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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(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, 1998
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
RAINTREE 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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15300 N. 90TH STREET, SUITE 100
SCOTTSDALE, ARIZONA 85260-2768
(480) 423-1954
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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 [X] No [ ]
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 April 9, 1999, there were 7,593,697 shares of Common Stock, par value
$0.001 per share, outstanding. The aggregate market value of the shares of
Common Stock held by nonaffiliates of the registrant on April 9, 1999 was
approximately $21 million. For purposes of the foregoing calculation only, all
directors and executive officers of the registrant have been deemed affiliates.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
1998 ANNUAL REPORT ON FORM 10-K
RAINTREE HEALTHCARE CORPORATION
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 15
Item 3. Legal Proceedings........................................... 17
Item 4. Submission of Matters to a Vote of Security Holders......... 19
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 19
Item 6. Selected Financial Data..................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
Item 8. Financial Statements and Supplementary Data................. 34
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 34
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 34
Item 11. Executive Compensation...................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 39
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 40
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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, among others: delays in or inability
to conclude transactions; unsuccessful implementation of its new business
strategy; general economic and business conditions; competition; loss of
customers; changes in applicable laws and regulations; availability, terms and
deployment of capital in light of recent losses and cash flow shortfalls;
cancellation of leases or contracts; demand fluctuations; adverse uninsured
determinations in any existing or future litigation or regulatory proceedings;
health care statutory or regulatory changes which disfavor the types of care
delivered by the Company; reversal of the current limitations in the supply of
long-term care facilities; and Year 2000 issues. 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
INTRODUCTION
The Company is a Delaware corporation founded in 1992. The Company and its
consolidated subsidiaries are referred to herein as "RainTree" or the "Company."
The Company's principal executive offices are located at 15300 N. 90th Street,
Suite 100, Scottsdale, Arizona, 85260.
RainTree provides comprehensive long-term and specialty healthcare
services. RainTree ranks as one of the 30 largest long-term care operators in
the United States, operating facilities in six states clustered in the Midwest,
Southwest and Southeast regions. These facilities include 32 long-term and
specialty care facilities with 3,400 licensed beds and three independent or
assisted living facilities with 214 units. In addition, RainTree currently
manages six facilities for a third party. RainTree seeks to operate its
businesses as an interrelated network of services to provide cost-effective
long-term and specialty healthcare.
RainTree's healthcare services include both traditional long-term care
services and more specialized healthcare, such as rehabilitation, infusion and
respiratory therapy. RainTree also provides, either directly or through
third-party contracts, pharmaceutical services, medical supplies and laboratory
testing, both to its facilities and to nonaffiliated entities.
The Company operated under the protection of chapter 11 ("Chapter 11") of
the U.S. Bankruptcy Code (the "Bankruptcy Code") from May 28, 1998 until January
31, 1999 (the "Effective Date"). The Company is refocusing its business strategy
in order to revitalize, reposition and restore the Company's core business. See
"-- Business Strategy." The restructuring began on January 7, 1998, when three
of RainTree's subsidiaries, BritWill Investments -- I, Inc., BritWill
Investments -- II, Inc. and BritWill Indiana Partnership (the "BritWill
Debtors"), with operations in Texas and Indiana, filed for protection under
Chapter 11 with the United States Bankruptcy Court for the District of Arizona
(the "Bankruptcy Court"). The Chapter 11 filings were necessitated by actions
taken by Omega Healthcare Investors, Inc. ("Omega") to terminate or otherwise
enforce the terms of its lease agreements with the Company. RainTree, through
its subsidiaries, leased 14 long-term care facilities from Omega under three
master lease agreements. In addition, RainTree leased six facilities from
BritWill Investments Texas, Ltd. ("BritWill Texas") which were subject to a
mortgage in favor of Omega (the "BritWill Texas Leases"). BritWill Texas is an
affiliate of Bruce H. Whitehead, a major stockholder and creditor of RainTree
and formerly chairman of its Board of Directors.
RainTree initiated negotiations to reach a consensual restructuring of its
debt and lease obligations with Omega, representatives of certain of the holders
of its $100.0 million 12 1/4% Senior Notes due 2006 (the "12 1/4% Senior Notes")
and $20.0 million 13% Senior Notes due 1999 (the "13% Senior Notes") (the "Ad
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Hoc Committee"), and certain entities related to Mr. Whitehead (the "Whitehead
Affiliates") and David A. Kremser (the "Kremser Affiliates"). On June 15, 1998,
RainTree concluded an agreement in principle with respect to a consensual
restructuring with some, but not all, of its creditor constituencies. The
agreement in principle formed the basis of the plan of reorganization filed with
the Bankruptcy Court on August 10, 1998. On October 16, 1998, an amended plan of
reorganization (the "Plan") was filed. The significant elements of the Plan are
described in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Reorganization". Under Bankruptcy Court
supervision, the Company continued to manage and operate its business as a
debtor in possession and, as described above, developed the Plan to restructure
its financial affairs, including assuming or rejecting executory contracts and
leases. The Plan was confirmed by the Bankruptcy Court effective January 31,
1999 (the "Effective Date").
EMERGENCE FROM CHAPTER 11 AND PLAN OF REORGANIZATION
The Plan set forth a plan for repaying or otherwise compensating the
Company's creditors in order of the relative seniority of their respective
claims while seeking to maintain the Company as a going concern. The Plan
provided, among other things, for: (i) the conversion of substantially all of
the Company's prepetition liabilities into equity interests in the Company and
approximately $26 million of Senior Secured Notes due 2003; (ii) cancellation of
all of the prepetition equity interests in the Company, including the old common
stock; and (iii) restructuring of the Company's master lease for certain
facilities with Omega. The Plan became effective and the Company emerged from
Chapter 11 on the Effective Date. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PRIOR TO THE CHAPTER 11 REORGANIZATION
As described in greater detail elsewhere herein, the operating results and
financial condition of the Company have been negatively impacted by a number of
factors, including cash flow difficulties, increased costs due to acquisitions
and rising litigation costs. See Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Throughout 1997 and 1998, the Company's cash flows from operations and its
available capital were insufficient to meet its operating expenses, lease
obligations and debt service requirements. Consequently, when RainTree filed for
bankruptcy, it was in breach and in default of the terms of material operating
leases and indebtedness. As discussed below, the Company is in the process of
implementing a new business strategy in an attempt to deal with these issues.
See Item 2, "Properties" and Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Reorganization".
The Company's historic acquisition strategy negatively impacted RainTree's
financial performance. A key element of RainTree's business strategy was to
expand through the acquisition of new or existing long-term and specialty
healthcare facilities and the acquisition or development of ancillary health
care businesses or services. As a result of various acquisitions, the Company
was faced with unforeseen contingencies affecting its new businesses including
increased costs due to integrating the acquired operations into the overall
enterprise. For example, difficulties in integrating acquired facilities within
RainTree's financial reporting and management information systems were a
substantial factor contributing to the need to restate RainTree's financial
statements for the nine months ended September 30, 1996. Its financial reporting
and management information systems were not adequate for the larger and more
complex needs of the Company. Those system difficulties then contributed to the
operating inefficiencies that led to the unexpected losses for that period and
subsequent periods.
Additionally, the number of lawsuits initiated against the Company grew as
its financial difficulties worsened, including suits with vendors, landlords and
several class action lawsuits (which also involved certain of the Company's
current and former directors and officers (among others) as named defendants).
Such class action complaints generally asserted that the defendants knew, or
were reckless in not knowing, that RainTree's results for the first nine months
of 1996 were materially overstated, or misrepresented the capability of
RainTree's internal accounting systems to reliably record and reflect its
financial condition, among other things. See Item 3, "Legal Proceedings."
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As part of RainTree's reorganization, the Company has divested
underperforming facilities that were unlikely to contribute to the Company's
profitability. In connection with these divestitures, the Company terminated the
leases of twelve long-term care facilities in 1998 and seven facilities in the
1999 first quarter (the "Disposition Facilities"). Most of the facilities were
underperforming because of inadequate Medicaid reimbursement, low occupancy
rates or adverse local market conditions. Of the Disposition Facilities, six
were leased from Omega and, as part of the Plan, Omega released the Company from
its obligations related to these facilities. RainTree currently manages these
facilities on Omega's behalf.
RainTree has also agreed to sell certain assets of Sunbelt Therapy
Management Services, Inc. ("Sunbelt") and its subsidiaries. Sunbelt provides
rehabilitation therapy services to certain RainTree facilities and third
parties. The parties agreed to enter into definitive documentation as soon as
practicable. It is anticipated that under the definitive agreement Paul
Henderson and Paige Plash will purchase the therapy services contracts of
Sunbelt's outpatient clinics, hospitals, home health, and other business not
related to long-term care facilities. Messrs. Henderson and Plash, who were the
president and vice president, respectively, of Sunbelt until April 1, 1999, will
also acquire the therapy services contracts of two RainTree nursing facilities.
As consideration for the purchase, it is anticipated that Messrs. Henderson and
Plash will pay approximately $1.1 million in cash and assume certain Sunbelt
liabilities. The terms of the proposed sale are subject to the negotiation of
definitive documentation and are subject to change. In connection with the sale,
RainTree expects to enter into an agreement with a third party to manage
Sunbelt's remaining long-term care therapy operations.
INDUSTRY OVERVIEW
RainTree believes there will continue to be significant business
opportunities to provide healthcare services to long-term care residents in
non-hospital settings, including both nursing facilities and assisted or
independent living facilities. Certain factors that contribute to this growth
potential are described below.
Aging Population. The overwhelming majority of the patients in nursing
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 33.2 million
in 1994, or 13% of the population, and is projected to increase to approximately
69 million, or 20% of the population, by 2030. The number of people age 85 and
older is expected to double from 3.5 million in 1994 to 7 million in 2020,
making this age group the fastest growing segment of the population. As the
United States population ages, the demand for the types of services that
RainTree provides is expected to increase.
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 RainTree. The Balanced Budget Act
of 1997 (the "Balanced Budget Act") mandates that, beginning with cost reporting
periods on or after July 1, 1998, skilled nursing facilities will receive a
fixed payment for services to Medicare patients. 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. Innovations in medical equipment and new
treatment methodologies have lengthened life expectancies, increasing the number
of individuals requiring specialized care and supervision. The incidence of
chronic illness increases with age, particularly certain degenerative
conditions. 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 RainTree 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 to patients less
expensively than 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 demand in
recent years. Many states (but not all of the states in which RainTree operates)
have enacted certificate of need or similar legislation which generally limits
the
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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".
Industry Consolidation. The long-term care industry is highly fragmented.
There are approximately 17,000 long-term care facilities in the United States,
which contain a total of approximately 1.8 million licensed beds. The 50 largest
long-term care providers operate approximately 5,000 facilities comprising
approximately 500,000 licensed beds, or 28% of the industry total. In recent
years, 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 management information systems, operating efficiencies and
financial resources to compete effectively. The Company believes, however, that
the pace of consolidation has slowed substantially during the past year. In
response to the negative financial impact of the new Medicare prospective
payment system, increased government regulatory activity, and high levels of
debt resulting from acquisitions, many of the industry's larger companies have
suspended their acquisition programs and, in some cases, are divesting of
non-strategic assets. See "-- Business Strategy " and "-- Government
Regulation".
BUSINESS STRATEGY
As discussed elsewhere herein, RainTree restructured its debt and certain
lease obligations, disposed of underperforming business operations, and is in
the process of settling significant lawsuits. After emerging from Chapter 11,
RainTree has changed its operating strategy in order to focus on patient care.
By divesting itself of less productive facilities, the Company is now in a
position to concentrate on its core business of caregiving. The Company is
currently working to implement the business strategy set forth below, while
striving to regain the confidence of its employees, regulators, vendors and
investors by proving it is a viable and competitive concern. RainTree also is in
the process of redirecting its efforts in identifying, recruiting and training
top quality employees who will be instrumental in implementing the Company's
business strategy.
RainTree's overall business strategy is to become a preferred provider of
long-term and specialty healthcare services in its markets by offering high
quality, cost competitive, long-term healthcare services. The key components of
the Company's strategy are as follows.
Improve Payor Quality, Occupancy Levels and Operating Margins. RainTree 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. RainTree'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.
RainTree 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 the Company's directors of admissions 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. See "-- Government Regulation -- The
Balanced Budget Act".
Provide High Quality Care on an Economic Basis. RainTree 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. RainTree believes that it provides quality
patient care and is generally successful in maintaining regulatory compliance.
See "-- Operations -- Quality Management".
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Contain Costs. RainTree believes that the increasing penetration of
managed care and the new Medicare prospective payment system will intensify the
focus on containing costs. RainTree 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 RainTree to control operating costs. See "-- Government
Regulation -- The Balanced Budget Act".
Concentrate Healthcare Facilities in Geographic "Clusters." RainTree has
in the past sought to acquire facilities that 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 RainTree to leverage management across a
larger base of patient revenue and efficiently monitor individual facilities,
ensuring high quality patient care. The clustering strategy was to enable
RainTree to leverage the addition of ancillary services over a larger patient
base. The acquisition of Signature Health Care Corporation and affiliates
("Signature") in 1996, which included the acquisition of five long-term care
facilities in the Denver, Colorado area, is an example of this strategy.
