 days after the date of the Notice appointing the first appraiser, proceed to
appraise the Property to determine the Fair Market Value, Fair Market Value
Purchase Price or Fair Market Rental thereof (as the case may be) as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of their decision to the relevant date). In the case of two appraisers, except
as provided in Section 25.2, the two appraisals shall be averaged to determine
the Fair Market Value, Fair Market Value Purchase Price or Fair Market Rental,
as the case may be. In any event, the appraised value determined in accordance
with this Section shall be final and binding on Landlord and Tenant.
25.2 METHOD OF APPRAISAL. Any appraisal required or permitted by the terms
of this Lease shall be conducted in a manner consistent with sound appraisal
practice, taking into account each of the income, market and cost appraisal
methodologies. Notwithstanding the
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provisions of Section 25. 1, if the difference between the appraisal amounts
determined by the appraisers appointed pursuant to Section 25.1 exceeds ten
percent of the lesser of such appraisal amounts, then the two appraisers shall
have 20 days to appoint a third appraiser. If no such appraiser is appointed
within such 20 days or within 90 days of the original request for a
determination of Fair Market Value, Fair Market Value Purchase Price or Fair
Market Rental (as the case may be), whichever is earlier, either Landlord or
Tenant may apply to any court having jurisdiction to have such appointment made
by such court. Any appraiser appointed by the original appraisers or by such
court shall be instructed to determine the Fair Market Value, Fair Market Value
Purchase Price or Fair Market Rental (as the case may be) within 45 days after
the appointment of such appraiser. The determination of the three appraisers
which differs most in the terms of dollar amount from the determinations of the
other two appraisers shall be excluded, and 50% of the sum of the remaining two
determinations shall be the appraised value, which appraised value shall be
final and binding upon Landlord and Tenant as the Fair Market Value, Fair Market
Value Purchase Price or Fair Market Rental of the Property, as the case may be.
If the lowest and highest appraised values are equidistant in amount from the
middle appraised value, then such middle appraised value shall be the Fair
Market Value, Fair Market Value Purchase Price or Fair Market Rental (as the
case may be). The provisions of this Article shall be specifically enforceable
to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. Landlord and Tenant each shall pay the
fees and expenses of the appraiser appointed by it, and each shall pay one-half
of the fees and expenses of the third appraiser and one-half of all other costs
and expenses incurred in connection with each appraisal.
ARTICLE XXVI
OPTIONS TO PURCHASE
26.1 LANDLORD'S OPTION TO PURCHASE TENANT'S PERSONAL PROPERTY; TRANSFER OF
LICENSES. Provided Tenant has not exercised its option pursuant to Section 26.2
hereof, effective upon not less than ninety (90) days prior notice given at any
time within one hundred eighty (180) days prior to the expiration of the Term of
this Lease, or upon such shorter Notice as shall be reasonable if this Lease is
terminated prior to its expiration date, Landlord shall have the option to
purchase all (but not less than all) of Tenant's Personal Property, if any, at
the expiration or termination of this Lease, for an amount equal to the then
fair market value thereof, taking into account and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, UCC-1
financing statements and other encumbrances to which such Tenant's Personal
Property is subject. Upon the expiration or termination of the Lease and such
purchase by Landlord, Tenant shall use good faith efforts, at Landlord's sole
cost and expense, to transfer and assign to Landlord or its designee, or assist
Landlord or its designee in obtaining, any contracts, licenses, and certificates
required for the then operation of the Facility.
26.2 TENANT'S OPTION TO PURCHASE THE PROPERTY. Provided no Event of
Default specified in Section 17.1(a) hereof nor any other material Event of
Default has occurred and is continuing, and provided Tenant simultaneously
exercises its option to purchase the Properties
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subject to the other Leases, Tenant shall have the option exercisable on not
less than one hundred eighty (180) days nor more than three hundred sixty (360)
days Notice to purchase the Property, at the expiration of the Fixed Term, or at
the expiration of any Extended Term, at the greater of (y) the Fair Market Value
of the Property as of the date specified for transfer of the Property in such
Notice or (z) the Total Investment Cost. Any such purchase of the Property by
Tenant will constitute a Sale, and will be subject to the indemnification
provisions of Section 22.1 hereof. Upon exercise by Tenant of its option to
purchase the Property, Landlord shall, at the election of Tenant, either convey
the Property as a sale of assets or as a sale of the stock of a corporation
whose sole assets consist of the Property.
If Tenant shall timely and properly exercise the foregoing option, the
sale of the Property shall be consummated through an escrow to be opened with a
mutually acceptable title or escrow company and shall close within ten Business
Days following the expiration of the Fixed Term or Extended Term in connection
with which Tenant exercised such purchase option. The purchase price of the
Property (net of the principal balance of any Facility Mortgage placed on the
Property by Landlord and expressly assumed by Tenant) shall be deposited into
escrow by wire transfer of Federal Funds at least two business days prior to
close of escrow and shall be paid to Landlord at close of escrow by wire
transfer of Federal Funds to such account as Landlord shall designate. Tenant
acknowledges and agrees that it shall purchase the Property from Landlord "AS
IS" and subject to all faults, defects in title and other matters whatsoever,
including, but not limited to, all matters of record other than Facility
Mortgage not expressly assumed by Tenant and any other liens, encumbrances,
attachments, levies or claims encumbering, at the instance of Landlord, the
Property, all of which shall be removed of record prior to purchase. Landlord
shall be conclusively deemed not to have made any warranty or representation
regarding the title, condition or other status of the Property. All title
insurance premiums and other closing costs associated with the purchase of the
Property by Tenant pursuant to this Section shall be paid by Tenant.
26.3 TENANT'S RIGHT OF FIRST REFUSAL. In the event that at any time
during the Tenn or the Extended Term, Landlord should receive an offer to
acquire its interest in the whole or any portion of the Property, and if such
offer is acceptable to Landlord, or if Landlord should make an offer to sell,
convey or transfer the whole or any portion of its interest in the Property, the
Tenant shall have, and Landlord does hereby grant to Tenant, the right of first
refusal to acquire Landlord's interest in the Property under the same terms and
conditions as such offer; provided, however, that if such offer to acquire or to
sell, convey or transfer all or any portion of the Property is part of an offer
to acquire other property from Landlord, in addition to all or any portion of
the Landlord's interest in the Property, Tenant may exercise the right of first
refusal granted in this section 26.3 only by agreeing to acquire all of the
property which is the subject of the offer on the same terms, conditions and
payment timetable as in the original offer. Upon receipt of any such acceptable
offer or upon transmittal of any offer, Landlord shall certify a complete, true
and correct copy of such offer to Tenant including all of the terms thereof.
Tenant shall have a period of 20 days from the date of the receipt of such
certification to exercise such right of first refusal by Notice to Landlord
within such period. Failure to exercise the right with respect to any particular
offer shall not terminate the right with respect to any
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other offer. If Tenant refuses to acquire the Property pursuant hereto and
Landlord sells the Property to a third party, such sale shall provide that it is
subject to the rights of Tenant under this Lease.
ARTICLE XXVII
FACILITY MORTGAGE
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth below in this Section, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance, security
interest or title retention agreement ("ENCUMBRANCE") upon the Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing provided that the principal amount of such
borrowing, financing or refinancing does not exceed 80% of the then Fair Market
Value of the Property. Any such Encumbrance (i) shall contain the right to
prepay (whether or not subject to a prepayment penalty, which penalty shall be
paid by Landlord), (ii) shall provide that it is subject to the rights of Tenant
under this Lease, including the rights of Tenant to acquire the Property
pursuant to the applicable provisions of this Lease, provided, however, that
Tenant agrees that it will not unreasonably withhold its consent to any request
by Landlord that Tenant subordinate this Lease to any mortgage or deed of trust
that may hereafter from time to time be recorded on the Property, and to any and
all advances made or to be made thereunder, and to renewals, replacements and
extensions thereof and (iii) shall be paid in full and released and reconveyed
in the event Tenant purchases the Property pursuant to this Lease, unless Tenant
elects to assume such Encumbrance. Any such subordination, however, shall be
subject to the condition precedent that the mortgagee under such mortgage or the
beneficiary under such deed of trust enter into a written non-disturbance and
attornment agreement with Tenant, in form and content satisfactory to Tenant,
whereunder it is agreed that in the event of a sale or foreclosure under such
mortgage or deed of trust, the purchaser of the Property (including the
mortgagee or beneficiary under such mortgage or deed of trust), shall acquire or
hold the Property subject to this Lease so long as Tenant is not in default
hereunder, and so long as Tenant recognizes such purchaser as the landlord under
this Lease and agrees, if requested to do so, to attorn to such purchaser and,
if instructed to do so by such purchaser, to make rental payments directly to
it.
ARTICLE XXVIII
LIMITATION OF LIABILITY
Tenant specifically agrees that neither AHP nor Landlord nor any officer,
shareholder, employee or agent of AHP or Landlord (each of which shall, for
purposes of this Article XXVII, be considered an Affiliate of Landlord) shall be
held to any personal liability, jointly or severally, for any obligation of, or
claims against Landlord, Tenant agreeing to look solely to Landlord's equity
interest in the Property for recovery of any judgment from Landlord. The
provisions contained in the foregoing sentence are not intended to, and shall
not, limit any right that Tenant might otherwise have to obtain injunctive
relief against Landlord or Landlord's
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successors in interest, or any action not involving the personal liability of
Landlord (original or successor). In no event shall Landlord (original or
successor) or any Affiliate of Landlord be required to respond in monetary
damages from Landlord's assets other than Landlord's equity interest in the
Property. Furthermore, except as otherwise expressly provided herein, in no
event shall Landlord or any Affiliate of Landlord (original or successor) ever
be liable to Tenant for any indirect or consequential damages suffered by Tenant
from whatever cause.
ARTICLE XXIX
ADDITIONAL COVENANTS OF TENANT
29.1 ADDITIONAL NEGATIVE COVENANTS. Tenant covenants and agrees with
Landlord that, during the Term hereof, Tenant shall not, either directly or
indirectly:
(a) Liens. Incur, create, assume or permit to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever (including
conditional sales or other title retention agreements) on any property or other
assets now owned or hereafter acquired by Tenant, including, but not limited to,
Tenant's leasehold interest under this Lease and Tenant's Personal Property,
other than:
(i) deposits or pledges to secure payment of workmen's
compensation, unemployment insurance, old age pensions or other social security;
(ii) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable, or if in good faith being
contested or litigated, provided that a reserve against such taxes, assessments,
charges and levies deemed adequate by Landlord shall be maintained and Tenant
shall furnish security reasonably satisfactory to Landlord for the payment of
such taxes, assessments, charges and levies;
(iii) liens in favor of Landlord or NHI;
(iv) purchase money security interests securing the payment of
not more than 75% of the purchase price of any item of personal property;
(v) security interests in accounts receivable under working
capital lines of credit securing indebtedness not exceeding 80% of the net book
value of such accounts receivable;
(vi) judgments and other similar liens, 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 in accordance with the requirements of this Lease;
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(vii) liens constituting renewals, extensions or replacements
of liens described in the foregoing clauses, but only, in the case of each such
renewal, extension or replacement lien, to the extent of the principal amount of
the obligation so secured at the time of the extension, renewal or replacement,
and to the extent that such renewal, extension or replacement lien is limited to
all or part of the property that secured the lien extended, renewed or replaced;
and
(viii) liens being contested in accordance with the provisions
of Article XIII.
(b) CASH FLOW COVERAGE RATIO. Unless Tenant is in full compliance
with the provisions of Section 3.1 of the Security Agreement, Tenant shall not
permit the ratio of: (a) Cash Flow to (b) Total Rent reserved for any calendar
quarter to be less than 1.75 to one; provided, however, that the failure to
maintain either of such ratios shall not constitute an event of default if the
Lease Reserve Fund is (i) then maintained in an amount equal to six months
Initial Base Rent or (ii) reinstated to an amount equal to six months Initial
Base Rent within thirty (30) days after Tenant delivers to Landlord financial
statements indicating such failure.
(c) SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of
all or any substantial part of its properties or assets, except for (x)
properties that are no longer useful in its business or have been replaced and
(y) during any 12-month period, Properties with an aggregate market value of up
to $500,000.
(d) Consolidation or Merger. Consolidate with or merge into any
other corporation or partnership or permit any other corporation or partnership
to merge into it unless after giving pro forma effect to the merger, based on
its and the disappearing corporation's financial statements for, in each case,
its most recently completed fiscal year or quarter, there is no violation of any
of the covenants of this Lease to be observed or performed by Tenant.
(e) Guarantees. Guarantee or otherwise incur liability for the
obligations of others except for endorsement of negotiable instruments for
deposit or collection.
(f) Dividends. Declare or pay any dividend or make any distribution
unless (i) Tenant is not in default under the Lease and (ii) the Lease Reserve
Fund is maintained in an amount equal to six months Initial Base Rent, or,
Signature shall have a Tangible Net Worth of not less than $5,000,000.
(g) Management Fee. Pay any person or entity a management or
advisory fee in connection with the management and operation of the Facility in
any Fiscal Year unless Tenant is not in default under the Lease and the
obligation to pay such management fee is subordinated to the payment obligations
under the Lease and such person or entity provides a guaranty of the obligations
of the Leases.
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29.2 ADDITIONAL AFFIRMATIVE COVENANTS. Tenant covenants and agrees with
Landlord that, during the Term hereof, Tenant shall:
(a) Maintenance of Properties and Intangible Assets.
(i) Do or cause to be done all things necessary to preserve,
renew and keep in fall force and effect its existence and, except as permitted
in Section 29.1(d), with such exceptions, if any, as are not material in the
aggregate, to obtain and, having obtained, preserve, renew and keep in full
force and effect all customary accreditation, rights, licenses and permits and,
with such exceptions, if any, as are not material in the aggregate, comply with
all laws and regulations applicable to it and conduct and operate the Facility
in substantially the manner, with such changes as may from time to time be
considered by management as necessary or appropriate, in which it is presently
conducted and operated, and at all times, with such exceptions as are not
material in the aggregate, to obtain, maintain, preserve and protect all
necessary franchises, provide agreements, contract rights, trademarks and trade
names used or useful in its operations and preserve all its assets which are
used or useful in the conduct of its operations, and keep the same in working
order and condition, and, with such exceptions as are not material in the
aggregate, from time to time to make, or cause to be made, all necessary
repairs, renewals, replacements, betterments and improvements thereto, so that
the operation of the Facility may be properly and advantageously conducted at
all times. Tenant shall maintain the Facility in good condition and repair
pursuant to an annual capital expenditure budget or reserve of not less than
$300 per Facility bed with any such reserves to be expended within three years
of the reserve, and all such reserves to be expended during the Term. Without
limiting the generality of the foregoing, Tenant shall use or cause the Property
to be used for the Primary Intended Use and only for such other uses as may be
necessary in connection with or incidental to said use or as may be agreed to by
Landlord in its sole and absolute determination. With such exceptions as are not
material in the aggregate, no use shall be made or permitted to be made of the
Property and no acts shall be done which violate any Legal Requirements or
Insurance Requirements or which will cause the cancellation of any insurance
policy covering the Property or any part thereof or any provider agreements.
Tenant shall comply in all material respects with all Legal Requirements and all
of the requirements pertaining to the Property of any insurance board,
association, organization or company necessary for the maintenance of the
insurance required pursuant to this Lease.
(ii) Tenant, immediately upon obtaining knowledge of facts
which are reasonably likely to result in an action by any Federal, state or
local agency (or the staff thereof) to revoke, withdraw or suspend any permit,
license, conditional use permit, variance certificate, certificate of need,
letter of nonreviewability, provider agreement or other governmental approval,
or an action of any other type, which would have a material adverse effect on
the Tenant or the operations of the Facility, shall notify the Landlord thereof
immediately.
(b) OBLIGATIONS AND TAXES. With such exceptions as are not material
individually or in the aggregate, none of which exceptions results in the
creation of a lien prohibited by this Lease on any property of Tenant, pay all
indebtedness and obligations in
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accordance with customary trade practices and pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed on it or upon its
income and profit, or upon any of its property, real, personal or mixed, or upon
any part thereof, before the same shall become in default, as well as pay before
they shall become in default all lawful claims for labor, material and supplies
or otherwise which, if unpaid, might become a lien or charge upon such Property
or any part thereof.