Although RainTree's acquisition program has been curtailed for the indefinite
future, the Company has maintained its cluster strategy by divesting of
facilities that were in isolated areas.
PATIENT SERVICES
RainTree provides long-term care services, including independent living
services and 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. Assisted living facilities provide nutritional, housekeeping,
and limited medical services. 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 provision 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
RainTree's long-term care facilities. RainTree 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. RainTree'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 nursing facilities dispense medications and otherwise
follow care plans prescribed by the patient's physician. RainTree's nursing
facilities are licensed by state licensing agencies and are extensively
regulated at the federal, state, and local level.
Subacute and Other Specialty Care Services. RainTree'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) orthopedic
rehabilitation; and (vii) other specialized subacute services. RainTree provides
care to certain types of patients with specialized needs through designated
units such as those for the treatment of Alzheimer's disease and other
conditions. These units are located in specially designed sections within
selected facilities and are staffed by specially trained personnel. 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.
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The daily cost to patients for RainTree's specialty services are generally
significantly less than the cost charged for similar services by acute care
hospitals. See "-- Government Regulation -- The Balanced Budget Act".
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 rates of payment between these various payors. The following
table sets forth RainTree's mix of payor sources throughout the periods
presented.
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YEARS ENDED DECEMBER 31,
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SOURCE OF REVENUES 1998 1997 1996
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Medicare............................................ 28.5% 32.1% 29.5%
Private and other................................... 16.3 16.2 17.0
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Quality mix............................... 44.8 48.3 46.5
Medicaid............................................ 55.2 51.7 53.5
----- ----- -----
Total..................................... 100.0% 100.0% 100.0%
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OPERATION OF LONG-TERM CARE FACILITIES
RainTree is responsible for the day-to-day operation of both leased and
managed facilities. These responsibilities include recruiting, hiring and
training all nursing and other personnel and directing the full scope of
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, cash management, debt management, quality
assurance, risk management, legal services, marketing and regulatory compliance.
RainTree provides additional support by providing liability, workers
compensation, and casualty insurance for all of its facilities and ancillary
companies.
Organization. With respect to its long-term and specialty care facilities,
RainTree maintains four regions, each of which is supervised by a regional
director. The regional director is supported by a clinical operations specialist
and a financial consultant who are employed by RainTree. Daily operations of
each facility are supervised by an on-site licensed administrator. The
administrator at each facility is primarily responsible for adherence to
RainTree'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. The
administrator of each facility is supported by other professional personnel,
including a medical director, who assists in the medical management of the
facility, and a director of nursing who supervises a staff of registered nurses,
licensed practical nurses and nurse aides. Other personnel include dietary
staff, activities and social service staff, housekeeping, laundry and
maintenance staff and a business office staff.
Quality Management. RainTree 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 caregivers. Reporting is
monitored by RainTree's clinical operations specialists under the direction of
the Vice President of Clinical Services. Monthly reports are used to monitor
adherence to the standards of care established by RainTree'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.
Company-wide, RainTree's facilities had 204 on-site visits from government
agencies during the period from January 1, 1998 through December 31, 1998. The
average number of deficiencies cited during these reviews was 5.9, compared to a
national average of 8.0 in the states in which RainTree operates. The Company
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has reduced substandard quality of care deficiencies from 5.7% of total surveys
in 1996 to 1.3% in 1998, compared to a national average of 11.9% in the states
in which RainTree operates. As of April 13, 1999, RainTree had no outstanding
deficiencies for substandard quality of care.
Marketing. RainTree's marketing efforts are designed to promote higher
occupancy levels and improved payor quality mix. Quality mix improved from
approximately 41.5% in 1994 to approximately 48.3% in 1997 but declined in 1998
to approximately 44.8%. Average occupancy in the nursing facilities was 78.3% in
1996, 83.5% in 1997 and 80.4% in 1998. The decrease in quality mix and occupancy
in 1998 is due primarily to the negative perception of RainTree as a result of
the bankruptcy. Management believes that RainTree's average occupancy rate
should improve as consumer confidence grows. Quality mix, however, may be
adversely affected by the new Medicare prospective payment system. See
"-- Government Regulation -- The Balanced Budget Act".
RainTree 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. RainTree's marketing strategy emphasizes the role and
performance of the administrator and director of admissions in marketing and
promoting the services offered by RainTree facilities to each local community.
RainTree'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
operations. Market specific information, along with weekly and monthly
reporting, is used to monitor adherence to the standards established by
RainTree. The hub of this strategy is the local facility administrator and the
director of case management. These individuals are responsible for establishing
and building relationships with various referral sources including general and
specialty physicians, hospital administration and discharge planners, insurance
case managers and other local community organizations. RainTree 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
public awareness of their services.
ANCILLARY SERVICES
RainTree provides ancillary services, either directly or through
third-party contracts, to the residents of 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.
Management of each of the ancillary services companies described below
reports to RainTree's chief executive officer. RainTree's corporate management
team provides oversight in the areas of cash management, budgeting, accounting
controls, staffing and detailed review of financial results. RainTree also (i)
directs the ancillary companies' growth and marketing strategies and accounts
receivable management and (ii) implements the integration of the companies and
oversees the quality of services to RainTree facilities. RainTree provides
additional support to its ancillary companies in the areas of risk management,
legal services, regulatory compliance, government reimbursement, management
information systems and purchasing. A number of the ancillary companies' supply
contracts with major vendors are in the name of RainTree. In addition, bank
loans and equipment leases provided to the ancillary companies are negotiated by
RainTree's senior management, and general liability, workers compensation and
casualty insurance for all of RainTree's subsidiaries is provided under
RainTree's policy.
Laboratory. American Professional Holding, Inc. ("Ampro") operates three
medical reference laboratories located in Dallas, Texas, Poplar Bluff, Missouri
and Memphis, Tennessee, and three satellite offices located in Austin, Texas and
Fort Worth, Texas. As of February 28, 1999, Ampro provided laboratory services
to 10 RainTree-affiliated and 110 non-affiliated nursing facilities in Texas, 20
non-affiliated nursing facilities in Tennessee, 185 non-affiliated medical
facilities in Missouri and five RainTree-affiliated nursing facilities in
Colorado.
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The laboratories provide bodily fluid testing services to assist in
detecting, diagnosing and monitoring diseases. These tests, performed as ordered
by each patient's attending physician, include testing for complete blood count,
blood chemistry testing, coagulation studies, urinalysis, microbiology tests and
therapeutic drug level tests. Upon completion of these tests, the laboratories
communicate the results of each test to the applicable facility for inclusion on
each patient's medical chart for review by the attending physician.
Pharmacy. Quest Pharmacies, Inc. ("Quest") is a comprehensive,
full-service long-term care pharmacy and medical supply company that provides
services through two institutional pharmacies located in Longview, Texas and
Bloomington, Indiana. Quest has grown from a pharmacy servicing 15 long-term
care facilities in September 1995 to a highly diversified organization that
services, as of February 28, 1999, 10 RainTree-affiliated and 23 non-affiliated
skilled nursing facilities in East Texas; seven RainTree-affiliated and 16
non-affiliated skilled nursing facilities in Indiana; and 14 other
RainTree-affiliated nursing facilities in Alabama, Arizona and Colorado. Quest's
specialized services include pharmacy, wound care, medical supplies, enteral
therapies, infusion management, IV nurse consultants and Medicare Part B
services. Quest's clinical pharmacists provide consulting, medical records
services, educational seminars and continuing education programs. Quest seeks to
provide services that assist its clients in controlling costs and complying with
regulatory and medical standards.
Quest provides pharmaceutical dispensing services to approximately 4,000
patients and clients in various settings, including nursing facilities,
transitional care facilities, assisted living communities, rehabilitation
centers and correctional facilities. Additionally, Quest provides a variety of
pharmaceutical consulting services, including training of facility staff,
designed to assist nursing facilities in program administration.
Therapy. Sunbelt provides physical therapy, occupational therapy and
speech language pathology services through RainTree-affiliated facilities and
non-affiliated long-term care facilities. It is anticipated that a portion of
the assets of Sunbelt will be sold pending the negotiation of definitive
documentation. See "-- Prior to the Chapter 11 Reorganization." As of February
28, 1999, Sunbelt provided services through 177 contracts, which included 31
RainTree-affiliated facilities.
For financial reporting purposes, RainTree has four reportable segments:
(i) long-term and specialty care, including assisted and independent living;
(ii) pharmacy operations, including Medicare Part B billing and supply; (iii)
rehabilitation therapy services; and (iv) laboratory services. See Note 23 of
Notes to Consolidated Financial Statements for financial information about
RainTree's reportable segments.
COMPETITION
RainTree's facilities compete on a local and regional basis 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 RainTree and some are nonprofit or
charitable organizations. No assurance can be given that RainTree 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. The Company believes that significant
competitive factors include the quality and spectrum of care and services
provided, the reputation of the medical personnel employed, the physical
appearance of the facilities and, in the case of private-pay patients, the level
of charges for services. Because the Company's facilities compete primarily on a
local and regional basis, rather than on a national basis, the competitive
position of the Company varies from facility to facility. The Company seeks to
meet competition in each locality by improving the quality and types of services
provided in and the appearance of its facilities, by establishing a reputation
within the local medical communities for providing quality care, and by
responding appropriately to regional variations in demographics and preferences.
There is no price competition with respect to Medicare and Medicaid patients
because revenues for services administered to such patients are based on
strictly controlled fixed rates and cost reimbursement principles.
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RainTree's pharmacy and laboratory businesses compete with national,
regional and local pharmacies and medical reference laboratories, some of which
have significantly greater financial and other resources than RainTree. No
assurance can be given that RainTree will have the resources to compete
successfully with such companies. The Company's strategy for its pharmacy
services focuses on the expansion of services beyond dispensing tablet, capsule
and liquid medications to include more intensive IV therapy services, antibiotic
and hydration therapies, pain management and chemotherapy. RainTree believes
that the primary factors in competing for pharmacy business is prompt service
and the primary factor in competing for laboratory business is prompt and
accurate test results.
INSURANCE
RainTree carries general liability, comprehensive property damage,
malpractice, workers' compensation, directors and officers and other insurance
coverage 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 RainTree on commercially
reasonable terms in the future. A successful claim against RainTree in excess of
its insurance coverage could have a material adverse effect on RainTree and its
financial condition and results of operations. Claims against RainTree,
regardless of their merit or outcome, may also have an adverse effect on
RainTree's reputation and business. As of December 31, 1998, the Company is not
aware of any claims against RainTree that would have a material adverse effect
on RainTree's results of operations.
GOVERNMENT REGULATION
Introduction. The federal government and all states in which RainTree
operates regulate various aspects of RainTree's business. All of RainTree'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
RainTree. The Federal Social Security 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 Health Care Financing Administration ("HCFA") and Medicaid state agencies as
the basis for decisions to execute, deny or terminate provider agreements with
facilities.
Payment For Services. RainTree 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 RainTree's services. Any
significant decrease in Medicare or Medicaid reimbursement amounts could have a
material adverse effect on RainTree. RainTree also obtains payment from private
insurers, including managed care organizations, and private pay patients.
RainTree's facilities also have contracts with health maintenance organizations
and other managed care organizations to provide certain healthcare services to
patients for a set per diem payment for each patient. There can be no assurance
that the rates paid to RainTree by these payors will remain at current levels or
be adequate to reimburse RainTree for the cost of providing services to covered
beneficiaries. In addition, cost increases due to inflation without
corresponding increases in reimbursement could adversely affect RainTree's
business.
The Balanced Budget Act. The Balanced Budget Act, signed into law on
August 5, 1997, makes numerous changes to the Medicare and Medicaid programs.
The Balanced Budget Act mandates the establishment of a prospective payment
system ("PPS") for Medicare skilled nursing facility services, under which
facilities will be paid a fixed fee for virtually all covered services. PPS is
being phased in over a four-year period, effective for RainTree's facilities
since January 1, 1999. During the first three years, payments will be based on a
blend of the facility's historical costs and federal costs. Thereafter, the per
diem rates will be
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based 100% on federal costs. Under PPS, each patient's clinical status is
evaluated and placed into a payment category. The patient's payment category
dictates the amount that the provider will receive to care for the patient on a
daily basis. The per diem rate will cover (i) all routine inpatient costs
currently paid under Medicare Part A, (ii) certain ancillary and other items and
services currently covered separately under Medicare Part B on a "pass-through"
basis, and (iii) certain capital costs.
For Medicare patients receiving services on an outpatient basis under
Medicare Part B, reimbursement for ancillary services such as rehabilitation
therapy, drugs, medical supplies and other items is based on a fee schedule. In
addition, effective January 1, 1999, there is an annual per-patient cap of
$1,500 on reimbursement for combined Part B and outpatient physical and speech
therapy services and an annual per-patient cap of $1,500 on reimbursement for
combined Part B and outpatient occupational therapy services.
RainTree estimates that its average daily Medicare rate in 1999 under PPS
will be approximately 18% lower than its average daily Medicare rate in 1998.
The Company anticipates that these revenue decreases may be substantially
mitigated by reduced costs negotiated with therapy and pharmacy suppliers, as
well as increased lengths of stay resulting from less intensive levels of
therapy services provided.
PPS is expected to negatively impact RainTree's pharmacy revenues as a
result of lower rates negotiated with its nonaffiliated nursing facility
customers. The Company has taken steps to reduce its pharmacy cost of goods sold
through the use of "formularies", which are standard menus of drugs and other
pharmacy products. By reducing the number of different products offered,
RainTree expects that it can negotiate better pricing with its suppliers.
Additionally, the formulary will include more generic drugs that can be obtained
at lower prices than name brand drugs. While the Company will continue to supply
any drug required, it expects that most physicians will cooperate in an effort
to reduce costs.
RainTree's success under PPS will depend upon its ability to manage the
costs of caring for high acuity Medicare patients. However, although the Company
believes that PPS will provide opportunities for efficiently operated, low cost
providers, there can be no assurance that RainTree will be successful in keeping
its costs of services below the PPS rates.
The Balanced Budget Act also contains changes to the Medicaid program, the
most significant of which is the repeal of the Boren Amendment. The Boren
Amendment required state Medicaid programs to pay rates that are reasonable and
adequate to meet the costs that must be incurred by a nursing facility in order
to provide care and services in compliance with applicable standards. Since
October 1, 1997, states have had more flexibility in establishing payment rates.
Indiana adopted a case-mix prospective payment system on October 1, 1998 and
Colorado is expected to follow in 1999. The Company does not believe that the
change in Indiana's reimbursement system will materially negatively impact
RainTree's results of operations or financial condition, and RainTree has not
determined the impact the change in Colorado's system will have on its results
of operations. RainTree is unable to predict whether any other states will
change their reimbursement policies and, if so, what effect such changes would
have on the Company. There can be no assurance that any changes to the Medicaid
program will not have a material adverse impact on the Company.
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. 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.
Until the implementation of PPS, Medicare reimbursed the skilled nursing
facility based on a reasonable cost standard. With certain exceptions, payment
for skilled nursing facility services was made prospectively with each facility
receiving an interim payment during the year for its expected reimbursable
costs. The interim payment was later adjusted to reflect actual allowable direct
and indirect costs of services based on the submission of an annual cost report.
Each facility was also subject to limits on reimbursement for routine costs.
Exceptions to these limits were available for, among other things, the provision
of atypical services. Due in part to the provision of subacute services,
RainTree's costs for care delivered to Medicare patients in certain of its
long-term and specialty healthcare facilities have exceeded the routine cost
limits. RainTree has
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submitted to HCFA various requests for exceptions to the Medicare routine cost
limits for reimbursement ("RCLs"). As of December 31, 1998, approximately $5.0
million of receivables related to RCL exception revenues remain subject to audit
and final approval by the fiscal intermediary. Although RainTree believes that
it will recover these routine cost limit exception requests, failure to recover
excess costs or to obtain such exceptions could materially adversely affect
RainTree's results of operations.
Effective April 10, 1998, HCFA issued its new salary equivalency
guidelines, which changed Medicare reimbursement rates for contracted therapy
services. Under salary equivalency, the Company was reimbursed for contracted
therapy services based on the time spent on the premises by the contract
therapist times a fixed rate, depending on the service provided. While the new
rates for physical therapy represented an increase over what the Company
previously received for such services, the new rates for occupational therapy
and speech language pathology represented decreases from what the Company
previously received. The salary equivalency guidelines remained in effect until
the facility at which such services were provided, including the Company's
facilities and other facilities serviced by the Company's therapy subsidiaries,
started billing under PPS. The Company believes that while salary equivalency
had an adverse effect on its therapy revenue, the Company does not believe that
salary equivalency had a material adverse effect on the Company's consolidated
revenues in 1998.
Prior to PPS, Medicare regulations that applied to transactions between
related parties were relevant to the amount of Medicare reimbursement that the
Company was entitled to receive for the rehabilitation and respiratory therapy
and pharmaceutical services that it provides to RainTree facilities. These
related party regulations required that, among other things: (i) the Company's
therapy and pharmacy subsidiaries must each be a bona fide separate
organization; (ii) a substantial part of the services of each subsidiary is
transacted with nonaffiliated entities, and there is an open, competitive market
for such services; (iii) the services provided by such subsidiary commonly are
obtained by long-term and subacute care facilities from other organizations and
are not a basic element of patient care provided by such facilities; and (iv)
the prices charged to the Company's long-term and subacute care facilities by
such subsidiaries are in line with the charges for such services in the open
market and no more than the prices charged by its therapy and pharmacy
subsidiaries under comparable circumstances to nonaffiliated entities in order
to satisfy the "substantial part" requirement of such regulations. In instances
where this issue has been litigated by others, no consensus has emerged as to
the appropriate threshold necessary to satisfy the "substantial part"
requirement.
In the fourth quarter of 1997, RainTree was informed by its Medicare fiscal
intermediary that it is challenging the Company's reimbursement for certain
services provided at RainTree facilities by Sunbelt. Although the Company
intends to vigorously pursue reimbursement of the challenged items, in the
fourth quarter of 1997 it recorded a $4.6 million reduction in Medicare revenues
in connection with this related party issue. Under PPS, the Medicare impact of
the related party rule is eliminated.
The Medicaid Program. All of RainTree'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. 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. Alabama, Colorado and Michigan, three of the states in which RainTree
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 retrospective basis. 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.
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Currently several states, including Texas and Indiana, utilize case-mix
payment systems, pursuant to which payment levels increase based on a patient's
acuity level and need for services. Colorado is expected to adopt a case-mix
prospective payment system in 1999. Arizona utilizes a managed care program for
its Medicaid beneficiaries, whereby subcontractors, usually county health
departments, receive negotiated capped rates from the state. The subcontractors
then negotiate contracts with nursing facilities to provide patient care.
RainTree is unable to predict whether any other states will change their
reimbursement policies and, if so, what effect such changes would have on the
Company. There can be no assurance that any changes to the Medicaid program will
not have a material adverse impact on the Company.
Enforcement Proceedings and Sanctions; Certification Requirements. Under
the Omnibus Reconciliation Act of 1987 ("OBRA"), HCFA promulgated survey,
certification and enforcement rules governing skilled nursing facilities and
nursing facilities participating in the Medicare and Medicaid programs. The
rules require states to enact state plans to incorporate the provisions of the
rules.
Unannounced standard surveys must be conducted at least every 15 months
with a statewide 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 that 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. Available remedies include 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 employee 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 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.
RainTree 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, RainTree receives notices of
alleged deficiencies for failure to comply with regulatory requirements.
RainTree reviews such notices and attempts to take corrective action. RainTree's
facilities receive notices from state agencies that result in fines and/or the
agencies taking steps to decertify the facilities from participation in Medicare
and Medicaid programs. In February 1998, RainTree closed its Oaks at Boise
facility in Boise, Idaho after voluntarily terminating its participation in the
Medicare program and relocating the patients. RainTree had been negotiating with
the owners to dispose of the facility when it encountered regulatory problems.
Negotiations deteriorated and RainTree closed the facility. Subsequently,
RainTree was assessed a penalty amounting to $25,875 for alleged violations of
Medicare regulations, payment of which has not yet been demanded due to the
bankruptcy filing. Currently, RainTree has outstanding civil money penalties
related to various facilities in the aggregate amount of approximately $340,000.
Of this amount, approximately $280,000
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is subject to appeal or negotiated settlement. The Company believes, based on
historical experience, that these fines will ultimately be settled for amounts
substantially less than the amounts assessed.
Certificates of Need. Many states (although not every state in which
RainTree 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 RainTree to expand its operations,
RainTree could be adversely affected by its inability to obtain the necessary
approvals and could incur delays and expenses associated with obtaining such
approvals. Currently, the states with certificate of need requirements in which
the Company operates include Michigan and Alabama. In addition, Colorado and
Texas have placed moratoriums on bed additions.
Patient Referral Regulations. RainTree 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,
RainTree, 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 RainTree, and RainTree 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. To
the Company's knowledge, none of its patients were referred under practices that
are in violation of HR 3103. Although RainTree 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 RainTree's practices.
Other laws prohibit 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 RainTree to modify its contractual arrangements in order to satisfy an
available exception, or limit the ability of physicians with whom RainTree has
compensation arrangements to refer patients to RainTree.
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 RainTree 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 is focused on
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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.
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, RainTree operates pharmacies only in Texas and
Indiana. As required by Texas and Indiana law, RainTree and its pharmacists are
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 record keeping requirements with respect to the handling and dispensing
of controlled substances, small quantities of which are maintained in RainTree's
pharmacy for use in filling prescriptions. RainTree is subject to regular audits
by governmental authorities to monitor compliance with record keeping 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.
Laboratory. Companies providing laboratory services in the United States
are regulated by state statutes and the rules and regulations of the Clinical
Laboratory Improvement Act of 1998 ("CLIA"). All laboratories must have a
certificate of compliance or a certificate of accreditation for laboratory
testing. Laboratories that have certificates must permit HCFA or a HCFA agent to
conduct an inspection to assess the laboratory's compliance with the
requirements of CLIA. The most recent inspection of Ampro's three laboratories
revealed no deficiencies.
Health Care Reform. The Balanced Budget Act contains extensive changes to
the Medicare and Medicaid programs intended to reduce the projected amount of
increase in payments under those programs by $115 billion and $13 billion,
respectively, over the next five years. There also continue to be state
legislative proposals that would impose more limitations on government and
private payments to providers of healthcare services such as RainTree. Many
states have enacted or are considering enacting measures that are designed to
reduce their Medicaid expenditures and to make certain changes to private
healthcare insurance. There are also a number of legislative proposals including
cost caps and the establishment of Medicaid prospective payment systems for
nursing facilities. Moreover, by repealing the Boren Amendment, the Balanced
Budget Act eases impediments on the states' ability to reduce their Medicaid
reimbursement levels. In July 1998, President Clinton announced several new
initiatives to toughen survey and enforcement policies with respect to nursing
facilities. These initiatives include imposing sanctions immediately against
facilities with repeat violations that cause resident harm, imposing penalties
for each instance of harm, surveying repeat offenders more frequently, and
focusing enforcement efforts on chains with problems in multiple facilities.
HCFA has issued a schedule for implementing these initiatives in 1999. Due to
uncertainties regarding the ultimate features of reform or budget initiatives
and their enactment and implementation, RainTree cannot predict which, if any,
reform proposals will be adopted, when they may be adopted or what impact they
may have on RainTree. No assurance can be given that such measures will not have
a material adverse effect on RainTree.
EMPLOYEES
As of February 28, 1999, RainTree employed approximately 3,700 individuals,
including full-time and part-time employees. RainTree has two collective
bargaining agreements covering approximately 209 nursing facility employees.
RainTree believes that its overall relations with its employees declined
somewhat in 1998 due to concerns related to its bankruptcy proceedings, but are
improving.
IMPACT OF THE YEAR 2000 ISSUE
Some of RainTree's information systems have time-sensitive software that
will not properly recognize the year 2000. Based on an on-going assessment, the
Company has determined that it will be required to modify or replace significant
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. RainTree believes that
with modifications to existing software and conversions to new software, the
Company will be year 2000 ready by the end of 1999 and the year 2000 issue will
not pose significant operational problems for its computer systems.
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RainTree is in the process of completing a detailed inventory and analysis
of computer hardware, software and operating systems. The Company will utilize
both internal and external resources to reprogram, or replace, and test the
hardware and software for year 2000 readiness. The scope of the year 2000
project also encompasses consideration of potential impacts on the Company's
business operations. The Company is reviewing internal business operations and
relationships with external business partners to assess the current level of
compliance. The next step is to perform testing and develop contingency plans
with the goal of achieving year 2000 readiness by September 1999.
During 1998 and the first quarter of 1999, RainTree replaced substantially
all of its computer equipment in connection with implementation of the Plan. The
Company believes the new equipment is year 2000 compliant. The Company estimates
that the incremental cost to upgrade existing software to make it year 2000
compliant will not exceed $150,000.
RainTree has initiated formal communications with significant suppliers and
payors to determine the extent to which the Company's systems and operations are
vulnerable to those third parties' failure to remediate their own year 2000
issues. Examples of such issues include, but are not limited to, electronic
interfaces with external agents such as payors, suppliers and banks. The ability
of third parties with which RainTree transacts business to adequately address
their year 2000 issues is outside the Company's control. Although RainTree will
seek to replace any of its current vendors who are unable to become year 2000
ready in a timely manner, there can be no assurance that the Company's
operations will not be adversely affected by the ability of third parties,
including the federal and state governments on which RainTree's operations rely,
to also manage the year 2000 issue.
The Company will continue to assess each of its systems and their year 2000
readiness. At this time, the Company believes that appropriate actions are being
taken and expects to complete its overall year 2000 remediation prior to any
anticipated impact on its operations. However, there can be no assurance that
these assumptions will be achieved, and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, third party modification plans and similar uncertainties.
ITEM 2. PROPERTIES
The following table lists the nursing facilities and assisted and
independent living centers operated by the Company as of April 13, 1999. Except
as indicated all of these facilities are leased.