(c) PENSION PLANS. Tenant shall notify Landlord within ten business
days of the occurrence of any of the following events ("NOTIFICATION EVENTS")
with respect to Tenant's Plans and within ten days of obtaining knowledge of any
Notification Event with respect to Plans of its Affiliates: (i) the termination
of a Plan, unless such Plan can be terminated without material adverse effect on
the business, properties or condition (financial or otherwise) of Tenant or its
Affiliates; (ii) the failure to make contributions to any of Tenant's Plans
(including any Multiemployer Plans) in a timely manner and in sufficient amount
to comply with the requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"); (iii) the failure to comply with all material
requirements of ERISA and the Code which relate to such Plans and Multiemployer
Plans (as defined by ERISA), the failure with which to comply would have a
material adverse effect on the business, properties or condition (financial or
otherwise) of Tenant or its Affiliates; (iv) receipt by Tenant of any notice of
the institution of any proceeding or other action which may directly result in
the termination of any Plans or Multiemployer Plans; (v) a Termination Event or
Reportable Event (as defined by ERISA) with respect to a Plan; and (vi) any
event or condition which would cause the lien provided for in Section 4068 of
ERISA to attach to the assets of Tenant. Tenant shall not fail to make any
payments to any Multiemployer Plan that Tenant may be required to make under any
agreement relating to any Multiemployer Plan, ERISA or any other law pertaining
thereto, except for any payments being contested in good faith in accordance
with Article XIII with respect to which Tenant has established adequate reserves
or which, if not made, would not have a material adverse effect on the business,
properties or condition (financial or otherwise) of Tenant or its Affiliates.
29.3 SECURITY FOR THE LEASE.
(a) SECURITY AGREEMENT. On or before the Commencement Date, Tenant
shall execute and deliver to Landlord the Security Agreement.
(b) ABSOLUTE ASSIGNMENT. Tenant shall, on or before the Commencement
Date, execute and deliver to Landlord an absolute assignment of subleases and
rents pursuant to which Tenant shall assign to Landlord, subject to a license to
Tenant to retain so long as no Event of Default is continuing, all of Tenant's
rights, title and interest in any subleases and assignments permitted under this
Lease and the proceeds thereof.
(c) LEASE RESERVE FUND. As security for the timely and faithful
performance by Tenant of each and every one of Tenant's obligations under this
Lease, tenant shall, on the Commencement Date and thereafter as provided in
Section 3.1 of the Security Agreement, create
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and maintain the Lease Reserve Fund referred to in Section 3.1 of the Security
Agreement in an amount equal to six months Initial Base Rent (the "Lease Reserve
Fund"). Notwithstanding any contrary provision of this Section 29.3(c), Tenant
shall maintain the Lease Reserve Fund in a reduced amount equal to the amount of
the Initial Base Rent for three months, if, for each of the four consecutive
full calendar quarters most recently completed (during the Term), (i) (x)
Tenant's Cash Flow is at least 1.75 times (y) Total Rent, (ii) Guarantors' Cash
Flow is at least 2.5 times Fixed Charges, and (iii) Guarantors have maintained a
tangible net worth of at least $5,000,000, all as reflected in financial
statements prepared in accordance with generally accepted accounting principals
as set forth in an Officer's Certificate delivered not later than sixty (60)
days after the end of such most recent quarter. Such Officer's Certificate shall
be accompanied by an appropriate cash flow statement and a compilation report
thereon, without material qualification, of Tenant's independent public
accountants. If Tenant delivers financial information to Landlord pursuant to
Section 24.2 hereof which indicates that Tenant has failed to maintain the
financial conditions therein and herein for the most recent period of two
consecutive calendar quarters, Tenant shall within ten (10) business days
reinstate the Lease Reserve Fund to the full amount of six months Initial Base
Rent, and Tenant's failure so to do shall be deemed an immediate Event of
Default hereunder, without requirement of demand therefor by Landlord or the
giving of any Notice, and, in such event, Landlord shall have the right to draw
the entire balance of the Lease Reserve Fund and apply the proceeds against any
obligation or obligations of Tenant hereunder in such amount or amounts as
Landlord, in its sole discretion, shall decide and exercise any other remedies
permitted Landlord hereunder, at law or in equity. Landlord shall not be deemed
to hold the Lease Reserve Fund in trust, but shall not commingle such funds with
other assets of Landlord. Tenant shall not be entitled to any interest with
respect to any such funds held by Landlord.
ARTICLE XXX
MISCELLANEOUS
30.1 LANDLORD'S RIGHT TO INSPECT. Landlord and its authorized
representatives may, at any time and from time to time, upon reasonable notice
to Tenant, inspect the Property during usual business hours subject to any
security, health, safety or patient business confidentiality requirements of
Tenant or any governmental agency, or created by any Insurance Requirement or
Legal Requirement relating to the Property
30.2 NO WAIVER. No failure by Landlord or Tenant to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
provided hereunder, and no acceptance of full or partial payment of Rent during
the continuance of any such breach, shall constitute a waiver of any such breach
or of any such term. To the extent permitted by applicable law, no waiver of any
breach shall affect or alter this Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
30.3 REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord or Tenant now or
hereafter provided either in
60
<PAGE> 67
this Lease or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power and remedy the exercise or
beginning of the exercise by Landlord or Tenant of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Landlord or Tenant of any or all of such other rights, powers and
remedies.
30.4 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this Lease or of
all or any portion of or interest in the Property shall be valid or effective
unless agreed to and accepted in writing by Landlord, and no act by Landlord or
any representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender by Tenant.
30.5 NO MERGER OF TITLE. There shall be no merger of this Lease or of the
leasehold estate created hereby if the same person, firm, corporation or other
entity acquires, owns or holds, directly or indirectly, this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, and the fee estate in the Property.
30.6 CONVEYANCE BY LANDLORD. If Landlord or any successor owner of the
Property conveys the Property in accordance with the terms hereof (other than as
security for a debt), and the grantee or transferee of the Property expressly
assumes all obligations of Landlord hereunder arising or accruing from and after
the date of such conveyance or transfer, Landlord or such successor owner, as
the case may be, thereupon shall be released from all liabilities and
obligations of Landlord under this Lease.
If Tenant assigns the Lease in accordance with the terms hereof, Landlord
consents to such assignment pursuant to Section 23.1 and the assignee expressly
assumes all obligations of Tenant hereunder arising or accruing from and after
the date of such conveyance or transfer, Tenant and Guarantors thereupon shall
be released from their respective liabilities and obligations of Tenant under
this Lease.
30.7 QUIET ENJOYMENT. So long as Tenant pays all Rent as the same becomes
due and fully complies with all of the terms of this Lease and fully performs
its obligations hereunder, Landlord warrants, represents and covenants that
Tenant shall peaceably and quietly have, hold and enjoy the Property for the
Term hereof, free of any claim or other action by Landlord or anyone claiming
by, through or under Landlord, but subject to all liens and encumbrances of
record as of the date hereof or hereafter consented to by Tenant. Except as
otherwise provided in this Lease, no failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to cancel or terminate this Lease
or abate, reduce or make a deduction from or offset against the Rent or any
other sum payable under this Lease, or to fail or refuse to perform any other
obligation of Tenant hereunder. Notwithstanding the foregoing, Tenant shall have
the right, by separate and independent action, to pursue any claim it may have
against Landlord as a result of a breach by Landlord of the covenant of quiet
enjoyment contained in this Section.
61
<PAGE> 68
30.8 NOTICES. All notices, demands, requests, consents, approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
delivered by personal delivery, courier or messenger service, express or
overnight mail, or by registered or certified mail, return receipt requested and
postage prepaid, addressed to the respective parties as follows:
If to Tenant: Douglas Manor, Inc.
2105 Clubhouse Drive
Greeley, Colorado 80634
Attention: President
If to Landlord: American Health Properties of Arizona, Inc.
c/o American Health Properties, Inc.
6400 South Fiddler's Green Circle
Suite 1800
Englewood, Colorado 80111
Attention: General Counsel
If to NHI: National Health Investors, Inc.
City Center
100 Vine Street
Murfreesboro, Tennessee 37130
or to such other address as either party may hereafter designate. Personally
delivered Notices sent by courier or messenger service or by express or
overnight mail shall be effective upon receipt, and Notices given by mail shall
be complete at the time of deposit in the U.S. mail system, but any prescribed
period of Notice and any right or duty to do any act or make any response within
any prescribed period or on a date certain after the service of such Notice
given by mail shall be extended five (5) days.
30.9 SURVIVAL OF TERMS; APPLICABLE LAW. Anything contained in this Lease
to the contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination of this Lease shall survive
such termination for two years, except for third party claims based on alleged
tortious actions and omissions of Tenant during the term of this Lease, which
third party claims shall survive the term of this Lease. If any term or
provision of this Lease or any application thereof shall be invalid or
unenforceable for any reason whatsoever, the remainder of this Lease and any
other application of such term or provisions shall not be affected thereby. If
any late charge or any interest rate provided for in any provision of this Lease
based upon a rate in excess of the maximum rate permitted by applicable law,
such charges shall be fixed at the maximum permissible rate. Neither this Lease
nor any provision hereof may be changed, waived, discharged, modified or
terminated except by an instrument in writing and in recordable form, signed by
Landlord and Tenant. Subject
62
<PAGE> 69
to any limitations on assignment contained in this Lease, all the terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The headings in this
Lease are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, BUT NOT INCLUDING ITS
CONFLICTS OF LAWS RULES.
30.10 EXCULPATION OF LANDLORD'S OFFICERS AND AGENTS. This Lease is made on
behalf of Landlord by an officer thereof, not individually, but solely in his
capacity in such office as authorized by the directors of Landlord pursuant to
its by-laws. The obligations of this Lease are not binding upon, nor shall
resort be had to, the private property of any of the directors, shareholders,
officers, employees or agents of Landlord personally, but bind only Landlord's
property. The provision contained in the foregoing sentence is not intended to,
and shall not, limit any right that Tenant might otherwise have to obtain
injunctive relief against Landlord or Landlord's successors in interest, or any
action not involving the personal liability of the directors, Shareholders,
officers, employees or agents of Landlord. Except as otherwise expressly
provided herein, in no event shall Landlord ever be liable to Tenant for any
indirect or consequential damages suffered by Tenant from whatever cause.
30.11 TRANSFERS FOLLOWING TERMINATION. Upon the expiration or earlier
termination of the Term, Tenant shall use good faith efforts to transfer to
Landlord or Landlord's nominee, or to cooperate with Landlord or Landlord's
nominee in connection with the processing by Landlord or Landlord's nominee of
any applications for, all licenses, operating permits and other governmental
authorizations and all contracts (including contracts with governmental or
quasi-governmental entities) which may be necessary for the operation of the
Facility; provided, however, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Landlord or Landlord's
nominee.
30.12 TENANT'S WAIVERS. Tenant waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance and waives all notices of the existence,
creation, or incurring of new or additional obligations, except as expressly
granted herein.
30.13 MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon the
request of either party, enter into a short form memorandum of this Lease and
all options contained herein, in form suitable for recording under the laws of
the State in which the Property is located. Tenant shall pay all costs and
expenses of recording such memorandum of this Lease.
30.14 ARBITRATION. Any controversy (a) involving $1,000,000 or less
(exclusive of interest and costs) arising out of, connected with or incidental
to this Agreement (except disputes concerning determinations of Fair Market
Value which shall be resolved exclusively as provided in Article XXV) and (b)
involving clauses (vii) and (viii) in the definition of Substitute Property
shall be decided by arbitration under the expedited procedures of the American
Arbitration Association, provided that claim is made within the applicable
period of limitation. Depositions
63
<PAGE> 70
to obtain discovery may be taken upon good cause, upon leave to do so granted by
the arbitrator. If either party hereto alleges in a court action that such
controversy exceeds $1,000,000, such party shall be deemed to have waived the
right to interest and costs in any award obtained therein if such award does not
exceed $1,000,000.
30.15 MODIFICATIONS. No provision of this Lease may be amended,
supplemented or otherwise modified except by an agreement in writing signed by
the parties hereto or their respective successors in interest.
30.16 ATTORNEYS' FEES. If either party commences an action against the
other to interpret or enforce any of the terms of this Lease or because of the
breach by the other party of any of the terms hereof, the losing or defaulting
party shall pay to the prevailing party reasonable attorneys' fees, costs and
expenses incurred in connection with the prosecution or defense of such action,
whether or not the action is prosecuted to a final judgment.
30.17 BROKERS.
(a) TENANT. Tenant hereby warrants that no real estate broker or
finder who is not an employee of Tenant has represented or will represent it in
this transaction and that no finder's fees have been earned by a third party who
may claim through Tenant. Tenant shall indemnify and hold harmless the Landlord
against any claim for brokerage fees made by any employee of Tenant.
(b) LANDLORD. Landlord hereby warrants that no real estate broker or
finder who is not an employee of Landlord has represented or will represent it
in this transaction and that no finder's fees have been earned by a third party
who may claim through Landlord. Landlord shall indemnify and hold harmless the
Tenant against any claim for brokerage fees made by any employee of Landlord.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
64
<PAGE> 71
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first above written.
DOUGLAS NAMOR, INC. d/b/a
DOUGLAS MANOR NURSING HOME, INC.,
a Colorado corporation
By: /s/ David A. Kremser
------------------------------------
David A. Kremser,
President
AMERICAN HEALTH PROPERTIES OF
ARIZONA, INC.,
an Arizona corporation
By: /s/ Geoffrey D. Lewis
------------------------------------
Geoffrey D. Lewis,
Vice President
65
<PAGE> 72
EXHIBIT "A"
That portion of the Northeast quarter of Section 18, Twnship 24 South, Range 28
East of the Gila and Salt River Base and Meridican, Cochise County, Arizona,
together with the abandoned portion of 14th Street and the alleys thereof as
abandoned by Ordinance No. 486, recorded in Docket 1803, page 201 records of
Cochise County, Arizona, being more particularly described as follows:
COMMENCING at the Northeast corner of Lot 6, in block 3 of Eastside Addition to
the City of Douglas, according to Book 1 of Maps, page 96, records of Cochise
County, Arizona;
thence South along the East property line of said Lot 6 (the basis of
bearing), a distance of 512.00 feet to the southeast corner of Lot 6, in Block 8
of said East side Addition;
thence West along the South property line of said block 8 and Block 7 of
said subdivision, a distance of 720.00 feet to the Southwest corner of Lot 2, in
block 7 of said Eastside Addition;
thence North along the West property line of said Lot 2, in Block 7 and
the prolongation thereof, a distance of 512.00 feet to the Northwest corner of
Lot 2, in block 2 of said Eastside Addition;
thence East along the North property line of said Block 2 and Block 3, a
distance of 720.00 feet to the POINT OF BEGINNING.
66
<PAGE> 1
Exhibit 10.125
PROMISSORY NOTE
Greeley, Colorado
March 30, 1994 $19,100,000.00
For value received, SIGNATURE HEALTH CARE CORPORATION, a Delaware
corporation ("Signature"), PUEBLO NORTE, INC., a Colorado corporation ("Pueblo
Norte"), RIO VERDE NURSING CENTER, INC., a Colorado corporation ("Rio Verde"),
LOS ARCOS, INC., a Colorado corporation ("Los Arcos"), AMBERWOOD COURT, INC., a
Colorado corporation ("Amberwood"), CHRISTOPHER NURSING CENTER, INC., a Colorado
corporation ("Brookshire") (Signature, Pueblo Norte, Rio Verde, Los Arcos,
Amberwood, Christopher and Brookshire are collectively referred to herein as the
"Borrower"), jointly and severally promise to pay to the order of NATIONAL
HEALTH INVESTORS, INC., a Maryland corporation and its successors and assigns
(the "Lender"), at its offices in Murfreesboro, Tennessee, or at such other
place as may be designated in writing by the holder, from time to time in lawful
money of the United States of America, the principal sum of Nineteen Million
Once Hundred Thousand and No/100 Dollars ($19,100,000.00), together with
interest on the outstanding principal balance computed from the date hereof
until the Maturity Date (as hereinafter defined) at the rate of ten and one-half
percent (10 1/2%) per annum (the "Initial Interest Rate," subject to adjustment
as set forth in the next sentence (as it may be adjusted, the "Interest Rate").
On the fifth (5th) anniversary of the execution of this Note (the "Adjustment
Date"), the Initial Interest Rate shall be adjusted to the greater of (a) the
Initial Interest Rate, or (b) 500 basis points over the Treasury Rate (as on the
Adjustment Date. The Interest Rate shall be computed based upon a 360 day year.
This note evidences a loan (the "Loan") made pursuant to a Term Loan Agreement
dated as of March 30, 1994 (as it may be amended from time to time, the "Loan
Agreement"). Borrower shall make monthly payments of principal and interest to
Lender in level monthly amounts equal to the monthly payments required to
amortize the principal indebtedness outstanding on the date of this Note over
twenty-five (25) years (i.e., a 300 month term) with interest at a rate of ten
and one-half percent (10 1/2%) per annum. On the Adjustment Date, the monthly
payments of principal and interest shall be adjusted to equal the amount needed
to amortize the then outstanding principal with interest at the changed rate
over the months then remaining in the 300 month amortization period. Such
monthly payments of principal and interest shall be paid to the Lender on the
thirtieth (30th) day of each month (and the last day of each February()
commencing April 30, 1994 until the Maturity Date. This Note shall mature March
30, 2004 (the "Maturity Date"), at which time all outstanding principal, accrued
interest and other amounts owed hereunder shall be due and payable
<PAGE> 2
in full to Lender in immediately available funds (it being understood that said
monthly payments will not fully pay this Note prior to the Maturity Date and
that a "balloon payment" will be due and payable on the Maturity Date). THIS
NOTE IS PAYABLE IN FULL ON THE MATURITY DATE, HOWEVER BROUGHT ABOUT. UPON THE
MATURITY DATE, BORROWER MUST REPAY THE ENTIRE OUTSTANDING PRINCIPAL BALANCE OF
THIS NOTE, UNPAID ACCRUED INTEREST THEN DUE AND ANY OTHER AMOUNTS OWED
HEREUNDER. LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN EVIDENCED HEREBY
AT THE MATURITY DATE. BORROWER, THEREFORE WILL BE REQUIRED TO MAKE PAYMENT OUT
OF OTHER ASSETS THAT BORROWER MAY OWN OR BORROWER WILL HAVE TO FIND A LENDER,
WHICH MAY BE THE LENDER, WILLING TO LEND BORROWER THE MONEY. IF THE LENDER
REFINANCES THE LOAN EVIDENCED HEREBY AT THE MATURITY DATE, BORROWER MAY HAVE TO
PAY SOME OR ALL OF THE CLOSING COSTS ASSOCIATED WITH A NEW LOAN, EVEN IF
BORROWER OBTAINS REFINANCING FROM LENDER.
In the event Lender sells or transfers this Note to any person, Lender
shall give Borrower written notice of such sale or transfer.
Borrower, at its option, may prepay the outstanding principal evidence
by this Note in whole or in part at nay time prior to the Maturity Date only
upon paying a prepayment fee to compensate Lender for the loss of interest
income for the remainder of the term of the Loan. The prepayment fee shall be
calculated based upon the following table (the "Prepayment Fee"):
<TABLE>
<CAPTION>
Amount of
Prepayment
Time of Prepayment Premium
------------------ -------
<S> <C>
Prior to March 30, 1995 10% of amount prepaid
After March 30, 1995
but prior to March 30, 1996 9% of amount prepaid
After March 30, 1996
but prior to March 30, 1997 8% of amount prepaid
After March 30, 1997
but prior to March 30, 1998 7% of amount prepaid
After March 30, 1998
but prior to March 30, 1999 6% of amount prepaid
After March 30, 1999
but prior to March 30, 2000 5% of amount prepaid
After March 30, 2000
but prior to March 30, 2001 4% of amount prepaid
After March 30, 2001
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
but prior to March 30, 2002 3% of amount prepaid
After March 30, 2002
but prior to March 30, 2003 2% of amount prepaid
After March 30, 2003
but prior to March 30, 2004 1% of amount prepaid
</TABLE>
If the Loan should be accelerated because of an Event of Default, such
accelerated payment shall be deemed to be a prepayment and subject to the
Prepayment Fee set out above on the date of such acceleration. The Prepayment
Fee shall apply to repayments of principal received upon the liquidation of any
collateral for this Note prior to the Maturity Date. Provided,. however,
principal repayments received by Lender from insurance proceeds or from
condemnation awards or settlements shall not be subject to the Prepayment Fee
provisions.
Provided however, if any such prepayment Fee is ever deemed to be
interest, the amount of such Prepayment Fee shall be reduced so that the same,
together all other sums deemed to be interest, shall be the amount equal to the
Maximum Rate (as hereinafter defined). In the event of a partial prepayment of
principal, all accrued but unpaid interest on the principal so prepaid shall be
due and payable at the date of principal prepayment; all prepayments of
principal are to be applied to the payment of principal last maturing ont his
Note, that is, in inverse order of maturity and without reducing the amount or
time of payment of the remaining obligatory installments.
Principal and unpaid interest shall bear interest following any Event
of Default at the Maximum Rate until paid. IN case of suit, or if this
obligation is placed in an attorney's hands for collection, or to protect the
security for its payment, Borrower shall pay the costs of collection and
litigation, including reasonable attorneys' fees, as set forth in Section 9.23
of the Loan Agreement.
If Borrower should fail to make any payment to Lender when due under
this Note, such occurrence shall be an Event of Default following the passage of
five (5) days following Borrowers' receipt of written notice from Lender stating
that said default has occurred.
In the event any Event of Default shall occur under the Loan Agreement,
then, in any of such events (each an "Event of Default"), at the option of
Lender, the entire indebtedness hereby evidenced shall become due, payable and
collectible then or thereafter, without notice, as Lender may elect regardless
of the Maturity Date. Lender may waive any Event of Default before or after the
same has been declared and restore this Note to full
<PAGE> 4
force and effect without impairing any rights hereunder, such right of waiver
being a continuing one.
Borrower and all sureties, endorsers, guarantors and other parties
hereafter assuming or otherwise becoming liable for the payment of any sum of
money payable under this Note (i) severally waive grace, presentment and demand
for payment, protest and notice of protest, and non-payment, and all other
notice, including notice of intent to accelerate the Maturity Date and notice of
acceleration of the Maturity Date, filing of suit and diligence in collecting
this Note or enforcing any of the security herefor, (ii) severally agree to any
substitution, exchange or release of any such security or the release of any
party primarily or secondarily liable hereon, (iii) severally agree that Lender
shall not be required first to institute suit or exhaust its remedies hereon
against Borrower or others liable or to become liable hereon or to enforce its
rights against any security hereof in order to enforce payment of this Note by
it, and (iv) consent to any extension or postponement of time of payment of this
note and in any other indulgence with respect hereto without notice thereof of
it.
The Borrower shall pay a "late charge" of five percent (5%) of any
payments of principal and/or interest due when paid after the due date thereof
(provided that in no event shall said "late charge" result int he payment of
interest in excess of the Maximum Rate to cover the extra expenses involved in
handling delinquent payments.
It is expressly stipulated and agreed to be the intent of Borrower and
Lender to at all times comply with the usury and other applicable United States
federal laws or State of Colorado laws now or hereafter governing the Interest
Rate payable on this Note or the Loan, as such laws now are written or
interpreted, and any subsequent revisions, repeals or judicial interpretations
thereof, to the extent any of the same are applicable to this Note. The Interest
Rate attributable to the Loan shall never exceed the sum of the Interest Rate
plus five percent (5%) per annum (the "Maximum Rate").
If from any circumstances whatsoever fulfillment of any provision
hereof or of any other document securing or executed in connection with the
Loan, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then ipso facto the
obligation to be fulfilled shall be reduced to the limit of such validity, and
if from such circumstance Lender shall ever receive anything of value deemed by
applicable law to be interest in any amount that would exceed the Maximum Rate,
all such amounts received by Lender in excess of the Maximum Rate shall be
deemed held by Lender in trust or the exclusive use and benefit of Borrower and
shall be applied to the reduction of the principal amount owing hereunder or on
account of any principal indebtedness of Borrower to Lender, and not to the
<PAGE> 5
payment of interest. If such excessive interest exceeds the unpaid principal
balance hereof and such other indebtedness, the excess shall be repaid to
Borrower. It is further agreed, without limitation of the foregoing, that all
calculations of the Interest Rate contracted for, charged or received under this
Note, or under any instrument evidencing or securing the Loan, that are made for
the purpose of determining whether such Interest Rate exceeds the Maximum Rate,
shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading throughout the full stated term of this Note
(and any extensions of the term hereof that may be hereafter granted) all such
interest at any time contracted for, charged or received from Borrower or
otherwise by Lender so that the Interest Rate on account of the Indebtedness (as
defined in the Loan Agreement) as so calculated is uniform throughout the term
hereof, If Borrower is exempt of hereafter becomes exempt from applicable usury
statutes or for any other reason the Interest Rate to be charged on this Note is
not limited by law, none of the provisions of this paragraph shall be construed
so as to limit or reduce the interest or other consideration payable under this
Note or under the instruments securing payment hereof. The terms and provisions
of this paragraph shall control and supersede every other provision of all
agreements between the parties hereto.
This Note is secured by the Collateral (as defined in the Loan
Agreement), whether express or implied, from Borrower (or any other party) to
Lender, including those collateral interests given simultaneously herewith,
those given heretofore and those hereinafter given. this Note is guaranteed
pursuant to the Guaranty (as defined in the Loan Agreement).
The invalidity, or unenforceability in particular circumstances, or any
provision of this Note shall not extend beyond such provision or such
circumstances and no other provision of this Notice shall be affected thereby.
Any check, draft, money order or other instrument given in payment of
all or any portion of this Note may be accepted by the Lender and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights or Lender except to the extent that actual cash
proceeds of such instrument are unconditionally receive d by Lender and applied
to this indebtedness evidenced by this Note as herein provided.
This Note has been executed and delivered in, and shall be governed by
and construed according to the laws of the State of Colorado except to the
extent pre-empted by applicable laws of the United States of America.
This Note may not be changed or terminated without the prior written
approval of Lender and Borrower. No waiver of any term of provision hereof shall
be valid unless in writing signed by Lender.
<PAGE> 6
Jointly and severally executed by Borrower as of March 30, 1994.
This Note replaces an earlier form of this Note and is re-executed to
change the monthly payment date. The re-execution of this Note does not
constitute a renewal or novation of the indebtedness evidenced by the original
note.
BORROWERS: SIGNATURE HEALTH CARE CORPORATION, a
Delaware corporation
By:/s/ David Kremser
---------------------------------------
Name:David Kremser
-------------------------------------
4/16/94 Title:President
- ------------------ ------------------------------------
Date
PUEBLO NORTE, INC., a Colorado
corporation
By: /s/ David Kremser
---------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
RIO VERDE NURSING CENTER, INC., a
Colorado corporation
By: /s/ David Kremser
---------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
LOS ARCOS, INC., a Colorado
corporation
By: /s/ David Kremser
--------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
<PAGE> 7
AMBERWOOD COURT, INC., a Colorado
corporation
By: /s/ David Kremser
---------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
CHRISTOPHER NURSING CENTER, INC., a
Colorado corporation
By: /s/ David Kremser
---------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
BROOKSHIRE HOUSE, INC., a Colorado
corporation
By: /s/ David Kremser
--------------------------------------
Name: David Kremser
------------------------------------
4/16/97 Title: President
- ------------------ -----------------------------------
Date
<PAGE> 1
Exhibit 10.126
LEASE AGREEMENT
This Lease Agreement is made effective as of December 1, 1990 between
HEALTH CARE REIT, INC., a Delaware corporation ("Landlord"), having its
principal office located at One SeaGate, suite 1950, P.O. Box 1475, Toledo, Ohio
43603, and THE ARBORS HEALTH CARE CENTER INC., an Arizona corporation
("Tenant"), having its principal office located at 2105 Clubhouse Drive,
Greeley, Colorado 80634.
RECITALS
WHEREAS, Landlord and SIGNATURE HEALTH CARE CORPORATION, a Delaware
corporation (the "Guarantor") entered into an Agreement to Lease dated effective
as of November 1, 1990 (the "Agreement");
WHEREAS, Guarantor assigned the Agreement to Tenant; and
WHEREAS, Landlord and Tenant are entering into this Lease
Agreement pursuant to the Agreement;
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE I: PREMISES AND TERM
1.01 Leased Property. Landlord hereby leases to Tenant and Tenant hereby takes
from Landlord the following property:
(a) The land described in Exhibit A attached hereto (the "Land").
(b) All buildings, structures, and other improvements, including
without limitation, sidewalks, alleys, utility pipes, conduits, and lines,
parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").
(c) All easements, rights and other appurtenances relating to the Land
and Improvements (the "Appurtenances").
(d) All permanently affixed equipment, machinery, fixtures, and other
items of real and/or personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, and built-in oxygen and vacuum
systems, all of which, to the greatest extent permitted by law, are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto but specifically
<PAGE> 2
excluding all items included within the category of Personal Property as defined
below (collectively the "Fixtures").
(e) All machinery, equipment, furniture, furnishings, movable walls or
partitions, computers, trade fixtures, consumable inventory and supplies, and
other personal property used or useful in Tenant's business on the Leased
Property, including without limitation, all items of furniture, furnishings,
equipment, supplies and inventory listed on Exhibit C attached hereto and the
replacements therefor, except items, if any, included within the definition of
Fixtures (collectively the "Personal Property"). The Land, Improvements,
Appurtenances, Fixtures, and Personal Property are hereinafter referred to as
the "Leased Property".
SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit B attached hereto (the "Permitted Exceptions").
1.02 Term. The initial term of this Lease is ten (10) years commencing on
December 1, 1990 (the "Commencement Date") and expiring on November 30, 2000.
Provided that no Event of Default has occurred and that Tenant gives Landlord
notice on or before June 1, 2000, Tenant shall have the option to renew this
Lease for one (1) additional five (5) year term. The term "Term" means the
initial term and the renewal term. The term "Lease Year" means each twelve (12)
month period during the Term commencing on December 1 and ending on November 30.
1.03 Early Entry. Landlord may, at its sole discretion, grant possession of the
Leased Property to Tenant prior to the Commencement Date. If possession is
granted prior to the Commencement Date, Tenant shall be subject to all of the
terms and conditions of this Lease. The Rent (as hereinafter defined) shall be
prorated for the period of possession prior to the Commencement Date.
ARTICLE II: RENT
2.01 Base Rent. Tenant shall pay Landlord base rent (the "Base Rent") for the
Term in advance in consecutive monthly installments payable on the first day of
each month during the Term, commencing December 1, 1990 in accordance with the
Base Rent Schedule attached hereto as Exhibit D.
2.02 Additional Rent. In addition to Base Rent and Percentage Rent (as
hereinafter defined in Section 2.06), Tenant shall pay all other amounts,
liabilities, obligations and Impositions (as hereinafter defined) which Tenant
assumes or agrees to pay under this Lease and the Agreement and any fine,
penalty, interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "Additional Rent") The Base Rent,
Percentage Rent, and Additional Rent are hereinafter referred to as "Rent".
Landlord shall have all legal, equitable and contractual
<PAGE> 3
rights, powers and remedies provided either in this Lease or by statute or
otherwise in the case of nonpayment of the Rent.
2.03 Place of Payment of Rent. Tenant shall make all payments of Rent at the
Landlord's address set forth in the first paragraph of this Lease or at such
other place as Landlord may designate from time to time.
2.04 Net Lease. This Lease shall be deemed and construed to be an "absolute net
lease", and Tenant shall pay all Rent and other charges and expenses in
connection with the Leased Property throughout the Term, without abatement,
deduction or set-off.