<TABLE>
<CAPTION>
NUMBER OF
LICENSED
BEDS OR
FACILITY NAME LOCATION UNITS
- ------------- -------- ---------
<S> <C> <C>
Marshall Manor............................................ Guntersville, Alabama 91
Ridgewood Health Care Center.............................. Jasper, Alabama 98
Terrace Lake Village(1)................................... Guntersville, Alabama 90
The Arbors Health Care Center............................. Camp Verde, Arizona 118
Douglas Manor............................................. Douglas, Arizona 64
Los Arcos Health Care Center.............................. Flagstaff, Arizona 80
Peppertree Square(1)...................................... Safford, Arizona 62
Pueblo Norte Nursing Center............................... Show Low, Arizona 100
Rio Verde Health Care Center.............................. Cottonwood, Arizona 80
Safford Care Center....................................... Safford, Arizona 128
SunCrest Healthcare Center................................ Phoenix, Arizona 115
Village Catered Care(1)................................... Douglas, Arizona 62
Amberwood Court Care Center............................... Denver, Colorado 75
Arkansas Manor............................................ Denver, Colorado 116
Brookshire House.......................................... Denver, Colorado 67
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
NUMBER OF
LICENSED
BEDS OR
FACILITY NAME LOCATION UNITS
- ------------- -------- ---------
<S> <C> <C>
Christopher House......................................... Wheat Ridge, Colorado 78
Cornerstone Care Center................................... Lakewood, Colorado 140
Boonville Convalescent Center............................. Boonville, Indiana 108
Capital Care Healthcare Center(2)......................... Indianapolis, Indiana 60
Cloverleaf of Knightsville................................ Knightsville, Indiana 86
English Estates(2)........................................ Lebanon, Indiana 130
English Senior Living(1)(2)............................... Lebanon, Indiana 19
Holiday Manor............................................. Princeton, Indiana 91
Kendallville Manor........................................ Kendallville, Indiana 60
Lockerbie Healthcare Center(2)............................ Indianapolis, Indiana 79
Owensville Convalescent Center............................ Owensville, Indiana 68
Parkview Manor(2)......................................... Indianapolis, Indiana 39
Sunset Manor(2)........................................... Greencastle, Indiana 79
Wellington Manor.......................................... Indianapolis, Indiana 132
Willow Manor Convalescent Center.......................... Vincennes, Indiana 142
Nightingale West.......................................... Westland, Michigan 236
Colonial Pines............................................ San Augustine, Texas 107
Hemphill Care Center...................................... Hemphill, Texas 90
Heritage Plaza............................................ Texarkana, Texas 90
Homestead of McKinney..................................... McKinney, Texas 138
Pine Grove Nursing Center................................. Center, Texas 120
Pine Haven Care Center.................................... Texarkana, Texas 120
Pleasant Manor Living Center.............................. Waxahachie, Texas 120
Reunion Plaza............................................. Texarkana, Texas 102
South Place Nursing Center................................ Athens, Texas 120
West Place Nursing Center................................. Athens, Texas 120
-----
Total beds................................................ 4,020
=====
</TABLE>
- ---------------
(1) Assisted living and independent living facilities.
(2) RainTree manages these facilities for Omega.
RainTree leases approximately 14,000 square feet of office space in
Scottsdale, Arizona. The Scottsdale office houses the executive offices of
RainTree, and the lease for that space expires in the year 2003. 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 leases an aggregate of
approximately 35,800 square feet of space for outpatient clinics and fitness
centers in Mississippi and Alabama. Ampro leases an aggregate of approximately
12,000 square feet for office and laboratory space in Texas, Tennessee and
Missouri 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 RainTree's leased
properties are adequate for its present needs and that suitable additional or
replacement space will be available as required.
RainTree leases 35 long-term and specialty healthcare facilities and
assisted or independent living centers. RainTree's leases typically are triple
net obligations, have initial terms of 5-15 years with renewal options for up to
10 to 20 years and are classified as operating leases within the meaning of
Statement of Financial Accounting Standards No. 13. RainTree's leases typically
provide for automatic rent increases or repricing. RainTree typically grants its
lessor a security interest in RainTree's personal property at the leased
16
<PAGE> 19
facility. RainTree's leases are typically entered into by its subsidiaries and
guaranteed by RainTree. Some of the leases require RainTree to maintain a
minimum net worth, expend specified sums per bed for capital expenditures,
maintain certain current ratios and coverage ratios and prohibit RainTree from
operating any additional facilities within a certain radius of the leased
facility. In addition, RainTree is 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, RainTree's interest in the premises is subordinated to that of the
lessor's mortgage lenders.
RainTree's most significant lessors are Omega from which RainTree leases 18
long-term care facilities and American Health Properties from which RainTree
leases six long-term care facilities. The leases typically include cross default
provisions. Covenants in the Omega lease require maintenance of specified
operating ratios, levels of working capital and net worth. The Company was not,
at December 31, 1998, in compliance with the Omega master lease financial
covenants and did not obtain a waiver of the covenant violations. The Company
was in arrears with respect to its obligations under these leases in the
approximate amount of $1.5 million. Under the terms of the Plan, RainTree, on
the Effective Date, paid the past due rent amount and returned six facilities
located in Indiana to Omega. RainTree entered into a new master lease agreement
with Omega related to: (i) the remaining eight facilities currently leased from
Omega; (ii) the three facilities previously leased from BritWill Texas; and
(iii) seven other RainTree facilities pursuant to a sale leaseback transaction.
See "-- Recent Developments" and Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Reorganization."
ITEM 3. LEGAL PROCEEDINGS
RainTree 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
RainTree'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 RainTree's
business. As of December 31, 1998, the Company is not aware of any claims
against RainTree that would have a material adverse effect on RainTree's results
of operations.
On May 28, 1998, RainTree, together with 29 of its subsidiaries, filed
petitions for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy
Court for the District of Arizona (collectively, the "RainTree Debtors"). On
January 7, 1998, the BritWill Debtors (together with the RainTree Debtors, the
"Debtors") filed voluntary petitions for relief under Chapter 11 with the
Bankruptcy Court in the District of Arizona. All 33 cases were procedurally
consolidated for administrative purposes and have been jointly administered
under Case No. 98-06583-PHX-GBN. In November 1998, the Plan was accepted by
RainTree's creditors. Effective January 31, 1999, the Bankruptcy Court confirmed
RainTree's Plan and the Company emerged from bankruptcy.
RainTree is a defendant in seven consolidated securities class action
lawsuits pending in the United States District Court in Phoenix, Arizona (the
"Federal Action"), and a securities class action lawsuit pending in California
Superior Court (the "State Action") (collectively, the "Securities Class
Actions"). The Securities Class Actions arise from the Company's announcement on
March 11, 1997 that it would be restating its financial results for the
nine-month period ended September 30, 1996. A consolidated amended class action
complaint in the Federal Action was filed on January 6, 1998 under the caption
Martin Grossman, et al. v. Unison HealthCare Corporation, et al., USDC No. CIV
97-0583 PHX SMM. The State Action is captioned Jeffrey D. VanDyke v. Cruttenden
Roth, Inc., Wheat First Butcher Singer, Individually and as Representatives of a
Defendant Underwriter Class, and Bruce H. Whitehead, RainTree Healthcare Corp.,
John T. Lynch, Jr., Trouver Capital Partners, L.P., Jerry M. Walker, Phillip R.
Rollins, Craig R. Clark, and Paul J. Contris, Case No. 779111 (Orange County
Sup. Ct.) (filed May 13, 1997). The Federal Action seeks damages for alleged
violations of federal and Arizona state securities laws; the State Action seeks
damages for alleged violations of the California state securities laws. The
broadest class period is that alleged in the Federal Action from December 18,
1995 (the date of the Company's initial public offering) to May 30, 1997.
17
<PAGE> 20
The parties in the Federal Action have reached a settlement in principle
that is expected to resolve both the Federal and State Actions in their
entirety, assuming appropriate court approval and acceptance by members of the
class. The settlement includes a cash payment by the Company's primary insurer
amounting to $4.25 million and 1,000,000 shares of old Common Stock. Under the
Plan, old Common Stock was converted into warrants; under the proposed
settlement, class members who are to receive RainTree shares will receive a pro
rata share of such warrants. The settlement was approved by the Bankruptcy Court
on December 30, 1998 and preliminary approval of the settlement was granted by
the district court in the Federal Action on February 24, 1999. A final
settlement approval hearing is scheduled for April 28, 1999.
The Company and certain of its current and former officers and/or directors
were named as defendants in an action styled John D. Filkoski, et al. v. Unison
HealthCare Corporation, et al., filed in Colorado Superior Court on May 27, 1998
(the "Colorado Action"). The Colorado Action alleges causes of action under
Colorado common and statutory law in connection with the Signature Acquisition.
The Colorado Action arises out of the same general nexus of facts as alleged in
the Securities Class Actions described above. The plaintiffs are four former
shareholders of Signature whose Signature shares were acquired in exchange for
cash, notes and common stock on October 31, 1996. Essentially, plaintiffs allege
that the Company's financial statements for the second and third quarters of
1996 contained false and misleading statements that fraudulently induced
plaintiffs into entering into a merger agreement with the Company. Plaintiffs
further allege that the Company failed to perform on certain promissory notes
made in connection with the Signature Acquisition. Plaintiffs seek damages of
approximately $3.2 million in purported actual damages as well as punitive
damages, interest and costs. Plaintiffs were advised that all proceedings
against the Company, including the Colorado Action, were stayed as a result of
the Chapter 11 filing.
On June 24, 1998, plaintiffs voluntarily dismissed the Company from the
Colorado Action. Plaintiffs subsequently filed a second amended complaint, which
did not name the Company but which did charge certain individual defendants with
acts of fraud, negligent misrepresentation and breach of fiduciary duty in their
capacities as current or former officers and/or directors of the Company. The
Company may be required to indemnify and/or advance defense costs to the
individual defendants. The Company has an applicable insurance policy covering
the Colorado Action. Motions to dismiss the Colorado Action for lack of personal
jurisdiction have been filed by the individual defendants (except Jerry M.
Walker) and are pending before the court. Mr. Walker filed a motion to stay the
Colorado Action pending plaintiffs' decision as to whether they will participate
in the settlement of the Securities Class Actions.
On April 24, 1998, an action styled Franciscan Eldercare Corporation, Inc.
v. Sunquest SPC, Inc., Unison HealthCare Corporation, Inc. [sic], Jerry Walker,
Phillip Rollins and Paul Contris was filed in the Circuit Court of the State of
Oregon (County of Multnomah) (Case No. 9801-00050). This action relates to four
nursing facilities that the Company previously leased from Franciscan Eldercare
Corporation ("FEC"). These leases were rejected by RainTree in the Bankruptcy
Court. The action alleges breach of contract, conversion and breach of
promissory note against RainTree and Sunquest SPC, Inc., a RainTree subsidiary,
and breach of guaranty against Messrs. Walker, Rollins and Contris. FEC is
seeking damages from the Company in the amount of at least $1.2 million plus
attorney's fees, interest and costs.
On May 4, 1998, an action styled Healthprime, Inc., HP/Healthcare
Acquirors, Inc., Markleysburg Healthcare Investors, L.P., Marshall Manor
Healthcare Services, Inc., and Lake City Nursing Homes, Inc. v. Unison
HealthCare Corporation and Sunquest SPC, Inc. was filed in the Superior Court of
Fulton County, Georgia (Case No. E.68081). The action alleges breach of contract
related to a nursing facility that the Company previously leased from
Markleysburg Healthcare Investors, Inc. and four nursing facilities that the
Company previously managed on behalf of the plaintiff. The facility lease was
rejected by RainTree in the Bankruptcy Court. Plaintiffs are seeking a judgment
holding that the Company is entitled to no additional management fees relating
to the managed facilities and other unspecified damages. On November 11, 1998,
the Company filed an action in Bankruptcy Court (Unison v. HealthPrime, Inc. et
al., Adversary Proceeding No. 98-808-GBN) seeking to recover management fees
related to these facilities totaling $1.6 million plus interest and attorneys'
fees.
18
<PAGE> 21
On December 10, 1998, an action styled American Professional Holdings, Inc.
[sic] v. John L. Maguire, W. Jerome McGee, and Harold N. McKinney was filed in
the Bankruptcy Court (Adversary No. 98-861). American Professional Holding, Inc.
("Ampro"), a wholly owned subsidiary of RainTree, was acquired on October 31,
1996. Messrs. Maguire, McGee and McKinney are former officers, directors and
stockholders of Ampro. The complaint alleges breach of contract related to loans
made by Ampro in June 1996 to the Defendants in the aggregate amount of
$250,000. These loans were due and payable in full on December 15, 1997. The
Company is seeking damages in the amount of $292,674, which represents the
aggregate principal amount of the loans plus accrued interest, and attorneys'
fees and costs. Also on December 10, 1998, an action styled American
Professional Holding, Inc. v. Associated Solutions, Inc. was filed in the
Bankruptcy Court (Adversary No. 98-862). Associated Solutions, Inc. ("ASI") is
an affiliate of Messrs. Maguire, McGee and McKinney. The complaint alleges
breach of contract related to a loan made by Ampro to ASI in March 1996 in the
amount of $600,000. This loan was due and payable in full on December 15, 1997.
The Company is seeking damages in the amount of $781,106, which represents the
principal amount of the loan plus accrued interest, and attorneys' fees and
costs.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's old common stock was traded on The Nasdaq Stock Market's
National Market System under the symbol "UNHC" from December 19, 1995 to August
21, 1997. Effective August 22, 1997, Nasdaq moved RainTree's old common stock to
The Nasdaq SmallCap Market, and on April 15, 1998, Nasdaq delisted the old
common stock. The Company did not pay dividends on its old common stock.