2.05 No Termination, Abatement, Etc. Except as otherwise specifically provided
in this Lease, Tenant shall remain bound by this Lease in accordance with its
terms. Except as otherwise specifically provided in the Lease, Tenant shall not,
without the prior written consent of Landlord, which consent will not be
unreasonably withheld, modify, surrender or terminate the Lease, nor seek nor be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against the Rent. Except as specifically provided in this Lease, the obligations
of Landlord and Tenant shall not be affected by reason of (i) any damage to, or
destruction of, the Leased Property or any part thereof from whatever cause or
any Taking (as hereinafter defined) of the Leased Property or any part thereof;
(ii) the lawful or unlawful prohibition of, or restriction upon, Tenant's use of
the Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; (iii) any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which Landlord
and Tenant are parties; (iv) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or (v)
any other cause, whether similar or dissimilar to any of the foregoing, other
than a discharge of Tenant from any such obligations as a matter of law. Except
as otherwise specifically provided in this Lease, Tenant hereby specifically
waives all rights, including but not limited to, any rights under Arizona
Revised Statutes Section 33-343 or a successor statute thereto, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(a) to modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof; or (b) entitling Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder. The obligations of Landlord and Tenant hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of
an Event of Default.
<PAGE> 4
2.06 Percentage Rent. In addition to the monthly Base Rent, during the first and
second Lease Years, Tenant shall pay Landlord percentage rent (the "Percentage
Rent") in accordance with this Section 2.06 on the twenty-fifth (25th) day of
each month commencing on January 25, 1991. The Percentage Rent will be the
excess of (i) the product of (a) the Gross Revenues for the prior month times
(b) the Applicable Rent Factor set forth in Section 2.06.02; over (ii) the
monthly Base Rent. If any governmental agencies or third party payors increase
the reimbursement for the first and second Lease Years at any time after the
expiration of the first or second Lease Years or, if the Leased Property
realizes increased Gross Revenues from any other source for the first and second
Lease Years, so that gross revenues for the first and second Lease Years are
increased, then Tenant shall pay Percentage Rent based upon the adjusted gross
revenues.
2.06.01 "Gross Revenues" means all revenues received or receivable from
or by reason of the operation of the Leased Property, or any other use of the
Leased Property, including without limitation all patient revenues received or
receivable for the use of or otherwise by reason of all rooms, beds and other
facilities provided, meals served, services performed, space or facilities
subleased or goods sold on the Leased Property, including without limitation,
and except as provided below, any consideration received under any subletting,
licensing, or other arrangements with third parties relating to the possession
or use of any portion of the Leased Property. Gross Revenues shall not include
(a) professional fees or charges by physicians and providers of ancillary
services who are independent contractors, when and to the extent such charges
are paid over to such physicians or providers of ancillary services, or
accompanied by separate charges for use of the Leased Property or any portion
thereof; (b) non-operating revenues such as interest income or income from the
sale of assets not sold in the ordinary course of business; and (c)) State or
Federal pass throughs of the cost of meeting State or Federal regulations,
rules, or statutes e.g. minimum wage pass throughs, OBRA regulation pass
throughs, and nurse-aid training pass throughs; provided, however, that any
profit component of the pass throughs shall be included in Gross Revenues. Gross
Revenues shall be adjusted for the following items: (i) contractual allowances
(difference between customary charges and amounts receivable based on contract)
relating to any period during the Term of the Lease; (ii) all proper patient
billing credits and adjustments according to generally accepted accounting
principles relating to health care accounting; and (iii) federal, state or local
excise taxes and any tax based upon or measured by said revenues which is added
to or made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately. To the
extent that the Leased Property is subleased by Tenant, Gross Revenues shall be
calculated for all purposes of the Lease by including the Gross Revenues of such
sub-lessees with respect to the subleased property, i.e., the Gross Revenues
generated from the operations conducted on such subleased portion of the Leased
<PAGE> 5
Property shall be included directly in the Gross Revenues for the purpose of
determining percentage rent payable under this Lease and the rent received or
receivable by Tenant from under such subleases shall be excluded from Gross
Revenues for such purpose.
2.06.02 "Applicable Rent Factor" means (i) 8.67% for the First Lease
Year; and (ii) 9.7% for the Second Lease Year.
2.06.03 On or before the twenty-fifth (25th) day of each month during
the first three (3) Lease Years of the Term, Tenant shall deliver to Landlord a
notarized, sworn statement (the "Tenant's Certification") setting forth the
Gross Revenues for the prior month and the Percentage Rent due, if any. In
addition to the Tenant's Certification, the Tenant shall deliver to Landlord
within five (5) days after such information is received, sent or made available,
but in no event later than the dates set forth below, the following: (i) any
reports sent to any reimbursement agency, including, but not limited to Medicaid
Cost Reports; (ii) copies of all Medicare Cost Reports; (iii) copies of all
interim or final cost settlements with Medicare authorities concerning Medicare
receivables with a debit or credit balance; (iv) patient census data by type of
patient on a quarterly basis within thirty (30) days after the end of each
calendar quarter beginning January 31, 1991; (v) reports of any changes in rates
for Medicare, Medicaid, private payor or any other provider paying for patients
in the Leased Property; and (vi) Tenant's calculation supporting any estimated
contractual allowances in the Financial Statements.
2.06.04 Landlord or its duly authorized representatives may, on any
business day and during reasonable office hours, inspect Tenant's records of the
Gross Revenues, either at the Leased Property or elsewhere as reasonably
designated by Tenant, provided such inspection is made within twelve months
after a Tenant's Certification is furnished to Landlord by Tenant. Any claim by
Landlord for a revision of any Tenant's Certification must be made in writing to
Tenant within twelve (12) months after the date such Tenant's Certification is
furnished to Landlord, otherwise it shall be deemed waived by Landlord. If
Landlord inspects Tenant's records and such inspection shows an error(s) in the
Tenant's Certification which results in an understatement of the Gross Revenues
of five percent (5%) or more, then in addition to paying the additional
Percentage Rent on demand, Tenant shall pay Landlord, on demand, the reasonable
cost of such inspection as Additional Rent.
ARTICLE III: IMPOSITIONS AND UTILITIES
3.01 Payment of Impositions. Subject to the adjustments set forth herein, Tenant
shall pay, as Additional Rent, all Impositions (as hereinafter defined) that may
be levied or become a lien on the Leased Property or any part thereof at any
time (whether prior to or during the Term), without regard to prior ownership of
said Leased Property, before any fine, penalty, interest, or cost is incurred.
Tenant shall, upon request from Landlord, promptly
<PAGE> 6
furnish to Landlord copies of official receipts or other satisfactory proof
evidencing such payments. Tenant's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon the
Leased Property or any part thereof. Tenant, at its expense, shall prepare and
file all tax returns and reports in respect of any Imposition as may be required
by governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default (as hereinafter defined) shall have
occurred hereunder and be continuing. Landlord shall be entitled to any refund
from any taxing authority if an Event of Default has occurred and is continuing.
Any refunds retained by Landlord due to an Event of Default shall be applied as
provided in Section 9.08. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may legally so file.
Landlord, to the extent it possesses the same, and Tenant, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Landlord is legally required to file personal
property tax returns, Tenant will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Landlord, at Tenant's option and
at Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant's expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other action.
Tenant shall promptly reimburse Landlord for all personal property taxes paid by
Landlord upon receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term commences and terminates shall be adjusted and prorated
between Landlord and Tenant on a per them basis, with Tenant being obligated to
pay its pro rata share from and including the Commencement Date to and including
the expiration or termination date of the Term, whether or not such Imposition
is imposed before or after such commencement or termination, and Tenant's
obligation to pay its prorated share thereof shall survive such termination.
Tenant shall also pay to Landlord a sum equal to the amount which Landlord may
be caused to pay of any privilege tax, sales tax, gross receipts tax, rent tax,
occupancy tax or like tax (excluding any tax based on net income), hereinafter
levied, assessed, or imposed by any federal, state, county or municipal
governmental authority, or any subdivision thereof, upon or measured by or rent
or other consideration required to be paid by Tenant under this Lease.
<PAGE> 7
3.02 Definition of Impositions. "Impositions" means, collectively, (i) taxes
(including without limitation, all real estate and personal property ad valorem
(whether assessed as part of the real estate or separately assessed as unsecured
personal property, sales and use, business or occupation, single business, gross
receipts, transaction privilege, rent or similar taxes); (ii) assessments
(including without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed with the Term); (iii) ground rents, water, sewer
or other rents and charges, excises, tax levies, and fees (including without
limitation, license, permit, inspection, authorization and similar fees); (iv)
all taxes imposed on Tenant's operations of the Leased Property, including
without limitation, employee withholding taxes, income taxes and intangible
taxes; and (v) all other governmental charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property or any part thereof and/or the Rent
(including all interest and penalties thereon due to any failure in payment by
Tenant) , which at any time prior to, during or in respect of the Term hereof
may be assessed or imposed on or in respect of or be a lien upon (a) Landlord or
Landlord's interest in the Leased Property or any part thereof; (b) the Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein; or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased Property
or the leasing or use of the Leased Property or any part thereof. Tenant shall
not, however, be required to pay (i) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Landlord;
or (ii) except as provided in Section 13.01, any tax imposed with respect to the
sale, exchange or other disposition by Landlord of any Leased Property or the
proceeds thereof; provided, however, that if any tax, assessment, tax levy or
charge which Tenant is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (i) or (ii) immediately above is levied, assessed or imposed expressly in
lieu thereof, Tenant shall then pay such tax, levy, or charge set forth in said
clause (i) or (ii).
3.03 Escrow of Impositions. If Landlord's lender requires Landlord to escrow
real property taxes or other Impositions on a periodic basis during the Term,
Tenant, on notice from Landlord indicating this requirement, shall pay a sum of
money toward its liability under this Article to Landlord on a periodic basis in
accordance with the Lender's requirements. Landlord shall escrow the payments
received from Tenant in accordance with the requirements of its lender, and
shall furnish Tenant with a copy of the lender's requirements for escrow.
Further, if an Event of Default occurs hereunder, Tenant shall thereafter, at
Landlord's election, deposit with Landlord on the first day of each month during
the remaining Term hereof and any extended Term, a sum equal to one-twelfth
<PAGE> 8
(1/12th) of the Impositions assessed against the Leased Property for the
preceding tax year, which sums shall be used by Landlord toward payment of such
Impositions. Tenant, on demand, shall pay to Landlord any additional funds
necessary to pay and discharge the obligations of Tenant pursuant to the
provisions of this Section. The receipt by Landlord of the payment of such
Impositions by and from Tenant shall only be as an accommodation to Tenant, the
mortgagees, and the taxing authorities, and shall not be construed as rent or
income to Landlord, Landlord serving, if at all, only as a conduit for delivery
purposes.
3.04 Utilities. Tenant shall pay, as Additional Rent, all taxes, assessments,
charges, deposits, and bills for utilities, including without limitation charges
for water, gas, oil, sanitary and storm sewer, electricity, telephone service,
and trash collection, which may be charged against the occupant of the
Improvements during the Term. If an Event of Default occurs hereunder, Tenant
shall thereafter, at Landlord's election, deposit with Landlord on the first day
of each month during the remaining Term hereof and any extended Term, a sum
equal to one-twelfth (1/12th) of the amount of the annual utility expenses for
the preceding Lease Year, which sums shall be used by Landlord to pay such
utilities. Tenant shall, on demand, pay to Landlord any additional amount needed
to pay such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees to
indemnify and hold Landlord harmless from and against any liability or damages
to the utility systems and the Leased Property that may result from Tenant's
failure to maintain sufficient heat in the Improvements.
3.05 Discontinuance of Utilities. Landlord will not be liable for damages to
person or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of Rent or operate to release
Tenant from any of Tenant's obligations under this Lease.
3.06 Business Expenses. Tenant shall promptly pay all expenses and costs
incurred in connection with the operation of a nursing home facility on the
Leased Property, including without limitation, employee benefits, employee
vacation and sick pay, consulting fees, and expenses for inventory and supplies.
ARTICLE IV: INSURANCE
4.01 Property Insurance. Tenant shall, at Tenant's expense, keep the
Improvements, Fixtures, Personal Property, and other components of the Leased
Property insured against the following risks:
(a) Loss or damage by fire, vandalism and malicious mischief, sprinkler
leakage, and all other physical loss perils commonly covered by "All Risk"
insurance in an amount not less than one
<PAGE> 9
hundred percent (100%) of the then full replacement cost thereof (as hereinafter
defined). Such policy shall include an agreed amount endorsement if available at
a reasonable cost. Such policy shall also include endorsements for contingent
liability for operation of building laws, demolition costs, and increased cost
of construction.
(b) Loss or damage by explosion of steam boilers, pressure vessels, or
similar apparatus, now or hereafter installed on the Leased Property, in
commercially reasonable amounts acceptable to Landlord.
(c) Loss of rent under a rental value insurance policy covering risk of
loss during the first nine (9) months of reconstruction necessitated by the
occurrence of any hazards described in Sections 4.01(a) or 4.01(b) above, in an
amount sufficient to prevent Landlord or Tenant from becoming a coinsurer,
containing endorsements for extended period of indemnity and premium adjustment,
and written with an agreed amount clause if available at a reasonable cost.
(d) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
(e) if the Land is located in whole or in part within a designated
flood plain area, loss or damage caused by flood in commercially reasonable
amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, and loss of property of patients accepted by Tenant for
safekeeping, in commercially reasonable amounts acceptable to the Landlord.
4.02 Liability Insurance. Tenant shall, at Tenant's expense, maintain liability
insurance against the following:
(a) Claims for personal injury or property damage commonly covered by
comprehensive general liability insurance with endorsements for nursing home
professional malpractice, blanket contractual, personal injury, owner's
protective liability, real property fire damage legal liability, voluntary
medical payments, products and completed operations, broad form property damage,
and extended bodily injury, with commercially reasonable amounts for bodily
injury, property damage, and voluntary medical payments acceptable to Landlord,
but with a combined single limit of not less than one Million Dollars
($1,000,000.00) per occurrence, Three Million Dollars ($3,000,000.00) aggregate.
(b) Claims for personal injury and property damage commonly covered by
comprehensive automobile liability insurance, covering all owned and nonowned
automobiles, with commercially reasonable amounts for bodily injury, property
damage, and for automobile medical payments acceptable to Landlord, but with a
combined single
<PAGE> 10
limit of not less than One Million Dollars ($1,000,000.00) per occurrence, Three
Million Dollars ($3,000,000.00) aggregate.
(c) Claims for personal injury commonly covered by medical malpractice
insurance in commercially reasonable amounts acceptable to Landlord.
(d) Claims commonly covered by worker's compensation insurance for all
persons employed by Tenant on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of all applicable local,
state, and federal law.
4.03 Insurance Requirements. The following provisions shall apply to all
insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject to the
approval of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating of "All or
better and a Best's Financial Category of XII or larger and shall be authorized
to do insurance business in the State of Arizona.
(c) Tenant shall be the "named insured" and Landlord shall be an
"additional named insured" on each policy.
(d) Tenant shall deliver to Landlord certificates or policies showing
the required coverages and endorsements. The policies of insurance shall provide
that the policy may not be canceled or not renewed, and no material change or
reduction i.n coverage may be made, without at least thirty (30) days' prior
written notice to Landlord.
(e) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant will
not invalidate the Landlord's coverage, and provide that Landlord shall not be
responsible for payment of premiums.
(f) All loss adjustment shall require the written consent of Landlord
and Tenant, as their interests may appear.
(g) At least thirty (30) days prior to the expiration of each policy,
Tenant shall deliver to Landlord a certificate showing renewal of such policy
and payment of the annual premium therefor.
4.04 Replacement Cost. The term "full replacement cost" means the actual
replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, not
later than thirty (30) days after the anniversary of each Lease Year of the
Term, increase the amount of the replacement cost endorsement for the
Improvements to equal
<PAGE> 11
the option exercise price set forth in Exhibit E for the current Lease Year
(except during the renewal term where the option exercise price for Lease Year
10 will apply) less Four Hundred Ten Thousand Dollars ($410,000.00) and the
replacement cost for the Personal Property will be Three Hundred Sixty Thousand
Dollars ($360,000.00). If Tenant makes any Permitted Alterations (as hereinafter
defined) to the Leased Property, Landlord may have such full replacement cost
redetermined at any time after such Permitted Alterations are made, regardless
of when the full replacement cost was last determined.
4.05 Blanket Policy. Notwithstanding anything to the contrary contained in this
Section, Tenant may carry the insurance required by this Article under a blanket
policy of insurance, provided that the coverage afforded Tenant will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.