On the Effective Date of the Plan, all shares of the Company's old common
stock were cancelled. As of April 9, 1999, approximately 7,593,697 shares of
RainTree new common stock have been issued. As of April 9, 1999 there were
approximately 28 record holders of its Common Stock. As of April 9, 1999, there
was no established public trading market for the new common stock.
RainTree has not paid a common dividend and does not anticipate declaring a
common dividend in the near future. Moreover, the Company's ability to pay
dividends is limited by the Indenture relating to the new Senior Secured Notes,
the Amendment to the Omega Master Lease and the Loan and Security Agreements
with HCFP Funding, Inc.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below is derived from RainTree's
audited financial statements. The Company's historical financial data is not
indicative of future results of operations or financial condition due to the
implementation of fresh start reporting on the Effective Date of the Plan. The
selected financial data set forth below should be read in conjunction with the
Consolidated Financial Statements and notes thereto and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
19
<PAGE> 22
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1998(1) 1997(1) 1996(1) 1995 1994
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................ $ 184,031 $ 224,366 $ 148,674 $ 68,488 $ 18,406
Expenses:
Wages and related................... 99,668 116,137 85,789 35,047 9,593
Other operating..................... 73,528 84,566 64,771 24,032 6,462
Rent................................ 14,644 16,119 15,658 6,673 1,406
Interest............................ 12,140 20,076 5,824 1,176 147
Depreciation and amortization....... 8,970 9,974 4,561 1,311 286
Impairment losses and other
charges.......................... 23,385 27,185 3,865 -- --
--------- --------- --------- --------- ---------
Total expenses................... 232,335 274,057 180,468 68,239 17,894
--------- --------- --------- --------- ---------
Income (loss) from operations......... (48,304) (49,691) (31,794) 249 512
Reorganization expenses............... 5,487 -- -- -- --
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary charges............... (53,791) (49,691) (31,794) 249 512
Income tax expense (benefit).......... (9,842) (2,480) (8,356) 132 172
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
charges............................. (43,949) (47,211) (23,438) 117 340
Extraordinary charge -- early
extinguishment of debt.............. 1,094 -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss)..................... $ (45,043) $ (47,211) $ (23,438) $ 117 $ 340
========= ========= ========= ========= =========
Net income (loss) per share........... $ (7.01) $ (7.41) $ (5.01) $ 0.05 $ 0.19
Shares used in per share
calculation......................... 6,422,096 6,370,834 4,676,037 2,280,213 1,806,164
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
-------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 16,863 $ 5,295 $ 17,409 $ 6,169 $ 306
Working capital (deficit)................. 21,152 (151,068) (13,955) (927) 1,691
Total assets.............................. 170,540 192,167 230,921 81,301 7,468
Total debt................................ 8,144 172,797 157,138 26,737 2,623
Liabilities subject to compromise......... 166,870 -- -- -- --
Stockholders' equity (deficit)............ (79,077) (34,034) 11,689 20,903 736
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997(1) 1996(1) 1995 1994
--------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Skilled nursing facilities(2):
Number of facilities................... 38 49 54 45 16
Number of licensed beds................ 3,907 4,839 5,455 4,629 1,621
Patient days........................... 1,282,728 1,524,025 1,203,655 581,410 112,727
Assisted living facilities(2):
Number of facilities................... 4 6 6 3 2
Number of units........................ 233 325 325 229 104
Sources of patient revenues:
Medicare............................... 28.5% 32.1% 29.5% 26.9% 9.1%
Private pay............................ 16.3 16.2 17.0 17.2 32.4
--------- --------- --------- ------- -------
Quality mix......................... 44.8 48.3 46.5 44.1 41.5
Medicaid............................... 55.2 51.7 53.5 55.9 58.5
--------- --------- --------- ------- -------
Total............................... 100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ======= =======
</TABLE>
- ---------------
(1) All acquisitions that occurred in 1995 and 1996, except for the merger with
Ampro, are reflected from the date of each acquisition in the historical
operating results of the Company.
(2) Number of facilities, beds and units are expressed at end of period.
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", "-- Reorganization" and
"-- Risks and Uncertainties."
The following material should be read in conjunction with RainTree's
Consolidated Financial Statements and related notes thereto for the years ended
December 31, 1998, 1997 and 1996. All references in this discussion and analysis
to years are to fiscal years ended December 31 of such year.
SIGNIFICANT EVENTS
- In 1998, RainTree and its subsidiaries filed for reorganization under
Chapter 11 of the federal bankruptcy laws. RainTree's Plan of
Reorganization was confirmed and the Company emerged from bankruptcy on
January 31, 1999. See "-- Reorganization".
- RainTree disposed of 12 long-term care facilities in 1998 and an
additional seven facilities in January 1999 in connection with the
Company's restructuring.
- For the year ended December 31, 1998, RainTree recorded a net loss of
$45.0 million compared to net losses of $47.2 million in 1997 and $23.4
million in 1996. See "-- Results of Operations".
REORGANIZATION
In 1998, RainTree's operating results and financial condition continued to
be negatively impacted by a number of factors, including cash flow difficulties,
increased costs due to acquisitions and rising litigation costs. Throughout 1997
and 1998, the Company's cash flows from operations and its available capital
were insufficient to meet its operating expenses, lease obligations and debt
service requirements. These problems culminated in Chapter 11 bankruptcy
proceedings in 1998. When RainTree filed for bankruptcy, it was in breach and in
default of the terms of material operating leases and indebtedness.
21
<PAGE> 24
The risks associated with the Company's historic acquisition strategy
negatively impacted RainTree's financial performance. A key element of
RainTree's business strategy during 1995 and 1996 was to expand through the
acquisition of new or existing long-term and specialty healthcare facilities and
the acquisition or development of ancillary healthcare businesses or services.
As a result of acquisitions, the Company was faced with unforeseen contingencies
affecting its new businesses including increased costs due to integrating the
acquired operations into the overall enterprise. For example, difficulties in
integrating acquired facilities with RainTree's financial reporting and
management information systems were a substantial factor contributing to the
need to restate RainTree's financial statements for the nine months ended
September 30, 1996. The Company's financial reporting and management information
systems were not adequate for its increased and more complex needs. Those system
difficulties then contributed to the operating inefficiencies that led to the
unexpected losses for that period and subsequent periods.
Additionally, the number of lawsuits initiated against the Company grew as
its financial difficulties worsened, including suits with vendors, landlords and
several class action lawsuits (which also involved certain of the Company's
former directors and officers (among others) as named defendants). Such class
action complaints generally asserted that the defendants knew, or were reckless
in not knowing, that RainTree's results for the first nine months of 1996 were
materially overstated, or misrepresented the capability of RainTree's internal
accounting systems to reliably record and reflect its financial condition, among
other things. See Item 3, "Legal Proceedings".
In 1997, RainTree began work on a plan designed to: (i) reduce its costs of
capital and operating expenses in order to improve operating results and cash
flows; (ii) provide short-term and long-term liquidity; and (iii) restructure
its balance sheet. The Company sought to: (a) reduce controllable costs; (b)
refinance the mortgage on six facilities owned and operated by the Company (the
"Mortgage Note"), the proceeds of which would be used for debt service and
working capital; and (c) obtain a new asset-backed revolving line of credit.
RainTree also attempted to restructure its lease agreements with Omega related
to 26 nursing facilities operated by the Company in Texas and Indiana. As a
result of the Company's continuing losses, it was not in compliance with certain
financial covenants contained in the Omega leases.
In November 1997, RainTree announced that it had been unable to complete a
refinancing of the Mortgage Note, and was therefore unable to make the scheduled
$6.7 million interest payment on its 12 1/4% Senior Notes. On December 1, 1997,
RainTree completed the private placement of its $20.0 million 13% Senior Notes.
The proceeds from the sale were used to make the interest payment on the 12 1/4%
Senior Notes and for working capital.
Despite the sale of the 13% Senior Notes, the Company lacked sufficient
liquidity to meet all of its short-term and long-term debt service and capital
requirements. The Company was also unable to reach an agreement with Omega with
respect to a restructuring of the terms of the Omega leases. On January 7, 1998,
the BritWill Debtors, with operations in Texas and Indiana, filed for protection
under Chapter 11 of the federal bankruptcy laws. The Chapter 11 filings were
necessitated by actions taken by Omega to terminate or otherwise enforce the
terms of its lease agreements with the Company.
In 1998, the Company continued to work to develop a plan to achieve a
viable capital structure, including a consensual restructuring of its debt and
lease obligations and the disposition of unprofitable facilities. On May 28,
1998, RainTree and 29 of its subsidiaries filed petitions for reorganization
under Chapter 11 of the federal bankruptcy laws.
In June 1998, RainTree reached an agreement in principle (the "Term Sheet")
with respect to a restructuring of the Company's debt and equity with Omega and
the Ad Hoc Committee. The Company also obtained a continuation of its accounts
receivable-backed line of credit with HealthCare Financial Partners ("HCFP") in
the amount of $11.0 million (the "HCFP DIP Facility"), which was used by
RainTree for working capital needs during the Chapter 11 process. RainTree did
not at that time reach an agreement with Messrs. Kremser and Whitehead,
shareholders and former directors to whom the Company has various debt
obligations. The Term Sheet formed the basis for the Company's Plan of
Reorganization, which was filed with the Bankruptcy Court on August 10, 1998.
The Term Sheet expired on September 30, 1998. On October 16, 1998, RainTree
filed an amended Plan of Reorganization with the Bankruptcy Court. The Plan was
supported
22
<PAGE> 25
by Omega and the Official Committee of Unsecured Creditors but not the Ad Hoc
Committee. Nevertheless, in November 1998, RainTree obtained the requisite
number of votes from its creditors to approve the Plan. Effective January 31,
1999, the Bankruptcy Court confirmed the Plan, as modified, and RainTree emerged
from bankruptcy. The significant provisions of the Plan are as follows.
- All of RainTree's common stock was cancelled on the Effective Date. As
described below, RainTree will issue up to 8,000,000 new common shares
(the "New Common Stock"). As of April 9, 1999, RainTree had issued
7,593,697 shares of New Common Stock. RainTree will also issue up to $26
million of new debt securities (the "Senior Secured Notes") in
satisfaction of bankruptcy claims. The Senior Secured Notes bear interest
at 11.0%, will mature four years from the Effective Date, and are secured
by the stock and personal property of certain RainTree subsidiaries.
- On December 31, 1998, Omega purchased seven facilities owned and operated
by RainTree for a purchase price of $38.2 million. The facilities were
then leased back to RainTree (the "Sale Leaseback"). A portion of the
proceeds were used to (i) repay the Mortgage Note amounting to
approximately $19,335, including a prepayment penalty and (ii) exercise
the Company's option to purchase The Arbors Health Care Center for
approximately $3.2 million. The Arbors facility was included in the Sale
Leaseback. The remaining proceeds from the sale were held in escrow until
the Effective Date, when they were used to settle bankruptcy claims as
provided for in the Plan and described below. Omega received closing
costs, financing fees and reimbursement of expenses in the amount of $1.0
million. These seven facilities and eleven other facilities leased from
Omega and BritWill Texas were combined into a single master lease (the
"Omega Master Lease"). RainTree realized no gain or loss on the Sale
Leaseback, which was accounted for as a financing transaction.
- Six leased facilities were returned to Omega and three BritWill Texas
facilities that RainTree disposed of in March 1997 via a sublease
agreement are excluded from the Master Lease. In return, Omega received
$2.0 million in cash, a seven-year, $3.0 million promissory note bearing
interest at 7.0%, and a guarantee by RainTree that supersedes and
replaces all previous guarantees of BritWill Texas obligations. RainTree
also paid to Omega, in cash, prepetition rent payments and other
obligations in the amount of approximately $2.1 million.
- In settlement of approximately $15.8 million of allowed claims, the
Whitehead Affiliates received $541,000 in cash, unsecured promissory
notes amounting to $1.5 million, Senior Secured Notes amounting to
approximately $292,000 and approximately 729,000 shares of New Common
Stock. The promissory note bears interest at 9.0%, payable quarterly, and
the principal amount will be due and payable at the end of four years.
- In settlement of approximately $5.4 million of allowed claims, the
Kremser Affiliates received $541,000 in cash and a promissory note
amounting to approximately $1.4 million. The promissory note bears
interest at 9.0%, payable quarterly, and the principal amount will be due
and payable at the end of five years.
- Convenience Claims, defined in the Plan as payables due to general
unsecured creditors amounting to $1,000 or less (or $2,000 or less whose
holders elect to reduce their claims to $1,000), were paid in cash.
RainTree paid approximately $520,000 to settle Convenience Claims.
Essential Vendor Claims, defined in the Plan as payable to vendors deemed
essential to the continued operation of RainTree's business, were paid in
cash in the aggregate amount of approximately $2.5 million.
- Trade Unsecured Claims are defined in the Plan as payables to other trade
vendors. As of the date of this Report, RainTree was in the process of
settling or objecting to Trade Unsecured Claims and other general
unsecured claims. Each holder of a Trade Unsecured Claim will receive, in
cash, the lesser of 35% of the allowed amount of the claim or a pro rata
portion of $1.4 million, plus shares of New Common Stock. The total
amount of Trade Unsecured Claims was approximately $3.4 million.
- All other general unsecured creditors will share pro rata in
approximately 91% of the New Common Stock and the Senior Secured Notes. A
subordination agreement related to the 13% Senior Notes resulted in a
reallocation among the holders of the 13% Senior Notes and those holders
of the 12 1/4%
23
<PAGE> 26
Senior Notes who had consented to the subordination agreement (the "Consenting
Noteholders"). As a result of this reallocation, the holders of the 13% Senior
Notes received Senior Secured Notes equal to 100% of their allowed claims ($22.1
million) and the Consenting Noteholders received only New Common Stock
totaling 6.3 million shares. The holders of 12 1/4% Senior Notes who did
not consent to the subordination agreement received Senior Secured Notes
totaling $1.8 million and approximately 522,000 shares of New Common
Stock. The aggregate amount of these general unsecured claims was
approximately $137.5 million.
- Secured claims included the Mortgage Note, the HCFP DIP Facility, claims
of Omega, property tax liabilities and other secured loans. Secured
claims were either: (i) paid in cash on the Effective Date; (ii) the
liability was continued in accordance with its original terms after
defaults, if any, were cured; or (iii) the collateral securing such
liability was returned to the creditor in full satisfaction of the claim.
The aggregate amount of secured claims was approximately $34.7 million.
- RainTree's former stockholders will share pro rata in the issuance of
warrants to purchase approximately 400,000 shares of New Common Stock.
- On the Effective Date, RainTree obtained a new $12.0 million line of
credit from Health Partners that replaced the HCFP DIP Facility. See
"-- Liquidity and Capital Resources."
IMPACT OF FRESH START REPORTING
When RainTree emerged from bankruptcy, it adopted fresh start reporting in
accordance with Statement of Position 90-7 of the American Institute of
Certified Public Accountants ("SOP 90-7"). Under fresh start reporting, the
reorganization value of RainTree has been allocated to its assets and
liabilities on a basis substantially consistent with purchase accounting. The
portion of reorganization value not attributable to specific intangible assets
has been recorded as "Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets". Certain fresh start adjustments, primarily related to the
adjustment of the Company's assets and liabilities to fair market values, will
have a significant effect on RainTree's future results of operations. The more
significant adjustments relate to increased depreciation expense on property and
equipment and reduced amortization expense on intangible assets.
As of the Effective Date, Reorganized RainTree recorded total assets of
$135.6 million, total debt and lease financing obligations of $71.4 million and
stockholders' equity of $21.0 million. See Note 2 of Notes to Consolidated
Financial Statements for further detail regarding fresh start reporting.
RISKS AND UNCERTAINTIES
The restructuring of RainTree involves a degree of risk, and this
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. Reorganized RainTree's actual results could differ materially
from those anticipated in such forward-looking statements as a result of a
variety of factors, including those set forth in the following risk factors and
elsewhere in this Report.
Successful Implementation of Turnaround. As part of RainTree's turnaround
plan, the Company is focusing on its core business of providing patient care
while controlling costs. However, RainTree's occupancy levels at its facilities
were adversely affected by negative perceptions due to the Company's bankruptcy
and the associated uncertainty regarding the Company's future viability as a
going concern. Therefore, average occupancy for the Company's nursing facilities
decreased from approximately 83.5% in 1997 to 80.4% in 1998. The successful
implementation of the Company's business strategy includes improving its image
with patients, vendors and other parties.
The Company has continued to experience losses while operating in Chapter
11. If the Company is not successful in attracting new patients and reversing
this trend, it will not be able to implement its strategies without additional
financing (which may not be available) and any improvement in the Company's
results of operations would not materialize. If the Company is not successful in
fully implementing its business strategy, it is less likely that the trends of
negative earnings will be reversed which, in turn, would have an adverse affect
24
<PAGE> 27
on the availability of cash and other financial resources necessary for the
implementation of the Company's business strategy. Further, if the
implementation of the strategy is not successful and the Company is unable to
generate sufficient operating funds to pay the interest on the Senior Secured
Notes and fund its other capital requirements, there can be no assurance that
alternative sources of financing would be available to the Company or, if
available, that such financing would be on commercially reasonable terms. If it
becomes necessary for the Company to raise capital in addition to the amounts
permitted to be raised by the Indenture, the Company would be limited in such
efforts by the terms of the Indenture.
Noncomparability of Financial Information. Information reflecting the
results of operations and financial condition of the Company since the Effective
Date is not comparable to prior periods due to: (i) the disposition of certain
facilities; (ii) the costs and expenses relating to the Company's bankruptcy
case and the impact of the restructuring or extinguishment of certain interests
and liabilities; and (iii) the application of Fresh Start Reporting. Under Fresh
Start Reporting, the Company's assets have been stated at "reorganization
value," which is defined as the value of the entity (before considering
liabilities) on a going -- concern basis following the reorganization and
approximates the amount a willing buyer would pay for the assets of the Company
immediately after the reorganization. Accordingly, there is only limited
financial and operating history of the Company to evaluate.
Dependence on Management and Skilled Personnel. RainTree depends upon the
active involvement of its senior managers, including its executive officers. The
loss of one or more of such officers could have a material adverse effect on the
Company's results of operations and its efforts to rebuild its financial health.
RainTree's business strategy also depends on its ability to attract and retain
qualified clinical management and other personnel. RainTree competes with
general acute care hospitals, rehabilitation facilities, nursing homes,
ambulatory care facilities and other healthcare providers for the services of
physicians, registered nurses, therapists and other clinical personnel. Such
clinical personnel are in high demand and are often subject to competing offers.
There can be no assurance that RainTree will be able to attract and retain the
qualified personnel necessary for its business. See Item 10, "Directors and
Executive Officers".
Reliance on Reimbursement from Government Sources. In 1998 and years
prior, RainTree was reimbursed under the Medicare program for its actual
allowable direct and indirect costs of services based on the submission of an
annual cost report. Each facility was also subject to limits on reimbursement
for routine costs. Exceptions to these limits are available for, among other
things, the provision of atypical services. Due in part to the provision of
subacute services, RainTree's costs for the care delivered to Medicare patients
in certain of its nursing facilities have exceeded the routine cost limits.
RainTree has submitted to HCFA various requests for exceptions to the Medicare
routine cost limit for reimbursement. As of December 31, 1998, approximately
$5.0 million of receivables related to RCL exception revenues remain subject to
audit and final approval by the fiscal intermediary. Although RainTree believes
that it will recover these routine cost limit exceptions, failure to recover
excess costs could adversely affect the Company's results of operations.
Governmental payors and their paying agencies and private third-party payor
sources have instituted cost containment measures of various kinds designed to
limit payments made for long-term care and ancillary services, and there can be
no assurance that future measures will not materially and adversely affect
reimbursement to the Company. Revenues received from the Medicare program for
services provided in RainTree's facilities represented approximately 28.5% of
RainTree's 1998 long-term care revenues. The Medicare program is subject to
statutory and regulatory changes, retroactive and prospective rate adjustments,
complex reimbursement audits, paying agency discretion and interpretations,
administrative rulings and funding restrictions, all of which could have the
effect of limiting or reducing reimbursement levels for RainTree's services. Any
significant decrease in Medicare reimbursement levels, or imposition of
significant restrictions on participation in the Medicare program, could have a
material adverse effect on RainTree. There can be no assurance that the
Company's facilities will continue to satisfy the requirements for participation
in the Medicare program.
Revenues received from state Medicaid programs for services provided in
RainTree's facilities represented approximately 55.2% of the Company's 1998
long-term care revenues. RainTree's facilities are subject
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<PAGE> 28
to risks of changes in Medicaid reimbursement and payment delays resulting from
budgetary shortfalls of state Medicaid programs. Many states have enacted or are
considering enacting measures that are designed to reduce their Medicaid
expenditures and to make certain changes to private healthcare insurance. There
are also a number of legislative proposals including cost caps and the
establishment of Medicaid prospective payment systems for nursing facilities.
See "-- Risks and Uncertainties -- Health Care Reform".
Health Care Reform. The Balanced Budget Act, signed into law on August 5,
1997, is intended to reduce Medicare payments by $115 billion over the next five
years and makes numerous changes to Medicare and Medicaid programs. The Balanced
Budget Act mandates the establishment of the prospective payment system for
Medicare skilled nursing facility services, under which facilities will be paid
a fixed fee for virtually all covered services. PPS will be phased in over a
four-year period, effective for the Company's facilities beginning January 1,
1999. During the first three years, payments will be based on a blend of the
facility's historical costs and calculated federal rates. Thereafter, the per
diem rates will be based 100% on federal rates, adjusted for inflation and
geographical data. In addition, effective January 1, 1999, there will be an
annual per-patient cap of $1,500 on reimbursement for combined Part B and
outpatient physical and speech therapy services and an annual cap of $1,500 on
reimbursement for combined Part B and outpatient occupational therapy services.
RainTree estimates that its average daily Medicare rate in 1999 under PPS will
be approximately 18% lower than its average daily Medicare rate in 1998. The
Company anticipates that these revenue decreases may be substantially mitigated
by reduced costs negotiated with therapy and pharmacy suppliers, as well as
increased lengths of stay resulting from less intensive levels of therapy
services provided.
PPS is expected to negatively impact RainTree's pharmacy revenues as a
result of lower rates negotiated with its nonaffiliated nursing facility
customers. The Company has taken steps to reduce its pharmacy cost of goods sold
through the use of "formularies", which are standard menus of drugs and other
pharmacy products. By reducing the number of different products offered,
RainTree expects that it can negotiate better pricing with its suppliers.
Additionally, the formulary will include more generic drugs that can be obtained
at lower prices than name brand drugs. While the Company will continue to supply
any drug required, it expects that most physicians will cooperate in an effort
to reduce costs.
RainTree's success under PPS will depend upon its ability to manage the
costs of caring for high acuity Medicare patients. However, although the Company
believes that PPS will provide opportunities for efficiently operated, low cost
providers, there can be no assurance that RainTree will be successful in keeping
its costs of services below the PPS rates.
The Balanced Budget Act also contains changes to the Medicaid program, the
most significant of which is the repeal of the Boren Amendment. The Boren
Amendment required state Medicaid programs to pay rates that are reasonable and
adequate to meet the costs that must be incurred by a nursing facility in order
to provide care and services in compliance with applicable standards. Since
October 1, 1997, states have had more flexibility in establishing payment rates.
Indiana changed its Medicaid program to a prospective payment system effective
October 1, 1998 and Colorado is expected to follow in 1999. The Company does not
believe that the change in Indiana's reimbursement system will materially
negatively impact RainTree's results of operations or financial condition, and
RainTree has not determined the impact the change in Colorado's system will have
on its results of operations. RainTree is unable to predict whether any other
states will change their reimbursement policies and, if so, what effects such
changes would have on the Company. There can be no assurance that any changes to
the Medicaid program will not have a material adverse impact on the Company.
In an attempt to limit the federal budget deficit, there have been, and
RainTree expects that there will continue to be, a number of other proposals to
limit Medicare and Medicaid payments for services. RainTree cannot predict
whether any of these proposals will be adequate to reimburse RainTree for the
cost of providing services. In addition, cost increases due to inflation without
corresponding increases in reimbursement would adversely affect the Company's
business.
Extensive Government Regulations. The operation of skilled nursing
facilities is subject to federal, state and local laws relating to, among other
things, the number of beds, the provision of ancillary services, the adequacy of
medical care, distribution of pharmaceuticals, equipment, personnel, operating
policies, fire
26
<PAGE> 29
prevention and compliance with building codes, as well as those relating to
other business, such as those mandating fair employment practices and
prohibiting damage to the environment. Skilled nursing facilities are also
subject to periodic inspection by governmental and other authorities to assure
compliance with various standards and to maintain continued licensing under
state law and certification under the Medicare and Medicaid programs. Although
the Company generally has been able to secure necessary approvals or licenses in
the past, it voluntarily closed one facility in 1996 and one in 1997 due to
violations of Medicare regulations. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect RainTree's ability to
offer existing or additional services, to receive Medicaid or Medicare payments,
and to expand the scope of its operations, any of which could materially
adversely affect the Company's business. See Item 1,
"Business -- Operations -- Quality Management".
In May 1996, HCFA announced the first year results of its "Operation
Restore Trust" initiative, designed to combat Medicare and Medicaid fraud, waste
and abuse by home health agencies, nursing homes and durable medical equipment
suppliers. Operation Restore Trust originally focused on five states and is now
extended to all states and 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. In addition, HCFA certification, survey and
enforcement regulations impose significant burdens on long-term care facilities.
The regulations may require state survey agencies to take aggressive enforcement
actions, such as imposing fines, decertifying facilities, banning admissions or
revoking necessary licenses and closing facilities. Additional remedies are
available. There can be no assurance that these rules, or future rules or
legislation, will not have a material adverse affect on the Company.
Competition for Patients and Employees. The industries in which RainTree
operates are highly competitive. RainTree competes 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, both for patients and for nurses and other key
personnel. Many of these companies have greater financial and other resources
than RainTree. A number of states in which RainTree operates do not have
"certificate of need" or similar laws restricting the construction of competing
facilities. No assurance can be given that RainTree will have the resources to
compete successfully with such companies.