4.06 No Separate Insurance. Tenant shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, or increase the amounts of any then existing insurance, by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including Landlord
and any mortgagees, are included therein as additional named insureds or loss
payees, the loss is payable under said insurance in the same manner as losses
are payable under this Lease, and such additional insurance is not prohibited by
the existing policies of insurance. Tenant shall immediately notify Landlord of
the taking out of such separate insurance or the increasing of any of the
amounts of the existing insurance by securing an additional policy or additional
policies. The term "mortgages" as used in this Lease includes Deeds of Trust and
the term "mortgagees" includes trustees and beneficiaries under a Deed of Trust.
4.07 Waiver of Subrogation. Each party hereto hereby waives any and every claim
which arises or may arise in its favor and against the other party hereto during
the Term or any extension or renewal thereof, for any and all loss of, or damage
to, any of its property located within or upon, or constituting a part of, the
Leased Property, which loss or damage is covered by valid and collectible
insurance policies, to the extent that such loss or damage is recoverable under
such policies. Said mutual waiver shall be in addition to, and not in limitation
or derogation of, any other waiver or release contained in this Lease with
respect to any loss or damage to property of the parties hereto. Inasmuch as the
said waivers will preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give each insurance company which has issued
to it policies of insurance, written notice of the terms of said mutual waivers,
and to have such insurance policies properly endorsed, if necessary, to prevent
the invalidation of said insurance coverage by reason of said
<PAGE> 12
waivers, so long as such endorsement is available at a reasonable cost.
4.08 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: (i)
Tenant shall obtain a standard form of mortgage clause insuring the interest of
the mortgagee; (ii) Tenant shall deliver evidence of insurance to such
mortgagee; (iii) loss adjustment shall require the consent of the mortgagee; and
(iv) Tenant shall obtain such other coverages and provide such other information
and documents as may be reasonably required by the mortgagee.
4.09 Escrows. If Landlord's lender requires the Landlord to escrow insurance
premiums on a periodic basis, or if an Event of Default occurs hereunder,
Tenant, after notice from Landlord, shall make such periodic payments in
accordance with the lender's or Landlord's requirements.
ARTICLE V: INDEMNITY
5.01 Tenant's Indemnification. Except as otherwise provided in the Agreement,
Tenant hereby agrees to indemnify and hold harmless Landlord, its agents, and
employees from and against any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages), losses, liabilities
(including strict liability), judgments, and expenses (including, without
limitation, attorneys' fees, court costs, and the costs set forth in Section
9.07) incurred in connection with or arising from: (i) the use or occupancy of
the Leased Property by Tenant or any persons claiming under Tenant; (ii) any
activity, work, or thing done, or permitted or suffered by Tenant in or about
the Leased Property; (iii) any acts, omissions, or negligence of Tenant or any
person claiming under Tenant, or the contractors, agents, employees, invitees,
or visitors of Tenant or any such person; (iv) any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind; and (v) any injury or damage to the
person, property or business of Tenant, its employees, agents, contractors,
invitees, visitors, or any other person entering upon the Leased Property under
the express or implied invitation of Tenant. If any action or proceeding is
brought against Landlord, its employees, or agents by reason of any such claim,
Tenant, upon notice from Landlord, will defend the claim at Tenant's expense
with counsel reasonably satisfactory to Landlord.
5.02 Environmental Compliance, Indemnity and Audits. Tenant shall comply with
the Environmental Compliance Provisions for Leases set forth on Exhibit F
attached hereto.
5.03 Limitation of Landlord's Liability. Except as otherwise provided in the
Agreement, Landlord, its agents, and employees,
<PAGE> 13
will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord's control.
ARTICLE VI: USE AND ACCEPTANCE OF PREMISES
6.01 Use of Leased Property. Tenant shall use and occupy the Leased Property
exclusively as a nursing home facility for the aged or physically infirm and for
no other purpose without the prior written consent of the Landlord, which
consent will not be unreasonably withheld. Tenant shall obtain and maintain all
.approvals, licenses, and consents needed to use and operate the Leased Property
as a nursing home facility. Tenant shall promptly deliver to Landlord complete
copies of surveys, examinations, certification and licensure inspections,
compliance certificates, and other similar reports issued to Tenant by any
governmental agency.
6.02 Acceptance of Leased Property. Except as otherwise specifically provided in
the Agreement, Tenant acknowledges that (i) Tenant and its agents have had an
opportunity to inspect the Leased Property; (ii) Tenant has found the Leased
Property fit for Tenant's use; (iii) Landlord will deliver the Leased Property
to Tenant in "as-is" condition; (iv) Landlord is not obligated to make any
improvements or repairs to the Leased Property; and (v) the roof, walls,
foundation, heating, ventilating, air conditioning, telephone, sewer,
electrical, mechanical, utility, plumbing, and other portions of the Leased
Property are in good working order. Tenant waives any claim or action against
Landlord with respect to the condition of the Leased Property. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH
RISKS ARE TO BE BORNE BY TENANT.
6.03 Conditions of Use and Occupancy. Tenant agrees that during the Term it
shall use and keep the Leased Property in a careful, safe and proper manner; not
commit or suffer waste thereon; not use or occupy the Leased Property for any
unlawful purposes; not use or occupy the Leased Property or permit the same to
be used or
<PAGE> 14
occupied, for any purpose or business deemed extra hazardous on account of fire
or otherwise; keep the Leased Property in such repair and condition as may be
required by the Board of Health, or other city, state or federal authorities,
free of all cost to Landlord; not permit any acts to be done which will cause
the cancellation, invalidation, or suspension of any insurance policy; and
permit Landlord and its agents to enter upon the Leased Property at all
reasonable times after notice to Tenant to examine the condition thereof.
6.04 Financial Statements. Within one hundred twenty (120) days after the end of
each fiscal year, Tenant shall deliver to Landlord audited consolidated
financial statements of Guarantor (hereinafter defined), certified by a
nationally recognized accounting firm. The financial statements shall include a
complete schedule of contingent liabilities and transactions with affiliates.
Within forty-five (45) days after the end of each calendar quarter, Tenant shall
deliver to Landlord unaudited profit and loss statements of Guarantor.
6.05 Continuous Operation. Tenant shall, during the Term, continuously operate
the Leased Property as a nursing home facility and maintain its licensure,
certification for reimbursement, and accreditation.
ARTICLE VII: REPAIRS, COMPLIANCE
WITH LAWS, AND MECHANICS' LIENS
7.01 Maintenance. Tenant shall maintain, repair, and replace the Leased
Property, including without limitation, all structural and nonstructural repairs
and replacements to the roof, foundations, exterior walls, parking areas,
sidewalks, water, sewer, and gas connections, pipes, and mains. Tenant shall
pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.
7.02 Compliance With Laws. Tenant shall comply with all laws, ordinances,
orders, rules, regulations, and other governmental requirements relating to the
use, condition, or occupancy of the Leased Property, including without
limitation, (i) licensure requirements for operation as a nursing home facility,
(ii) certification requirements needed to obtain reimbursement under the
Medicare and state Medicaid programs unless Tenant, after notice to Landlord,
determines to discontinue participation in such programs; (iii) requirements of
the board of fire insurance underwriters or insurance service office or any
other similar body having jurisdiction over the Leased Property, and (iv) all
zoning and building codes and Environmental Laws. At Landlord's request, from
<PAGE> 15
time to time, Tenant shall deliver to Landlord copies of certificates or permits
evidencing compliance with such laws, including without limitation, copies of
the nursing home facility license, provider agreements, certificates of
occupancy and building permits. Tenant hereby agrees to defend, indemnify and
hold Landlord harmless from and against any loss, liability (including strict
liability), claim, damage (including consequential damages), cost and expense
(including attorneys' fees) resulting from any failure by Tenant to comply with
any laws, ordinances, rules, regulations, and other governmental requirements.
7.03 Required Alterations. Tenant shall, at Tenant's sole cost and expense, make
any additions, changes, improvements or alterations to the Leased Property,
including structural alterations, which may be required by any governmental
authorities, including those required to continue certification under the
Medicare and Medicaid programs (unless Tenant has elected not to participate in
such programs), whether such changes are required by Tenant's use, changes in
the law, ordinances, or governmental regulations, defects existing as of the
date of this Lease, or any other cause whatever. All such additions, changes,
improvements or alterations shall be deemed to be Permitted Alterations and
shall comply with all laws requiring such alterations and with the provisions of
Section 8.02.
7.04 Mechanic's Liens. Tenant shall have no authority to permit or create a lien
against Landlord's interest in the Leased Property, and Tenant shall post
notices or file such documents as may be required to protect Landlord's interest
in the Leased Property against liens. Tenant hereby agrees to defend, indemnify,
and hold Landlord harmless from and against any mechanic's liens against the
Leased Property by reason of work, labor, services or materials supplied or
claimed to have been supplied on or to the Leased Property. Pursuant to Arizona
Revised Statutes Sections 33-1004 or any successor statute, Tenant shall
immediately remove, bond-off, or otherwise obtain the release of any 'mechanic's
lien filed against the Leased Property. Tenant shall pay all expenses in
connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.
7.05 Replacements of Fixtures and Personal Property. Tenant shall not remove
Fixtures and Personal Property from the Leased Property except to replace the
Fixtures and Personal Property by other similar items of equal quality and
value. Items being replaced by Tenant may be removed and shall become the
property of Tenant and items replacing the same shall be and remain the property
of Landlord. Tenant shall execute, upon written request from Landlord, any and
all documents necessary to evidence Landlord's ownership of the Personal
Property and replacements therefor. Tenant may finance replacements for the
Fixtures and Personal Property by equipment lease or by a security agreement and
financing statement; provided, however, that for any item of Fixtures or
Personal Property having a cost greater than or equal
<PAGE> 16
to Ten Thousand Dollars ($10,000.00), Tenant may not finance replacements by
security agreement or equipment lease unless (i) Landlord has consented to the
terms and conditions of the equipment lease or security agreement; (ii) the
equipment lessor or lender has entered into a nondisturbance agreement with
Landlord upon terms and conditions acceptable to Landlord, including without
limitation, the following: (a) Landlord shall have the right (but not the
obligation) to assume such security agreement or equipment lease upon the
occurrence of an Event of Default by Tenant under this Lease; (b) the equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable opportunity
to cure such default; and (c) Landlord shall have the right to assign its rights
under the equipment lease, security agreement, or nondisturbance agreement; and
(iii) Tenant shall, within thirty (30) days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement, and nondisturbance
agreement, including limitation, reasonable attorneys' fees and costs.
ARTICLE VIII: ALTERATIONS AND SIGNS
8.01 Prohibition on Alterations and Improvements. Except for alterations
required by Section 7.03; (ii) replacements of Fixtures and Personal Property
provided for in Section 7.05; and (iii) alterations having an aggregate cost of
less than One Hundred Thousand Dollars ($100,000.00) in any Lease Year, Tenant
shall not make any structural or nonstructural changes, alterations, additions
and/or improvements (hereinafter collectively referred to as "Alterations") to
the Leased Property without the prior written consent of Landlord which consent
will not be unreasonably withheld. If Tenant desires to perform any Alterations,
Tenant shall deliver to Landlord plans, specifications, drawings, and such other
information as may be reasonably requested by Landlord (collectively the "Plans
and Specifications") showing the Alterations that Tenant desires to perform.
Landlord agrees not to unreasonably delay its review of the Plans and
Specifications. Tenant shall reimburse Landlord for all costs and expenses
reasonably incurred by Landlord in reviewing and approving or disapproving the
Plans and Specifications; provided, however, that Landlord will consult with
Tenant and notify Tenant of the estimated amount of such expenses. Tenant shall
comply with the requirements of Section 8.02 in making any Alterations approved
by Landlord (the "Permitted Alterations").
8.02 Requirements for Permitted Alterations. Tenant shall comply with all of the
following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance with the
approved Plans and Specifications.
<PAGE> 17
(b) The Permitted Alterations and the installation thereof shall comply
with all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and workmanlike
manner, shall not impair the value or the structural integrity of the Leased
Property, and shall be free and clear of all mechanic's liens.
(d) Tenant shall deliver to Landlord a payment and performance bond,
with a surety acceptable to Landlord, in an amount equal to the estimated cost
of the Permitted Alterations, guaranteeing the completion of the work free and
clear of liens and in accordance with the approved Plans and Specifications, and
naming Landlord and any mortgagee of Landlord as joint obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's completed
value risk policy of insurance insuring against all risks of physical loss,
including collapse and transit coverage, in a nonreporting form, covering the
total value of the work performed, and equipment, supplies, and materials, and
insuring initial occupancy. Landlord and any mortgagee of Landlord shall be
additional named insureds of such policy. Landlord shall have the right to
approve the form and substance of such policy.
(f) Tenant shall pay the premiums required to increase the amount of
the insurance coverages required by Article IV to reflect the increased value of
the Improvements resulting from installation of the Permitted Alterations, and
shall deliver to Landlord a certificate evidencing the increase in coverage.
(g) If the alterations are structural or additions, Tenant shall, not
later than sixty (60) days after completion of the Permitted Alterations,
deliver to Landlord a revised "as-built" survey of the Leased Property and an
"as-built" set of Plans and Specifications for the Leased Property in form and
substance satisfactory to Landlord.
(h) Tenant shall, not later than thirty (30) days after completion of
the Permitted Alterations, reimburse Landlord for any costs and expenses,
including attorneys' fees and architects' and engineers, fees, reasonably
incurred in connection with reviewing and approving the Permitted Alterations
and ensuring Tenant's compliance with the requirements of this Section.
8.03 Ownership and Removal of Permitted Alterations. The Permitted Alterations
shall become a part of the Leased Property, owned by Landlord, and leased to
Tenant subject to the terms and conditions of this Lease. Tenant shall not be
required or permitted to remove any Permitted Alterations.
8.04 Signs. Tenant may, at its own expense, erect and maintain identification
signs at the Leased Property, provided such signs
<PAGE> 18
comply with all laws, ordinances, and regulations. Upon the occurrence of an
Event of Default or the termination or expiration of this Lease, Tenant shall,
within thirty (30) days after notice from Landlord, remove the signs and restore
the Leased Property to its original condition.
ARTICLE IX: DEFAULTS AND REMEDIES
9.01 Events of Default. The occurrence of any one or more of the following shall
be an an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or any other
monetary obligation payable by Tenant under this Lease, within five (5) business
days after notice of nonpayment from Landlord.
(b) Landlord gives three (3) or more notices of nonpayment of Rent to
Tenant in any Lease Year.
(c) Tenant fails to observe and perform any other covenant, condition
or agreement under the Lease to be performed by Tenant (except those described
in Section 9.01(a) and 9.01(b) of this Lease) and (i) such failure continues for
a period of thirty (30) days after written notice thereof is given to Tenant by
Landlord; or (ii) if, by reason of the nature of such default, the same cannot
be remedied within said thirty (30) days, Tenant fails to proceed with
reasonable diligence (satisfactory to Landlord) after receipt of the notice to
cure the same or, in any event, fails to cure such default within sixty (60)
days after receipt of the notice.
(d) Tenant abandons or vacates the Leased Property during the Term.
(e) (i) The filing by Tenant of a petition under 11 U.S.C. or the
commencement of a bankruptcy or similar proceeding by Tenant; (ii) the failure
by Tenant within sixty (60) days to dismiss an involuntary bankruptcy petition
or other commencement of a bankruptcy, reorganization or similar proceeding
against Tenant, or to lift or stay any execution, garnishment or attachment of
such consequence as will impair its ability to carry on its operation at the
Leased Property; (iii) the entry of an order for relief under 11 U.S.C. in
respect of Tenant; (iv) any assignment by Tenant for the benefit of its
creditors; (v) the entry by Tenant into an agreement of composition with its
creditors; (vi) the approval by a court of competent jurisdiction of a petition
applicable to Tenant in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
(vii) appointment by final order, judgement, or decree of a court of competent
jurisdiction of a receiver of a whole or any substantial part of the properties
of Tenant (provided such receiver shall not have been removed or discharged
within sixty (60) days of the date of his qualification).
<PAGE> 19
(f) (i) any administrator, custodian or other person takes possession
or control of any of the Leased Property and continues in possession for sixty
(60) days; (ii) any writ against any of the Leased Property is not released
within sixty (60) days; (iii) any judgment is rendered or proceedings are
instituted against the Leased Property or Tenant which affect the Leased
Property or any part thereof, which is not dismissed for sixty (60) days (except
as otherwise provided in this Section; (iv) all or a substantial part of the
assets of Tenant are attached, seized, subjected to a writ or distress warrant,
or are levied upon, or come into the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors; (v) Tenant is enjoined,
restrained, or in any way prevented by court order, or any proceeding is filed
or commenced seeking to enjoin, restrain or in any way prevent Tenant from
conducting all or a substantial part of its business or affairs; or (vi) except
as permitted by Section 18.18, a notice of lien, levy or assessment is filed of
record with respect to all or any part of the property of Tenant and is not
dismissed with thirty (30) days.
(g) Tenant or any Affiliate defaults on any obligation to Landlord,
Tenant defaults on any obligations under any agreements with respect to the
Leased Property, or Tenant defaults on any indebtedness or capital lease. As
used herein, "Affiliate" means any person, corporation, partnership, trust, or
other legal entity that, directly or indirectly, controls or is controlled by,
or is under common control with, Tenant or David Kremser. "Control" (and the
correlative meanings of the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of such entity.
(h) Any guarantor of the Lease dies, dissolves, terminates, is
adjudicated incompetent, files a petition in bankruptcy, or is adjudicated
insolvent under 11 U.S.C. or any other insolvency law, or fails to comply with
any covenant or requirement set forth in the guarantee of such guarantor, and
Tenant fails within thirty (30) days to deliver to Landlord a substitute
guaranty or other collateral satisfactory to Landlord.
(i) A default occurs under any agreement having annual payments of Two
Thousand Five Hundred Dollars ($2,500.00) or more affecting the ownership, use
or operation of the Leased Property or any property used in connection with the
operation of a nursing home facility on the Leased Property and is not cured
within any grace period set forth in such document; provided, however, that such
a default will not be an Event of Default hereunder if the Tenant is in good
faith diligently and continuously contesting such default.
(j) The nursing home facility license is canceled, suspended or
otherwise invalidated.
<PAGE> 20
(k) The Average Patient Census for any month is less than seventy-five
(75) patients. The term "Average Patient Census" means the average number of
patients use the Leased Property using the actual days of the month.
9.02 Remedies. Landlord may exercise any one or more of the following remedies
upon the occurrence of an Event of Default:
(a) Landlord may terminate this Lease, exclude Tenant from possession
of the Leased Property and use reasonable efforts to lease the Leased Property
to others. If this Lease is terminated pursuant to the provisions of this
subparagraph (a), Tenant will remain liable to Landlord for damages in an amount
equal to the Rent and other sums which would have been owing by Tenant under
this Lease for the balance of the Term if this Lease had not been terminated,
less the net proceeds, if any, of any re-letting of the Leased Property by
Landlord subsequent to such termination, after deducting all Landlord's expenses
in connection with such reletting, including without limitation, the expenses
set forth in Section 9.02(b)(2) below. Landlord will be entitled to collect such
damages from Tenant monthly on the days on which the Rent and other amounts
would have been payable under this Lease if this Lease had not been terminated
and Landlord will be entitled to receive such damages from Tenant on each such
day. Alternatively, at the option of Landlord, if this Lease is terminated,
Landlord will be entitled to recover from Tenant (A) the worth at the time of
award of the unpaid Rent which had been earned at the time of termination; (B)
the worth at the time of award of the amount by which the unpaid Rent which
would have been earned after termination until the time of awards exceeds the
amount of such Rent loss that Tenant proves could reasonably have been avoided;
(C) the worth at the time of award of the amount by which the unpaid Rent for
the balance of the Term of this Lease after the time of award exceeds the amount
of such Rent loss that Tenant proves could reasonably be avoided; and (D) any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result from such failure.
The "worth at the time of award" of the amount referred to in clauses (A) and
(B) is computed by allowing interest at the rate of eighteen percent (18%) per
annum. The worth at the time of award of the amount referred to in clause (C) is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of Cleveland at the time of award. For the purpose of determining unpaid
Rent under clause (C), the Rent reserved in this Lease will be deemed to be the
sum of the following: (i) the Base Rent computed pursuant to Section 2.01; (ii)
the Additional Rent pursuant to Section 2.02 based upon the amount of the
Additional Rent for the month preceding the date of termination increased by
four percent (4%) per annum, compounded monthly, to the date on which the Lease
would have expired if Landlord had not terminated the Lease; and (iii) the
Percentage Rent pursuant to Section 2.06 based upon the amount of the Gross
Revenues for the month preceding the date of termination, as
<PAGE> 21
adjusted pursuant to Section 2.06, increased by four percent (4%) per annum,
compounded monthly, to the date on which the Lease would have expired if
Landlord had not terminated the Lease.
(b) (1) Without demand or notice, Landlord may re-enter and take
possession of the Leased Property or any part of the Leased Property; and
repossess the Leased Property as of the Landlord's former estate; and expel the
Tenant from the Leased Property and those claiming through or under Tenant; and,
remove the effects of both or either, without being deemed guilty of any manner
of trespass and without prejudice to any remedies for arrears of Rent or
preceding breach of covenants or conditions. If Landlord elects to re-enter, as
provided in this paragraph (b) or if Landlord takes possession of the Leased
Property pursuant to legal proceedings or pursuant to any notice provided by
law, Landlord may, from time to time, without terminating this Lease, re-let the
Leased Property or any part of the Leased Property, either alone or in
conjunction with other portions of the Improvements of which the Leased Property
are a part, in Landlord's or Tenant's name but for the account of Tenant, for
such term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the Term of this Lease) and on such
terms and conditions (which may include concessions of free rent, and the
alteration and repair of the Leased Property) as Landlord, in its uncontrolled
discretion, may determine. Landlord may collect and receive the Rents for the
Leased Property. Landlord will not be responsible or liable for any failure to
re-let the Leased Property, or any part of the Leased Property, or for any
failure to collect any Rent due upon such re-letting. No such re-entry or taking
possession of the Leased Property by Landlord will be construed as an election
on Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord under this Lease or under
a forcible entry and detainer statute or similar law will constitute an election
by Landlord to terminate this Lease unless such notice specifically says so.
Landlord reserves the right following any such re-entry or re-letting, or both,
to exercise its right to terminate this Lease by giving Tenant such written
notice, and, in that event the Lease will terminate as specified in such notice.
(2) If Landlord elects to take possession of the Leased Property
according to this subparagraph (b) without terminating the Lease, Tenant will
pay Landlord (i) the Rent and other sums which would be payable under this Lease
if such repossession had not occurred, less (ii) the net proceeds, if any, of
any re-letting of the Leased Property after deducting all of Landlord's expenses
incurred in connection with such re-letting, including without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration, remodeling, repair costs, and expenses of
preparation for such re-letting. if, in connection with any reletting, the new
Lease term extends beyond the existing Term or the Leased Property covered by
such re-letting include areas which are not part of the Lease Property, a fair
apportionment of the Rent received from such
<PAGE> 22
re-letting and the expenses incurred in connection with such re-letting will be
made in determining the net proceeds received from such re-letting. In addition,
in determining the net proceeds from such re-letting, any rent concessions will
be apportioned over the term of the new Lease. Tenant will pay such amounts to
Landlord monthly on the days on which the Rent and all other amounts owing under
this Lease would have been payable if possession had not been retaken Landlord
will be entitled to receive the rent and other amounts from Tenant on each such
day.
(c) Landlord may re-enter the Leased Property and have, repossess and
enjoy the Leased Property as if the Lease had not been made, and in such event,
Tenant and its successors and assigns shall remain liable for any contingent
or unliquidated obligations or sums owing at the time of such repossession.
(d) Landlord may have access to and inspect, examine and make copies of
the books and records and any and all accounts, data and income tax and other
returns of Tenant insofar as they pertain to the Leased Property.
(e) Landlord may take whatever action at law or in equity as may appear
necessary or desirable to collect the Rent and other amounts payable under the
Lease then due and thereafter to become due, or to enforce performance and
observance of any obligations, agreements or covenants of Tenant under this
Lease.
9.03 Right of Set-Off. Landlord may, and is hereby authorized by Tenant to, at
any time and from time to time, after advance notice to Tenant, set-off and
apply any and all sums held by Landlord, any indebtedness of Landlord to Tenant,
and any claims by Tenant against Landlord, against any obligations of Tenant
hereunder and against any claims by Landlord against Tenant, whether or not
Landlord has exercised any other remedies hereunder. The rights of Landlord
under this Section are in addition to any other rights and remedies Landlord may
have against Tenant.
9.04 Performance of Tenant's Covenants. Landlord may perform any obligation of
Tenant which Tenant has failed to perform after Landlord has sent a written
notice to Tenant informing it of its specific failure. Tenant shall reimburse
Landlord on demand, as Additional Rent, for any expenditures thus incurred by
Landlord and shall pay interest thereon at the Overdue Rate (as hereinafter
defined).
9.05 Late Payment Charge. Tenant acknowledges that any default in the payment of
any installment of Rent payable hereunder will result in loss and additional
expense to Landlord in servicing any indebtedness of Landlord secured by the
Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within five (5) days after the due
date, Tenant shall pay a
<PAGE> 23
late charge of four percent (4%) of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord. The five (5) day grace period set forth in this Section
shall not extend the time for payment of Rent or the period for curing any
default or constitute a waiver of such default.
9.06 Interest. Any payment not made by Tenant when due shall thereafter bear
interest at the rate (the "Overdue Rate") of the greater of (i) eighteen percent
(18%) per annum; or (ii) two percent (2t) per annum above the rate of interest
announced from time to time by National City Bank (Cleveland, Ohio) as its base
rate of interest. Tenant shall not, however, be required to pay interest upon
any late payment fees assessed pursuant to Section 9.05.
9.07 Litigation; Attorneys' Fees. Within ten (10) days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Lease, whether or not an Event of Default has
actually occurred or has been declared and thereafter cured, including without
limitation, (i) the fees, expenses, and costs of any litigation, receivership,
administrative, bankruptcy, insolvency or other similar proceeding; (ii)
reasonable attorney, paralegal, consulting and witness fees and disbursements;
and (iii) the expenses, including without limitation, lodging, meals, and
transportation, of Landlord and its employees, agents, attorneys, and witnesses
in preparing for litigation, administrative, bankruptcy, insolvency or other
similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. All such costs, charges and fees as incurred shall be
deemed to be Additional Rent under this Lease.
9.08 Escrows and Application of Payments. As security for the performance of its
obligations hereunder, Tenant hereby assigns to Landlord all its right, title,
and interest in and to all monies escrowed with Landlord under this Lease and
all deposits with utility companies, taxing authorities, and insurance
companies; provided, however, that Landlord shall not exercise its rights
hereunder until an Event of Default has occurred. Any payments received by
Landlord under any provisions of this Lease during the existence or continuance
of an Event of Default shall be applied to Tenant's obligations in the order
which Landlord may determine.
9.09 Remedies Cumulative. The remedies of Landlord herein are cumulative to and
not in lieu of any other remedies available to Landlord at law or in equity. The
use of any one remedy shall not be taken to exclude or waive the right to use
any other remedy.
<PAGE> 24
9.10 Power of Attorney. Tenant hereby irrevocably and unconditionally appoints
Landlord, or Landlord's authorized officer, agent, employee or designee, as
Tenant's true and lawful attorney-in-fact, to act, after an Event of Default,
for Tenant in Tenant's name, place, and stead, and for Tenant's and Landlord's
use and benefit, to execute, deliver and file all applications and any and all
other necessary documents or things, to effect a transfer, reinstatement,
renewal and/or extension of any and all licenses and other governmental
authorizations issued to Tenant in connection with Tenant's operation of the
Leased Property, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of the
Tenant's obligations under this Lease.
ARTICLE X: DAMAGE AND DESTRUCTION
10.01 General. Tenant shall notify Landlord if any of the Leased Property is
damaged or destroyed by reason of fire or any other cause. Tenant shall promptly
repair, rebuild, or restore the Leased Property, at Tenant's expense, so as to
make the Leased Property at least equal in value to the Leased Property existing
immediately prior to such occurrence and as nearly similar to it in character as
is practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, complete and detailed plans and specifications for such
repairs or rebuilding. Promptly after receiving Landlord's approval of the plans
and specifications, Tenant will begin such repairs or rebuilding and will
prosecute the repairs and rebuilding to completion with diligence, subject,
however, to strikes, lockouts, acts of God, embargoes, governmental
restrictions, and other causes beyond Tenant's reasonable control. Landlord will
make available to Tenant the net proceeds of any fire or other casualty
insurance paid to Landlord for such repair or rebuilding as the same progresses,
after deduction of any costs of collection, including attorneys' fees. Payments
will be made against properly certified vouchers of a competent architect in
charge of the work and approved by Landlord. Prior to commencing the repairing
or rebuilding, Tenant shall deliver to Landlord for Landlord's approval a
schedule setting forth the estimated monthly draws for such work. Landlord will
contribute to such payments out of the insurance proceeds an amount equal to the
proportion that the total net amount received by Landlord from insurers bears to
the total estimated cost of the rebuilding or repairing, multiplied by the
payment by Tenant on account of such work. Landlord may, however, withhold ten
percent (10%) from each payment until the work of
<PAGE> 25
repairing or rebuilding is completed and proof has been furnished to Landlord
that no lien or liability has attached or will attach to the Leased Property or
to Landlord in connection with such repairing or rebuilding. Upon the completion
of rebuilding and the furnishing of such proof, the balance of the net proceeds
of such insurance payable to Tenant on account of such repairing or rebuilding
will be paid to Tenant. Tenant will obtain and deliver to Landlord a temporary
or final certificate of occupancy before the Leased Property is reoccupied for
any purpose. Tenant shall complete such repairs or rebuilding free and clear of
mechanic's or other liens, and in accordance with the building codes and all
applicable laws, ordinances, regulations, or orders of any state, municipal, or
other public authority affecting the repairs or rebuilding, and also in
accordance with all requirements of the insurance rating organization, or
similar body. Any remaining proceeds, of insurance after such restoration will
be Tenant's property.
10.02 Landlord's Inspection. During the progress of such repairs or rebuilding,
Landlord and its architects and engineers may, from time to time, inspect the
Leased Property and will be furnished, if required by them, with copies of all
plans, shop drawings, and specifications relating to such repairs or rebuilding.
Tenant will keep all plans, shop drawings, and specifications at the building,
and Landlord and its architects and engineers may examine them at all reasonable
times. if, during such repairs or rebuilding, Landlord and its architects and
engineers determine that the repairs or rebuilding are not being done in
accordance with the approved plans and specifications, Landlord will give prompt
notice in writing to Tenant, specifying in detail the particular deficiency,
omission, or other respect in which Landlord claims such repairs or rebuilding
do not accord with the approved plans and specifications. Upon the receipt of
any such notice, Tenant will cause corrections to be made to any deficiencies,
omissions, or such other respect. Tenant's obligations to supply insurance,
according to Article IV, will be applicable to any repairs or rebuilding under
this Section.
10.03 Landlord's Costs. Tenant shall, within thirty (30) days after receipt of
an invoice from Landlord, pay the reasonable costs, expenses, and fees of any
architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith; provided, however, that Landlord will consult
with Tenant and notify Tenant of the estimated amount of such expenses.
10.04 No Rent Abatement. Notwithstanding anything to the contrary in Arizona
Revised Statutes Section 33-343 or any successor statutes, all rights under
which are hereby waived by Tenant, Rent will not abate pending the repairs or
rebuilding.
<PAGE> 26
10.05 Damage During Last Year. If, at any time during the last year of the Term,
the Leased Property is so damaged by f ire or otherwise that the cost of
restoration exceeds fifty percent (50%) of the replacement value of the Leased
Property (exclusive of foundations) immediately prior to such damage, Tenant
may, within thirty (30) days after such damage, give notice of its election to
terminate this Lease and, subject to the further provisions of this Section,
this Lease will cease on the tenth (10th) day after the delivery of such notice.
If this Lease is so terminated, Tenant will have no obligation to repair,
rebuild or replace the Leased Property, and the entire insurance proceeds will
belong to Landlord. If the Lease is not so terminated, Tenant shall rebuild the
Leased Property in accordance with Section 10.01.