Impact of the Year 2000 Issue. Some of RainTree's information systems have
time-sensitive software that will not properly recognize the year 2000. Based on
an on-going assessment, the Company has determined that it will be required to
modify or replace significant portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. RainTree believes that with modifications to existing software and
conversions to new software, the Company will be year 2000 ready by the end of
1999 and the year 2000 issue will not pose significant operational problems for
its computer systems.
RainTree is in the process of completing a detailed inventory and analysis
of computer hardware, software and operating systems. The Company will utilize
both internal and external resources to reprogram, or replace, and test the
hardware and software for year 2000 readiness. The scope of the year 2000
project also encompasses consideration of potential impacts on the Company's
business operations. The Company is reviewing internal business operations and
relationships with external business partners to assess the current level of
compliance. The next step is to perform testing and develop contingency plans
with the goal of achieving year 2000 readiness by September 1999.
During 1998 and the first quarter of 1999, RainTree replaced substantially
all of its computer equipment in connection with implementation of the Plan. The
Company believes the new equipment is year 2000 compliant. The Company estimates
that the incremental cost to upgrade existing software to make it year 2000
compliant will not exceed $150,000.
RainTree has initiated formal communications with significant suppliers and
payors to determine the extent to which the Company's systems and operations are
vulnerable to those third parties' failure to remediate their own year 2000
issues. Examples of such issues include, but are not limited to, electronic
interfaces with external agents such as payors, suppliers and banks. The ability
of third parties with which RainTree transacts business to adequately address
their year 2000 issues is outside the Company's control. Although RainTree will
seek to replace any of its current vendors who are unable to become year 2000
ready
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<PAGE> 30
in a timely manner, there can be no assurance that the Company's operations will
not be adversely affected by the ability of third parties, including the federal
and state governments on which RainTree's operations rely, to also manage the
year 2000 issue.
The Company will continue to assess each of its systems and their year 2000
readiness. At this time, the Company believes that appropriate actions are being
taken and expects to complete its overall year 2000 remediation prior to any
anticipated impact on its operations. However, there can be no assurance that
these assumptions will be achieved, and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, third party modification plans and similar uncertainties.
RESULTS OF OPERATIONS
The following table summarizes selected operating statistics.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Leased/Owned Facilities:
Number of facilities...................................... 42 54 57
Number of licensed beds:
Long-term care......................................... 3,907 4,768 5,145
Assisted and independent living........................ 233 325 325
Managed facilities:
Number of facilities...................................... -- 1 3
Number of licensed beds................................... -- 71 310
Institutional Pharmacies:
Number of outlets......................................... 2 2 2
Nonaffiliated entities served............................. 34 58 42
Laboratory Services:
Number of laboratories.................................... 3 3 3
Nonaffiliated entities served............................. 300 275 295
Therapy Services:
Nonaffiliated entities served............................. 145 115 55
</TABLE>
The following table identifies RainTree's sources of revenues.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Operating revenues:
Long-term care............................................ 76.4% 77.0% 81.0%
Therapy services.......................................... 12.5 13.9 8.9
Pharmacy services......................................... 8.2 6.3 5.7
Laboratory services....................................... 2.9 2.8 4.4
----- ----- -----
Total............................................. 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
RainTree'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 the
Company's ancillary services. Medicare patients have historically generated 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 the
Company than governmental reimbursement sources. RainTree generally derives a
higher profit margin from ancillary services than from basic nursing services.
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<PAGE> 31
Data for nursing center operations with respect to sources of net patient
revenues by payor type and average occupancy are set forth below (long-term care
only).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
SOURCE OF REVENUES
Medicare.................................................... 28.5% 32.1% 29.5%
Private and other........................................... 16.3 16.2 17.0
----- ----- -----
Quality mix....................................... 44.8 48.3 46.5
Medicaid.................................................... 55.2 51.7 53.5
----- ----- -----
Total............................................. 100.0% 100.0% 100.0%
===== ===== =====
AVERAGE OCCUPANCY
Nursing facilities.......................................... 80.4% 83.5% 78.3%
Independent and assisted living facilities.................. 59.8 49.6 69.4
</TABLE>
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
For the year ended December 31, 1998, RainTree recorded a net loss of $45.0
million, or $7.01 per share, compared to a net loss of $47.2 million, or $7.41
per share, for 1997. Loss from operations amounted to $48.3 million in 1998
compared to $49.7 million in 1997. In 1998, the Company recorded impairment
losses and other charges in the amount of $23.4 million compared to $27.2
million in 1997.
Revenues. Total operating revenues decreased by 18.0% to $184.0 million in
1998 from $224.4 million in 1997. The decrease is primarily due to revenues from
patient services, which decreased from $221.1 million in 1997 to $182.5 million
in 1998. Patient days decreased from 1.5 million in 1997 to 1.3 million in 1998.
Of the decrease in net patient service revenues, approximately $21.4 million is
attributable to the disposition of long-term care facilities. Therapy company
revenues decreased by approximately $8.1 million due to a decrease in management
fee revenue and the impact of the new Medicare salary equivalency rules. See
Item 1, "Business -- Government Regulation -- The Medicare Program." Pharmacy
revenues increased by approximately $815,000. The balance of the decrease in
patient service revenues was due to nursing and assisted living facility
operations, which experienced declines in occupancy and quality mix (the
percentage of revenues from Medicare and private pay sources) in 1998. The
decrease in quality mix and occupancy in 1998 was due primarily to the negative
perception of RainTree as a result of the bankruptcy filings. See "-- Risks and
Uncertainties -- Successful Implementation of Turnaround."
RainTree recorded reductions to 1998 fourth quarter revenues in the
aggregate amount of $5.0 million. These adjustments followed the routine audit
of RainTree's 1996 and 1997 Medicare cost reports by the fiscal intermediary.
Although RainTree intends to appeal the decision by the intermediary to disallow
certain costs for reimbursement purposes, the Company recorded adjustments to
its third-party receivables.
Wages and related. Wages and related expenses decreased 14.2% from $116.1
million in 1997 to $99.7 million in 1998. Of this decrease, approximately $11.6
million is due to the disposition of facilities. Wages and related expenses of
the corporate and regional offices decreased by approximately $3.0 million from
1997 to 1998. The balance of the decrease is due primarily to cost controls at
the long-term care facilities and the ancillary companies. Wages and related
expense as a percentage of revenues amounted to 51.8% in 1997 and 54.2% in 1998.
Other operating. Other operating expenses decreased 13.1% from $84.6
million in 1997 to $73.5 million in 1998. Of this decrease, approximately $8.2
million is due to the disposition of facilities. Other operating expenses of the
corporate and regional offices decreased by $3.5 million. The provision for
doubtful accounts increased from $2.0 million in the 1997 period to $6.2 million
in the current period. The increase is due primarily to: (i) increased scrutiny
of Medicare claims by the Company's fiscal intermediaries, resulting in payment
delays and increase in the age of these receivables; (ii) accounts receivable of
acquired companies that have been determined to be uncollectible; (iii) an
increase in other patient accounts receivable that have
29
<PAGE> 32
been determined to be uncollectible; and (iv) a reserve for notes receivable
from former affiliates of Ampro. See Item 3, "Legal Proceedings". The balance of
the decrease in other operating expenses is due primarily to cost controls in
the long-term care facilities. Other operating expenses as a percentage of
revenues amounted to 40.0% in 1998 and 37.7% in 1997.
Rent. Rent expense decreased 9.2% from $16.1 million in 1997 to $14.6
million in 1998. The decrease is due to the disposition of facilities. Rent
expense as a percentage of revenues was 8.0% in the current period compared to
7.2% in the prior year period.
Interest. Interest expense amounted to $12.1 million in 1998 compared to
$20.1 million in 1997. In accordance with SOP 90-7, the Company did not accrue
interest on unsecured, prepetition debt during the Chapter 11 proceedings. Had
RainTree accrued all contractual interest, its interest expense for 1998 would
have been $23.1 million.
Depreciation and amortization. Depreciation and amortization expense
decreased from $10.0 million in 1997 to $9.0 million in 1998. The decrease is
due primarily to the disposition of facilities, net of depreciation on 1998
capital expenditures. Depreciation and amortization expense as a percentage of
revenues was 4.4% in 1997 and 4.9% in 1998.
Impairment losses and other charges. For the years ended December 31, 1997
and 1998, RainTree evaluated its long-lived assets, including property and
equipment, goodwill, lease operating rights and other intangible assets, for
impairment in accordance with 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"). These tests were triggered by the
Company's facility disposition plans and the bankruptcy. RainTree estimated the
undiscounted net cash flows from all business units and determined that the
carrying value of certain the Company's long-lived assets exceeded such
undiscounted cash flows. Accordingly, RainTree then compared the fair value of
the assets based on the present value of the estimated future cash flows for the
facilities with the carrying value. The future cash flows were estimated based
on: (i) the remaining weighted average useful lives of the assets; (ii) earnings
history; (iii) a discount rate commensurate with the risks involved and market
conditions; and (iv) assumptions reflecting internal operating plans and
strategies. RainTree determined that the fair value of certain assets was less
than the carrying value and, accordingly, recorded a provision for impairment
losses in the amount of $27.2 million in 1997 and $23.4 million in 1998.
Reorganization expenses. Reorganization expenses amounted to approximately
$5.5 million in 1998. Reorganization expenses are comprised primarily of
professional fees related to the bankruptcy proceedings and the Company's
restructuring.
Income tax benefit. RainTree recorded income tax benefits of $9.8 million
in 1998 and $2.5 million in 1997. The effective rates of 17.9% in 1998 and 5.0%
in 1997 are lower than the federal statutory rate of 34% as a result of a
valuation allowance established against the Company's deferred tax benefits.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"), requires a "more likely than not" criterion be applied
when evaluating the realizability of a deferred tax asset. Given the Company's
history of losses for income tax purposes and certain other factors, the Company
has established a valuation allowance principally for the portion of its
deductible temporary differences, including net operating loss carryforwards
that may not be available due to expirations or other limitations after
consideration of net reversals of future taxable and deductible amounts. After
application of the valuation allowance, RainTree's net deferred tax assets and
liabilities are zero as of December 31, 1998.
Management has determined that its net operating loss carryforwards
amounting to $51.9 million will be subject to substantial reduction in
realizability in future periods. Specifically, the Internal Revenue Service Code
provides that in a Chapter 11 bankruptcy case, income normally arising from the
discharge of indebtedness is excluded from taxable income. However, to the
extent that income from discharge of indebtedness is excluded from income,
taxpayers must reduce specified tax attributes, which include net operating
losses. The Company anticipates that, in connection with the implementation of
the Plan, its net operating losses will be substantially reduced as a result of
the restructuring of its debt obligations. In addition,
30
<PAGE> 33
the Company may have had a statutory ownership change (as defined for purposes
of Section 382 of the Internal Revenue Code) as a result of the effectiveness of
the Plan. Accordingly, those net operating losses that may remain available as a
result of the income tax implications of the attribute reduction may be
restricted.
If the Company, in future tax periods, were to recognize tax benefits
attributable to tax attributes of the Company prior to the Effective Date of the
Plan (such as net operating loss carryforwards), any such benefit would be
applied to reduce the balance of reorganization value in excess of amounts
allocable to identifiable assets rather than income tax expense.
Extraordinary charge -- early extinguishment of debt. The extraordinary
charge recorded in 1998 represents a prepayment penalty related to the Mortgage
Note that was repaid in connection with the Sale Leaseback transaction.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
For the year ended December 31, 1997, RainTree recorded a net loss of $47.2
million, or $7.41 per share, compared to a net loss of $23.4 million, or $5.01
per share, for 1996. Loss before income taxes amounted to $49.7 million in 1997
compared to $31.8 million in 1996. In 1997, the Company recorded impairment
losses and other charges related to the planned disposition of facilities in the
amount of $27.2 million compared to $3.9 million in 1996. The increased loss in
1997 is also attributable to interest expense, which increased from $5.8 million
in 1996 to $20.1 million in 1997, and depreciation and amortization expense,
which increased from $4.6 million in 1996 to $10.0 million in 1997.
Revenues. Total operating revenues increased by 50.9% to $224.4 million in
1997 from $148.7 million in 1996. The increase is primarily due to revenues from
patient services, which increased from $146.4 million in 1996 to $222.1 million
in 1997. Patient days increased from 1.2 million in 1996 to 1.5 million in 1997.
Of the increase in net patient service revenues, approximately $44.9 million is
attributable to 1996 long-term care facility acquisitions, including the
Signature acquisition on October 31, 1996, net of a $5.9 million decrease
attributable to the disposition of three nursing facilities on March 1, 1997.
The growth of the pharmacy and therapy companies accounted for an increase in
revenues of approximately $23.3 million. The balance of the increase in revenues
was produced by nursing and assisted living facility operations, which achieved
increases in quality mix and average occupancy in 1997 compared to 1996.
In the 1997 fourth quarter, RainTree was informed by its Medicare fiscal
intermediary that it is challenging RainTree's reimbursement for certain therapy
services provided at RainTree nursing facilities by Sunbelt. Although RainTree
intends to vigorously pursue reimbursement of the challenged items, the Company
recorded a reduction of $4.6 million in revenues in the 1997 fourth quarter due
to this related-party issue. The Company also recorded other potential Medicare
audit adjustments of $1.2 million in the fourth quarter. See
"Business -- Government Regulation -- The Medicare Program" and "-- Risks and
Uncertainties -- Reliance on Reimbursement from Government Sources".