ARTICLE XI: CONDEMNATION
11.01 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, whether such damages shall
be awarded as compensation for diminution in value of the leasehold or to the
fee of the Leased Property; provided, however, that Landlord shall not be
entitled to any award made to Tenant for any taking of fixtures and Tenant's
Property and for moving expenses. Tenant shall also be entitled to any award
made for loss of business or the relocation thereof. Notwithstanding the
foregoing, Tenant shall not be entitled to any portion of the award which
reduces the amount of the award to which Landlord would otherwise be entitled if
no award were made to Tenant.
11.02 Partial Taking. If, after a Taking, so much of the Leased Property remains
that the Leased Property can be used for substantially the same purposes for
which it was used immediately before the Taking, then (i) this Lease will end as
to the part taken on the earlier of the vesting of title to the Leased Property
in the condemning authority or the taking of possession of the Leased Property
by the condemning authority; (ii) Base Rent for so much of the Leased Property
as remains will be reduced in the proportion of the floor area of the building
remaining after the Taking to the floor area of the building before the Taking;
(iii) at its cost, Tenant shall restore so much of the Leased Property as
remains to a sound architectural unit substantially suitable for the purposes
for which it was used immediately before the Taking, using good workmanship and
new, first-class materials; (iv) upon completion of the restoration, Landlord
will pay Tenant the lesser of the net award made to Landlord on the account of
the Taking (after deducting from the total award, attorneys', appraisers', and
<PAGE> 27
other fees and costs incurred in connection with the obtaining of the award and
amounts paid to the holders of mortgages secured by the Leased Property), or
Tenant's actual out-of-pocket costs of restoring the Leased Property; and (v)
Landlord shall be entitled to the balance of the net award.
ARTICLE XII: TENANTS PROPERTY
12.01 Tenant's Property. Tenant shall install, place, and use on the Leased
Property such fixtures, furniture, equipment, inventory and other personal
property in addition to the Personal Property as may be required or as Tenant
may, from time to time, deem necessary or useful to operate the Leased Property
as a nursing home licensed for skilled and intermediate nursing. 'All fixtures,
furniture, equipment, inventory, and other personal property installed, placed,
or used on the Leased Property which is owned by Tenant or leased by Tenant from
third parties is hereinafter referred to as "Tenant's Property".
12.02 Requirements for Tenant's Property. Tenant shall comply with all of the
following requirements in connection with Tenant's Property:
(a) Tenant shall notify Landlord within one hundred twenty (120) days
after each anniversary of this Lease of any additions, substitutions, or
replacements of any item of Tenant's Property which individually has a cost of
more than $10,000.00 and shall furnish Landlord with such other information as
Landlord may request from time to time.
(b) Tenant's Property shall be installed in a good and workmanlike
manner, in compliance with all governmental laws, ordinances, rules, and
regulations and all insurance requirements, and be installed free and clear of
any mechanic's liens.
(c) Tenant shall, at Tenant's sole cost and expense, maintain, repair,
and replace Tenant's Property.
(d) Tenant shall, at Tenant's sole cost and expense, keep Tenant's
Property insured against loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage, earthquake, and other physical loss perils commonly
covered by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than ninety percent (90%) of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property. The insurance shall
meet the requirements of Section 4.03.
(e) Tenant shall pay all taxes applicable to Tenant's Property.
(f) If Tenant's Property is damaged or destroyed by fire or any other
cause, Tenant shall promptly repair or replace Tenant's
<PAGE> 28
Property unless Tenant is entitled to and elects to terminate the Lease pursuant
to Section 10.05.
(g) Unless an Event of Default (or any event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default) has
occurred, Tenant may remove Tenant's Property from the Leased Property from time
to time provided that (i) the items removed are not required to operate the
Leased Property as a licensed nursing home facility (unless such items are being
replaced by Tenant); and (ii) Tenant repairs any damage to the Leased Property
resulting from the removal of Tenant's Property.
(h) Tenant shall remove Tenant's Property upon the termination or
expiration of this Lease and shall repair any damage to the Leased Property
resulting from the removal of Tenant's Property. If Tenant fails to remove
Tenant's Property within thirty (30) days after the termination or expiration of
this Lease, then Tenant shall be deemed to have abandoned Tenant's Property,
Tenant's Property shall become the property of Landlord, and Landlord may
remove, store and dispose of Tenant's Property. In such event, Tenant shall have
no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.
(i) Tenant shall perform its obligations under any equipment lease or
security agreement for Tenant's Property. Tenant shall cause any equipment
lessor or any lender having a security interest in any of the Tenant's Property
having a cost in excess of Ten Thousand Dollars ($10,000.00) to enter into a
nondisturbance agreement with Landlord upon terms and conditions acceptable to
Landlord, including without limitation, the following: (i) Landlord shall have
the right (but not the obligation) to assume such equipment lease or security
agreement upon the occurrence of an Event of Default by Tenant hereunder; (ii)
such equipment lessor or lender shall notify Landlord of any default by Tenant
under the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and (iii) Landlord shall have the right to
assign its interest in the equipment lease or security agreement and
nondisturbance agreement. Tenant shall, within thirty (30) days after receipt of
an invoice from Landlord, reimburse Landlord for all costs and expenses incurred
in reviewing and approving the equipment lease, security agreement and
nondisturbance agreement, including without limitation, reasonable attorneys'
fees and costs.
(j) Tenant hereby grants to Landlord a security interest under the
Uniform Commercial Code, as enacted in the state where the Leased Property is
located, in any of Tenant's Property which is now or may hereafter be placed
upon the Leased Property, including without limitation, Tenant's accounts,
contract rights,
<PAGE> 29
documents, instruments, chattel paper and general intangibles used in connection
with the Leased Property, and all proceeds therefrom, to secure the payment and
performance of Tenant's obligations under this Lease. At the request of
Landlord, Tenant shall execute additional security agreements, financing
statements, and such other documents as may be requested by Landlord to maintain
and perfect such security interest. Tenant hereby irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, deliver and file such documents on behalf of Tenant. This power of
attorney is coupled with an interest and is irrevocable. Notwithstanding the
foregoing, Landlord agrees to subordinate its security interest in patient
receivables arising prior to an Event of Default to a security interest granted
to an institutional lender making a working capital loan in an amount not to
exceed Three Hundred Thousand and No/100 Dollars ($300,000.00) and, in addition,
Landlord agrees to subordinate its security interest to any other purchase money
security interest upon terms and conditions approved by Landlord.
ARTICLE XIII: OPTION TO PURCHASE
13.01 Option to Purchase. Landlord grants to Tenant the continuing right and
option to purchase the Leased Property. Tenant may exercise this option at any
time after December 1, 1991 but before December 1, 2000 (the "Option Period"),
provided that (i) Tenant is not in default hereunder; (ii) Tenant gives Landlord
six (6) months prior written notice of its intention to exercise the option
prior to June 1, 2000; (iii) Tenant pays any prepayment penalty that might be
imposed by any loan financing the Leased Property in an amount not to exceed
Fifty Thousand and No/100 Dollars ($50,000.00), or, if Tenant elects to assume
such loan (if permitted by the loan documents and the lender releases and
discharges Landlord and its properties from any and all liability in connection
with the loan), Tenant pays any assumption fees imposed by the lender; and (iv)
Tenant pays all costs and expenses of Landlord in connection with the transfer
of the Leased Property to Tenant, including without limitation, (a) real
property transfer taxes or conveyance fees, (b) title searches and premiums, (c)
survey fees, (d) recording fees, and (e) legal expenses which legal expenses
shall not exceed Two Thousand Dollars ($2,000.00). The option exercise price is
as set forth in Exhibit E. This option to purchase is personal and may not be
assigned separate from any permitted assignment of the Lease.
13.02 Closing. The purchase of the Leased Property by Tenant shall close not
later than the later of (i) sixty (60) days, or (ii) five (5) days plus the
number of days' notice that Landlord must provide to its lender under its
financing of the Leased Property, in each case after Tenant gives Landlord
written notice of the exercise of the option. Landlord shall convey title to the
Leased Property to the Tenant by a transferable and recordable special warranty
deed and special warranty bill of sale.
<PAGE> 30
13.03 Failure to Exercise Option. If Tenant for any reason fails to purchase the
Leased Property at or before the end of the Option Period, then Tenant shall
continue to be obligated as lessee hereunder for the remainder of the Term,
without any further option to purchase. In that event, Tenant shall be deemed to
have lost and abandoned any proprietary or ownership right or interest it may
have had in the Leased Property.
ARTICLE XIV: ASSIGNMENT AND
SALE OF LEASED PROPERTY
14.01 Prohibition on Assignment and Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the personal services and
business expertise of Tenant or the current owners of the Tenant. Tenant may not
assign, sublet, mortgage, hypothecate, pledge, or transfer any interest in this
Lease, or in the Leased Property, in whole or in part, without the prior written
consent of Landlord, which Landlord may withhold in its sole and absolute
discretion. The following transactions will be deemed an assignment or sublease
requiring Landlord's prior written consent: (i) an assignment by operation of
law; (ii) an imposition (whether or not consensual) of a lien, mortgage, or
encumbrance upon Tenant's interest in the Lease; (iii) an arrangement (including
but not limited to, management agreements, concessions, licenses, and easements)
which allows the use or occupancy of all or part of the Leased Property by
anyone other than Tenant; and (iv) a change of ownership of Tenant. Landlord's
consent to any assignment or sublease will not release Tenant (or any guarantor)
from its payment and performance obligations under this Lease, but rather
Tenant, any guarantor, and Tenant's assignee or sublessee will be jointly and
severally liable for such payment and performance. An assignment or sublease
without the prior written consent of Landlord will be void at the Landlord's
option. Landlord's consent to one assignment or sublease will not waive the
requirement of its consent to any subsequent assignment or sublease.
14.02 Requests for Landlord's Consent to Assignment, Sublease or Management
Agreement. If Tenant requests Landlord's consent to a specific assignment,
sublease, or management agreement, Tenant shall give Landlord (i) the name and
address of the proposed assignee, subtenant or manager; (ii) a copy of the
proposed assignment, sublease or management agreement; (iii) reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and (iv) banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that (a) such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; (b) such assignment,
sublease or
<PAGE> 31
management agreement may not be modified without the prior written consent of
Landlord; (c) if this Lease shall terminate before the expiration of such
assignment, sublease or management agreement, the assignee, subtenant or manager
thereunder will, at Landlord's option, attorn to Landlord and waive any right
the assignee, subtenant or manager may have to terminate the assignment,
sublease or management agreement' or surrender possession thereunder as a result
of the termination of this Lease; and (d) if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord. Tenant hereby collaterally assigns to Landlord, as security for the
performance of its obligations hereunder, all of Tenant's right, title, and
interest in and to any assignment, sublease or management agreement now or
hereafter existing for all or part of the Leased Property. Tenant shall, at the
request of Landlord, execute such other instruments or documents as Landlord may
request to evidence this collateral assignment. if Landlord, in its sole and
absolute discretion, consents to such assignment, sublease, or management
agreement, such consent shall not be effective until (i) a fully executed copy
of the instrument of assignment, sublease or management agreement has been
delivered to Landlord; (ii) in the case of an assignment, Landlord has received
a written instrument in which the assignee has assumed and agreed to perform all
of Tenant's obligations under the Lease; and (iii) Tenant has paid to Landlord a
fee in the amount of one-quarter percent (1/4%) of the option price applicable
to that Lease Year (except in the case of the renewal term, where the option
price for Lease Year 10 will be applicable) and Landlord has received
reimbursement for its attorneys' fees and costs incurred in connection with both
determining whether to give its consent and giving its consent.
14.03 Agreements with Residents. Notwithstanding Section 14.01, Tenant may enter
into an occupancy agreement with residents of the Leased Property without the
prior written consent of Landlord provided that (i) the agreement does not
provide for lifecare services; (ii) Tenant may not collect rent for more than
one month in advance; and (iii) all residents of the Leased Property are
accurately shown in Tenant's accounting records.
14.04 Sale of Leased Property. If Landlord or any subsequent owner of the Leased
Property sells the Leased Property, its liability for the performance of its
agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. For purposes of this Section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when its succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
<PAGE> 32
ARTICLE XV: HOLDOVER AND SURRENDER
15.01 Holding Over. Should Tenant, with or without the express or implied
consent of Landlord, continue to hold and occupy the Leased Property after the
expiration of the Term, such holding over beyond the Term and the acceptance or
collection of Rent by the Landlord shall operate and be construed as creating a
tenancy from month-to-month and not for any other term whatsoever. Said
month-to-month tenancy may be terminated by Landlord by giving Tenant ten (10)
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.
15.02 Surrender. Except for (i) Permitted Alterations; (ii) normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and (iii) damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up the Leased Property at the expiration or termination of the Term in
as good order and condition as of the Commencement Date.
ARTICLE XVI: LEASE SECURITY
16.01 Security Deposit. Upon execution of this Lease by Tenant, Tenant shall
deliver to Landlord a security deposit (the "Security Deposit") in the amount of
Fifty Seven Thousand Six Hundred Dollars ($57,600.00) as security for the
performance of Tenant's obligations under this Lease. Landlord will not be
required to keep the Security Deposit separate from Landlord's general Funds and
Tenant will not be entitled to any interest on the Security Deposit.
16-02 Use of Security Deposit. Landlord may apply all or part of the Security
Deposit upon the occurrence of an Event of Default hereunder. Any such
application shall not cure an Event of Default. Landlord may apply the Security
Deposit to pay (i) all Rent and other charges and expenses payable by Tenant
hereunder; plus (ii) all expenses and costs incurred by Landlord in enforcing or
preserving Landlord's rights under this Lease or any other security for the
Lease, including without limitation, (a) the fees, expenses, and costs of any
litigation, receivership, administrative, bankruptcy, insolvency, or other
similar proceeding; (b) attorney, paralegal, consulting and witness fees and
disbursements; and (c) the expenses, including without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. If Landlord applies all or any portion of the Security
Deposit, Tenant will restore the Security Deposit to its original amount within
five (5) days after written notice is given by Landlord. The application of the
Security Deposit will not be a limitation on Landlord's damages or other rights
under this Lease, or a payment of liquidated damages, or an advance payment of
Rent.
<PAGE> 33
16.03 Return of Security Deposit. If Tenant pays the Rent and performs its other
obligations under the Lease, Landlord will return the unused portion of the
Security Deposit to Tenant within thirty (30) days after the end of the Term;
however, if Landlord has evidence that the Lease has been assigned by Tenant,
Landlord will return the Security Deposit to the assignee. Landlord may deliver
the Security Deposit to any purchaser of the Leased Property and will thereby be
discharged from any liability with respect to the Security Deposit.
16.04 Lease Guaranty. The payment of Rent and the performance of Tenants other
obligations pursuant to the Lease are guaranteed by Signature Health Care
Corporation pursuant to the Lease Guaranty of even date herewith.
ARTICLE XVII: QUIET ENJOYMENT, SUBORDINATION,
ATTORNMENT, BOND FINANCING AND ESTOPPEL CERTIFICATES
17.01 Quiet Enjoyment. So long as Tenant performs all of its obligations under
this Lease, Tenant's possession of the Leased Property will not be disturbed by
or through Landlord.
17.02 Subordination. This Lease and Tenant's rights under this Lease are
subordinate to any ground lease or underlying lease, first mortgage, first deed
of trust, or other first lien against the Leased Property, together with any
renewal, consolidation, extension, modification or replacement thereof, which
now or at any subsequent time affects the Leased Property or any interest of
Landlord in the Leased Property, except to the extent that any such instrument
expressly provides that this Lease is superior. This provision will be
self-operative, and no further instrument or subordination will be required in
order to effect it. However, Tenant shall execute, acknowledge and deliver to
Landlord, at any time and from time to time upon demand by Landlord, such
documents as may be requested by Landlord or any mortgagee or any holder of any
mortgage or other instrument described in this Section, to confirm or effect any
such subordination. If Tenant fails or refuses to execute, acknowledge, and
deliver any such document within twenty (20) days after written demand, Landlord
may execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.
17.03 Attornment. If any holder of any mortgage, indenture, deed of trust, or
other similar instrument described in Section 17-02 succeeds to Landlord's
interest in the Leased Property, Tenant will pay to such holder all Rent
subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by (i) any payment of
<PAGE> 34
Rent for more than one (1) month in advance; (ii) any amendment or modification
of this Lease made without its written consent; (iii) any claim against Landlord
arising prior to the date on which the successor succeeded to Landlord's
interest; or (iv) any claim or offset of Rent against the Landlord. Upon request
by Landlord or such successor in interest and without cost to Landlord or such
successor in interest, Tenant will execute, acknowledge and deliver an
instrument or instruments confirming the attornment. If Tenant fails or refuses
to execute, acknowledge, and deliver any such instrument within twenty (20) days
after written demand, then Landlord or such successor in interest will be
entitled to execute, acknowledge, and deliver any document on behalf of Tenant
as Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
17.04 Estoppel Certificates. At the request of Landlord or any mortgagee or
purchaser of the Leased Property, Tenant shall execute, acknowledge, and deliver
an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: (i) that
the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; (ii) the date to which Rent and other charges have been paid;
(iii) that neither Tenant nor Landlord is in default nor is there any fact or
condition which, with notice or lapse of time, or both, would constitute a
default, if that be the case, or specifying any existing default; (iv) that
Tenant has accepted and occupies the Leased Property; (v) that Tenant has no
defenses, set-offs, deductions, credits, or counterclaims against Landlord, if
that be the case, or specifying such that exist; and (vi) such other information
as may reasonably be requested by Landlord or any mortgagee or purchaser. Any
purchaser or mortgagee may rely on this estoppel certificate. If Tenant fails to
deliver the estoppel certificates to Landlord within twenty (20) days after the
request of the Landlord, then Tenant shall be deemed to have certified that (a)
the Lease is in full force and effect and has not been modified, or that the
Lease has been modified as set forth in the certificate delivered to Tenant; (b)
Tenant has not prepaid any Rent or other charges except for the current month;
(c) Tenant has accepted and occupies the Leased Property; (d) neither Tenant nor
Landlord is in default nor is there any fact or condition which, with notice or
lapse of time, or both, would constitute a default; and (e) Tenant has no
defenses, set-offs, deductions, credits, or counterclaims against Landlord.
Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-fact to
execute, acknowledge, and deliver on Tenant's behalf any estoppel certificate
which Tenant does not object to within twenty (20) days after Landlord sends the
certificate to Tenant. This power of attorney is coupled with an interest and is
irrevocable.
<PAGE> 35
ARTICLE XVIII: MISCELLANEOUS
18.01 Notices. Landlord and Tenant hereby agree that all notices, demands,
requests, and consents (hereinafter "notices") required to be given pursuant to
the terms of this Lease shall be in writing, shall be addressed to the addresses
set forth in the introductory paragraph of this Lease, and shall be served by
(i) personal delivery; (ii) certified mail, return receipt requested, postage
prepaid; or (iii) nationally recognized overnight courier. All notices shall be
deemed to be given upon the earlier of actual receipt or three (3) days after
mailing, or one (1) business day after deposit with the overnight courier. Any
notices meeting the requirements of this Section shall be effective, regardless
of whether or not actually received. Landlord or Tenant may change its notice
address at any time by giving the other party notice of such change. Landlord
also agrees to send a copy of any notices given by Landlord to Signature Health
Care Corporation, 2105 Clubhouse Drive, Greeley, Colorado 80634.
18.02 Advertisement of Leased Property. In the event the parties hereto have not
executed a renewal Lease within one hundred twenty (120) days prior to the
expiration of this Lease, then Landlord or his agent shall have the right to
enter the Leased Property at all reasonable times for the purpose of exhibiting
the Leased Property to others and to place upon the Leased Property for and
during the period commencing one hundred twenty (120) days prior to the
expiration of this Lease, "for sale" or "for rent" notices or signs.
18.03 Entire Agreement. This Lease and the Agreement contain the entire
agreement between Landlord and Tenant with respect to the subject matter hereof.
No representations, warranties, and agreements have been made by Landlord except
as set forth in this Lease.
18.04 Severability. If any term or provision of this Lease is held or deemed by
Landlord to be invalid or unenforceable, such holding shall not affect the
remainder of this Lease and the same shall remain in full force and effect,
unless such holding substantially deprives Tenant of the use of the Leased
Property or Landlord of the rents herein reserved, in which event this Lease
shall forthwith terminate as if by expiration of the Term.
18.05 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Lease or the intent of any provision hereof.
18.06 Governing Law. This Lease shall be construed under the laws of the state
where the Leased Property is located.
18.07 Memorandum of Lease. Tenant shall not record this Lease. Tenant may,
however, record a memorandum of lease approved by Landlord.
<PAGE> 36
18.08 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.
18.09 Binding Effect. This Lease will be binding upon and inure to the benefit
of the heirs, successors, personal representatives, and permitted assigns of
Landlord and Tenant.
18.10 Authority. If Tenant is a corporation or partnership, the persons
executing this Lease on behalf of Tenant warrant that (i) Tenant has the power
and authority to enter into this Lease; (ii) Tenant is qualified to do business
in the state in which the Leased Property is located; and (iii) they are
authorized to execute this Lease on behalf of Tenant. Tenant shall, at the
request of Landlord, provide evidence satisfactory to Landlord confirming these
representations.
18.11 No Offer. Landlord's submission of this Lease to Tenant is not an offer to
lease the Leased Property, or an agreement by Landlord to reserve the Leased
Property for Tenant. Landlord will not be bound to Tenant until Tenant has duly
executed and delivered duplicate original leases to Landlord, and Landlord has
duly executed and delivered one of these duplicate original leases to Tenant.
18.12 Modification. This Lease may only be modified by a writing signed by both
Landlord and Tenant.
18.13 Lender's Modification. Tenant acknowledges that Landlord may mortgage the
Leased Property or use the Leased Property as collateral for a collateralized
mortgage obligations or REMICS. If any mortgage lender of Landlord requires any
modification of this Lease, Tenant agrees to execute such modification, so long
as such modification (i) does not increase the Rent, the option price, the
amount of the Security Deposit, or Tenant's share of any cost in addition to
Rent; (ii) does not materially interfere with Tenant's use or occupancy of the
Leased Property; and (iii) does not materially adversely affect Tenant's rights
or liabilities hereunder.
18.14 No Merger. The surrender of this Lease by Tenant or the cancellation of
this Lease by agreement of Tenant and Landlord or the termination of this Lease
on account of Tenant's default will not work a merger, and will, at Landlord' s
option, terminate, any subleases or operate as an assignment to Landlord of any
subleases.
<PAGE> 37
Landlord's option under this paragraph will be exercised by notice to Tenant and
all known subtenants of the Leased Property.
18.15 Laches. No delay or omission by either party hereto to exercise any right
or power accruing upon any noncompliance or default by the other party with
respect to any of the terms hereof shall impair any such right or power or be
construed to be a waiver thereof.
18.16 Waiver of Jury Trial. Landlord and Tenant waive trial by jury in any
action, proceeding or counterclaim brought by either of them against the other
on all matters arising out of this Lease or the use and occupancy of the Leased
Property (except claims for personal injury or property damage). If Landlord
commences any summary proceeding for nonpayment of Rent, Tenant will not
interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
18.17 Limitation on Tenant's Recourse. Tenant's sole recourse against Landlord,
and any successor to the interest of Landlord in the Leased Property, is to the
interest of Landlord, and any such successor, in the Leased Property. Tenant
will not have any right to satisfy any judgment which it may have against the
Landlord.- or any such successor, from any other assets of Landlord, or any such
successor. In this Section, the terms "Landlord" and "successor" include the
shareholders, venturers, and partners of "Landlord" and "successor" and the
officers, directors, and employees of the same. The provisions of this Section
are not intended to limit Tenant's right to seek injunctive relief or specific
performance.
18.18 Permitted Contests. Tenant, on its own or on Landlord's behalf (or in
Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any legal
requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that (i) in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; (ii) neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; (iii) in the case
Of a legal requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; (iv) in the event that any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000.00), Tenant
shall deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses (i), (ii) and (iii), to the extent applicable; (v)
in the case of a legal requirement and/or an Imposition, lien, encumbrance or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture
<PAGE> 38
of the affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this Section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; (vi) in the case of an insurance requirement, the
coverage required by Article IV shall be maintained; and (vii) if such contest
be finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable legal
requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby
agrees to indemnify and save Landlord harmless from and against any liability,
cost or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.
18.19 Construction of Lease. This Lease has been prepared by Landlord@ and its
professional advisors and reviewed by Tenant and its professional advisors.
Landlord, Tenant, and their advisors believe that this Lease is the product of
all their efforts, that it expresses their agreement, and agree that it shall
not be interpreted in favor of either Landlord or Tenant or against either
Landlord or Tenant merely because of their efforts in preparing it.
18.20 Counterparts. This Lease may be executed in duplicate counterparts, each
of which shall be deemed an original hereof.
18.21 Relationship of Landlord and Tenant. The relationship of Landlord and
Tenant is the relationship of lessor and lessee. Landlord and Tenant are not
partners, joint venturers, or associates.
18.22 Custody of Escrow Funds. Any funds paid to Landlord in escrow hereunder
may be held by Landlord or, at Landlord's election, by a financial institution,
the deposits or accounts of which are insured or guaranteed by a federal or
state agency. The funds shall not be deemed to be held in trust, may be
commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
18.23 Landlord's Status as a REIT. Tenant acknowledges that Landlord has now and
may hereafter elect to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code. Tenant shall not do anything which would adversely
affect Landlord's status as a REIT. Tenant hereby agrees to modifications of
this Lease which do not materially, adversely affect the Tenant's rights and
liabilities if such modifications are required to retain Landlord's status as a
REIT.
<PAGE> 39
18.24 Exhibits. The following exhibits are attached hereto and incorporated
herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Personal Property
Exhibit D: Base Rent Schedule
Exhibit E: Option Exercise Price
Exhibit F: Environmental Compliance
Provision for Leases
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
HEALTH CARE REIT, INC.
By: ________________________________
Title: ________________________
THE ARBORS HEALTH CARE CENTER, INC.
By: ________________________________
Title: ________________________
<PAGE> 1
EXHIBIT 11.1
UNISON HEALTHCARE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- ----- -----
<S> <C> <C> <C>
FOR PRIMARY EARNINGS PER SHARE
Shares outstanding at beginning of period(1)(2).................. 4,214 1,789 1,789
Sale of common stock in public offering.......................... -- 71
Conversion of debentures......................................... 105 12 --
Common stock issued for acquisitions............................. 259 -- --
Exercise of stock purchase warrants.............................. 96 -- --
Exercise of stock options........................................ 2 -- --
Dilutive effect of outstanding stock options..................... -- 3 --
Dilutive effect of stock purchase warrants(3).................... -- 195 17
Assumed conversion of noninterest-bearing convertible
debentures..................................................... -- 210 --
------- ----- -----
Weighted average number of shares and share equivalents
outstanding.................................................... 4,676 2,280 1,806
======= ===== =====
Net income (loss)................................................ $(23,438) $ 117 $ 340
======= ===== =====
Primary earnings per share....................................... $ (5.01) $0.05 $0.19
======= ===== =====
FOR FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares used in primary calculation.... 4,676 2,280 1,806
Assumed conversion of convertible notes and debentures........... 259 -- --
Additional dilutive effect of stock options and warrants......... -- 2 --
------- ----- -----
Weighted average number of shares fully diluted.................. 4,935 2,282 1,806
======= ===== =====
Net income (loss)................................................ $(23,438) $ 117 $ 340
Interest on convertible notes and debentures, net of tax
effect......................................................... 154 -- --
------- ----- -----
Net income (loss), as adjusted................................... (23,284) 117 340
------- ----- -----
Fully diluted earnings per share(4).............................. $ (4.72) $0.05 $0.19
======= ===== =====
</TABLE>
- ---------------
(1) Shares used in these tables are weighted based on the number of days the
shares were outstanding or assumed to be outstanding during each period.
(2) On October 31, 1996, Unison acquired American Professional Holding, Inc. and
Memphis Clinical Laboratory, Inc. in a business combination accounted for as
a pooling of interests. Unison issued 540,000 common shares in connection
with these acquisitions. All earnings per share information has been
restated to reflect these acquisitions.
(3) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, "Earnings Per Share Computation in an Initial Public Offering," an
aggregate of 16,667 common stock purchase warrants issued during the
twelve-month period prior to the initial public offering, at prices below
the initial public offering price have been included as if they were
outstanding in 1995 and 1994. In December 1995, Unison repurchased these
stock warrants.
(4) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an antidilutive result.
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
SunQuest SPC, Inc., an Arizona corporation
BritWill Healthcare Company, a Delaware corporation
Quest Pharmacies, Inc., an Arizona corporation
Sunbelt Therapy Management Services, Inc., an Arizona corporation
Safford Care, Inc., a Colorado corporation
RehabWest, Inc., a Colorado corporation
Cornerstone Care, Inc., a Colorado corporation
Signature HealthCare Corporation, a Delaware corporation
Arkansas, Inc., a Colorado corporation
Douglas Manor, Inc., a Colorado corporation
Memphis Clinical Laboratory, Inc., a Tennessee corporation
American Professional Holding, Inc., a Utah corporation
BritWill Investments-II, Inc., a Delaware corporation
BritWill Investments-I, Inc., a Delaware corporation
BritWill Funding Corporation, a Delaware corporation
Decatur Sports Fit & Wellness Center, Inc., an Alabama corporation
Therapy Health Systems, Inc., a Mississippi corporation
Henderson & Associates Rehabilitation, Inc., an Alabama corporation
Sunbelt Therapy Management Services, Inc., an Alabama corporation
Brookshire House Inc., (fka Asbury Circle, Inc.) a Colorado corporation
Christopher Nursing Center, Inc., a Colorado corporation
Amberwood Court, Inc., (fka Valley Hi, Inc.) a Colorado corporation
The Arbors Health Care Center, Inc., an Arizona corporation
Los Arcos, Inc., a Colorado corporation
Pueblo Norte, Inc., (fka Signature Health Care of California Corporation),
a Colorado corporation
Rio Verde Nursing Center, Inc., a Colorado corporation
Signature Management Group, Inc., a Colorado corporation
Ampro Medical Services, Inc., a Texas corporation
Gamma Laboratories, Inc., a Missouri corporation
Emory Care Center, Inc., a Texas corporation
Cedar Care, Inc., an Indiana corporation
Sherwood HealthCare Corp., an Indiana corporation
BritWill Indiana Partnership, an Arizona general partnership
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNISON'S
AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 17,409
<SECURITIES> 0
<RECEIVABLES> 32,384
<ALLOWANCES> 3,776
<INVENTORY> 938
<CURRENT-ASSETS> 51,902
<PP&E> 35,949
<DEPRECIATION> 5,119
<TOTAL-ASSETS> 230,921
<CURRENT-LIABILITIES> 65,857
<BONDS> 157,138
0
0
<COMMON> 5
<OTHER-SE> 11,684
<TOTAL-LIABILITY-AND-EQUITY> 230,921
<SALES> 0
<TOTAL-REVENUES> 148,674
<CGS> 0
<TOTAL-COSTS> 147,818
<OTHER-EXPENSES> 24,084
<LOSS-PROVISION> 2,742
<INTEREST-EXPENSE> 5,824
<INCOME-PRETAX> (31,794)
<INCOME-TAX> (8,356)
<INCOME-CONTINUING> (23,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,438)
<EPS-PRIMARY> (5.01)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITOR
The Board of Directors
American Professional Holding, Inc.
We have audited the accompanying consolidated balance sheets of American
Professional Holding, Inc. as of December 31, 1994 and 1995 and the related
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Professional Holding, Inc. at December 31, 1994 and 1995 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Ronald H. Ridgers, P.C.
Richardson, Texas
March 30, 1996
<PAGE> 1
EXHIBIT 99.2
REPORT OF INDEPENDENT AUDITOR
The Board of Directors
Memphis Clinical Laboratory, Inc.
We have audited the accompanying balance sheets of Memphis Clinical
Laboratory, Inc. as of December 31, 1994 and 1995 and the related statements of
income and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Memphis Clinical Laboratory,
Inc. at December 31, 1994 and 1995 and the results of it's operations and cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Ronald H. Ridgers, P.C.
Richardson, Texas
February 10, 1996