Wages and related. Wages and related expenses increased 35.3% from $85.8
million in 1996 to $116.1 million in 1997. As a percentage of revenues, wages
and related expenses decreased from 57.7% in 1996 to 51.8% in 1997. The dollar
increase is due primarily to the increase in the number of facilities operated
and the growth of RainTree's ancillary companies. The percentage decrease is due
primarily to cost controls in the nursing facilities.
Other operating. Other operating expenses increased 30.6% from $64.8
million in 1996 to $84.6 million in 1997. The increase is due primarily to an
increase in the number of facilities operated. Other operating expenses as a
percentage of revenues decreased to 37.7% in 1997 from 43.6% in 1996 due in part
to the Company's cost containment efforts. In addition, the 1996 period included
the following expenses which did not recur in 1997, resulting in decreases from
1996 to 1997 in: (i) legal and accounting fees, $1.1 million; (ii) fines and
penalties, $1.6 million; (iii) gross receipts taxes, $3.6 million; and (iv) loan
fees and bond issue costs, $840,000. Bad debt expense decreased by $703,000 in
1997.
31
<PAGE> 34
Rent. Rent expense increased 2.9% from $15.7 million in 1996 to $16.1
million in 1997. Rent expense decreased as a percentage of revenues from 10.5%
in 1996 to 7.2% in 1997. The dollar increase is due primarily to the increase in
the number of leased facilities operated and rent escalations, offset in part by
the disposition of four facilities in March 1997. The percentage decrease is due
to (i) a higher percentage of owned facilities to total facilities in 1997 than
in 1996 and (ii) the revenue growth of the Company's therapy, laboratory and
pharmacy companies which, in the aggregate, recorded rent expense amounting to
less than 1% of revenues in the 1997 period.
Interest. Interest expense amounted to $20.1 million in 1997 compared to
$5.8 million in 1996. The increase is primarily the result of debt incurred and
assumed in connection with acquisitions, including the $100.0 million of 12 1/4%
Senior Notes issued on October 31, 1996 and the $20.0 million of 13% Senior
Notes on December 1, 1997, as well as increases in borrowings for working
capital. Interest expense as a percentage of revenues increased to 8.9% in 1997
from 3.9% in 1996.
Depreciation and amortization. Depreciation and amortization expense
increased from $4.6 million in 1996 to $10.0 million in 1997. These increases
are 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 from
Signature on October 31, 1996. Depreciation and amortization expense as a
percentage of revenues was 3.1% in 1996 and 4.4% in 1997.
Impairment losses and other charges. In the third quarter of 1996,
RainTree announced the planned disposition of eight nursing facilities. Of
these, one was closed in June 1996 and three others, which had incurred
operating losses since the Company had acquired them in August 1995, were
disposed of in March 1997. As of December 31, 1997, additional facilities were
identified for disposition, and in 1998 the Company filed for bankruptcy.
Consequently, as of December 31, 1996 and 1997, RainTree evaluated its long-
lived assets, including property and equipment, goodwill, lease operating rights
and other intangible assets, for impairment in accordance with SFAS No. 121.
RainTree estimated the undiscounted net cash flows from all business units and
determined that the carrying value of certain the Company's long-lived assets
exceeded such undiscounted cash flows. Accordingly, RainTree then compared the
fair value of the assets based on the present value of the estimated future cash
flows for the facilities with the carrying value. The future cash flows were
estimated based on: (i) the remaining weighted average useful lives of the
assets; (ii) earnings history; (iii) a discount rate commensurate with the risks
involved and market conditions; and (iv) assumptions reflecting internal
operating plans and strategies. RainTree determined that the fair value of
certain assets was less than the carrying value and, accordingly, recorded a
provision for impairment losses in the amount of $3.9 million in 1996 and $27.2
million in 1997
Income tax benefit. RainTree recorded income tax benefits of $2.5 million
in 1997 and $8.4 million in 1996. The effective rate of 5.0% in 1997 is the
result of a valuation allowance established against the Company's net operating
loss carryforward benefits. SFAS No. 109, requires that a valuation allowance be
recorded against tax assets that are not likely to be realized. The Company has
determined that its net operating loss carryforwards amounting to $46.5 million
are not likely to be realized in future periods. Specifically, the Internal
Revenue Service Code provides that, in a Chapter 11 bankruptcy case, income
normally arising from the discharge of indebtedness is excluded from taxable
income. However, to the extent that income from discharge of indebtedness is
excluded from income, taxpayers must reduce specified tax attributes, which
include net operating losses. The Company anticipates that, in connection with
the implementation of the Plan, its net operating losses will be substantially
reduced as a result of the restructuring of its debt obligations. Therefore, a
valuation allowance has been established against the full amount of the
Company's net operating loss carryforward benefits.
The effective tax rate of 26.3% in 1996 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 purposes; and (iii) the
valuation allowance established against deferred tax assets. The Company
recorded a valuation allowance at December 31, 1996 amounting to $1.5 million
against tax benefits arising from net operating losses and depreciation of
certain of the Company's subsidiaries. The net operating losses of these
particular subsidiaries arose prior to the
32
<PAGE> 35
subsidiaries' acquisition by RainTree, and must be offset by taxable income of
the same companies. The valuation allowance was established due to the
uncertainty of the ultimate realization of these tax benefits based upon past
performance and expiration dates.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Provided by Operating Activities
Net cash provided by the Company's long-term care and ancillary company
operations amounted to approximately $2.0 million in 1998. This cash was
generated in spite of the operating loss recorded by RainTree and is due
primarily to an increase in accounts payable and accrued expenses, including
those subject to compromise.
Gross accounts receivable decreased approximately $8.0 million from
December 31, 1997 to December 31, 1998, primarily in connection with facility
dispositions. During this same period, the allowance for doubtful accounts
increased by $2.2 million. See "-- Results of Operations". RainTree anticipates
that its allowance for doubtful accounts may continue to fluctuate in the future
and will depend, in large part, on the mix of revenues, as well as the timing of
payments by private, third party and governmental payors. While the Company
believes that the allowance for doubtful accounts is adequate at December 31,
1998, if the Company is not successful in collecting its accounts receivable on
a timely basis, the Company will be required to further increase its provision
for doubtful accounts.
Cash Flows from Investing and Financing Activities
During the bankruptcy proceedings, RainTree financed its working capital
needs out of its operating cash flows and under the HCFP DIP Facility, an $11
million accounts receivable-backed revolving credit facility. Interest on the
HCFP DIP Facility accrued at the prime rate plus 3.0% (10.75% at December 31,
1998). As of December 31, 1998, borrowings under the HCFP DIP Facility amounted
to approximately $7.0 million. On the Effective Date, the HCFP DIP Facility was
replaced partially with a new $7 million revolving line of credit from Health
Partners (the "First Line"). Interest on amounts outstanding under the First
Line accrues at the prime rate plus 0.85%. As of March 31, 1999, borrowings
outstanding under the First Line totaled approximately $3.0 million, which based
on the level of eligible accounts receivable, was the maximum amount which could
be borrowed at that time. As the level of eligible accounts receivable
increases, the Company anticipates the amount available for borrowing under the
First Line to increase. The Company is in the process of negotiating with Health
Partners with respect to another $7 million line of credit (the "Second Line").
Total combined borrowings under the First Line and Second Line cannot exceed $12
million. Availability under the Second Line will be subject to the Company
having met certain requirements, including sufficient eligible accounts
receivable and certain financial covenants contained in the Omega Master Lease.
Although the Company believes that the Second Line will close shortly, there can
be no assurance that the Second Line will be obtained on terms acceptable to the
Company. The failure of the Company to obtain the Second Line could have a
material adverse effect on the Company.
At December 31, 1998, RainTree had cash and cash equivalents amounting to
$16.9 million compared to $5.3 million at December 31, 1997. The cash balance at
December 31, 1998 includes proceeds from the Sale Leaseback in the amount of
$13.0 million, which was held in escrow until the Effective Date. This cash was
used to settle bankruptcy claims and for working capital. See
"-- Reorganization".
Net cash used in investing activities in 1998 amounted to $7.8 million in
1998. In connection with the Sale Leaseback, RainTree exercised its option to
purchase The Arbors Health Care Center for $3.2 million. Routine capital
expenditures amounted to approximately $3.0 million and approximately $1.6
million was expended for lease and insurance deposits.
Net cash provided by financing activities amounted to approximately $17.4
million in 1998, primarily as a result of the Sale Leaseback. The Sale Leaseback
was accounted for as a financing transaction. Accordingly, RainTree recorded a
lease financing obligation amounting to $38.2 million, which represents the
price of the facilities sold to Omega.
33
<PAGE> 36
At December 31, 1998, RainTree had approximately $190.8 million in total
debt and lease financing obligations. When RainTree completes the implementation
of the Plan, its debt and lease financing obligations are estimated to be
approximately $71.4 million, in addition to borrowings under its revolving line
of credit. The Company also has aggregate minimum rent obligations of
approximately $137.9 million (subject to certain increases) during the remainder
of the initial terms and first renewal periods under its operating leases.
The terms of certain of RainTree's debt and lease obligations require the
Company to meet certain financial and reporting covenants. The terms of the
Omega Master Lease require that RainTree maintain specified operating ratios,
levels of working capital and net worth. The Indenture for the Senior Secured
Notes includes 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. For example, should RainTree sell collateral
securing the Senior Secured Notes, any cash proceeds from such sale must be used
to redeem Senior Secured Notes. Any cash proceeds received from the proposed
sale of Sunbelt assets would be used for this purpose.
The Company's future cash requirements and cash flow expectations are
closely related to the implementation of its restructuring. The Company
generally expects to meet its near future financing needs for the coming fiscal
year principally through its revolving line of credit, although the failure to
enter into the Second Line could have a material adverse effect on the Company.
Inflation. RainTree 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 lags behind such increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements are presented beginning on page F-1 of this Report and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In March 1997, RainTree's board of directors created a three-person
executive committee (the "Executive Committee") comprised of Messrs. Whitehead,
Lynch and Kremser (acting as Chair of the Executive Committee). The Executive
Committee exercised all of the functions of the board of directors until
February 1998, at which time a Special Restructuring Committee of the board was
created to deal solely with restructuring issues facing RainTree. The Special
Restructuring Committee consisted of Michael A. Jeffries, Clayton Kloehr and Nir
E. Margalit and was terminated when RainTree filed for bankruptcy in May 1998.
Messrs. Whitehead and Kremser remained as directors and members of the Executive
Committee until their resignations from all such positions on May 29, 1998. The
duties of the Executive Committee and the Special Restructuring Committee have
been assumed by the board of directors.
Tyrrell L. Garth was a director of RainTree from August 1995 until his
resignation on August 6, 1998. John T. Casey served as a director from August
1995 until his resignation on August 8, 1998. John T. Lynch, Jr. was a director
from June 1992 until his resignation on December 22, 1998. Mark W. White served
as a director from August 1995 until his resignation on February 16, 1999. Jock
Patton was a director from August 14, 1998 until his resignation on March 1,
1999. Donald D. Finney served as a director from September 1, 1998 until
December 2, 1998, when he resigned. James A. Brown was a director from September
25, 1998 until his resignation on March 1, 1999.
34
<PAGE> 37
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of April 9, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael A. Jeffries.................. 48 President and Chief Executive Officer, Director
Jimmy L. Fields...................... 48 Executive Vice President and Chief Financial Officer
Nir E. Margalit...................... 41 Executive Vice President, General Counsel and
Secretary
Terry Troxell........................ 48 Executive Vice President, Operations
Clayton Kloehr....................... 42 Senior Vice President and Treasurer
John S. Belisle(1)................... 51 Director
Martin Fenton(1)..................... 63 Director
A. Whitman Marchand(1)............... 62 Director
Mark Penn(1)......................... 45 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee and the Compensation Committee.
Michael A. Jeffries has served as President and Chief Executive Officer of
RainTree since September 8, 1997 and has been a director since October 1997.
From 1989 to August 1997, Mr. Jeffries was Senior Vice President and a Director
of Horizon/CMS Healthcare, a publicly traded long-term care company. From 1983
to 1989, Mr. Jeffries was employed by Beverly Enterprises, the nation's largest
long-term care company, most recently as Senior Vice President, Operations.
Prior thereto Mr. Jeffries was the Director of Operations and Chief Financial
Officer of Mid-America Nursing, a regional nursing home system in Kansas.
Jimmy L. Fields has served as Executive Vice President and Chief Financial
Officer since April 1, 1998. From 1995 to March 1998, he was the Chief Financial
Officer and Director of Health Care Operations for Fountains Retirement
Communities, Inc., a senior housing and long-term care company. From 1993 to
1995, Mr. Fields was the Chief Operating Officer of Retirement Management
Corporation, an operator of long-term care facilities. From 1983 to 1993, Mr.
Fields was an executive with various long-term care companies including The
Multicare Companies, Inc., where he served as Chief Financial Officer and Chief
Operations Officer. Mr. Fields is a certified public accountant.
Nir E. Margalit has served as Executive Vice President, General Counsel and
Secretary of RainTree since February 15, 1998. Mr. Margalit also served as a
director of RainTree from February 15, 1998 until March 4, 1999. From 1995 to
February 1998, when he joined RainTree, Mr. Margalit was Vice President, General
Counsel and Secretary of Starwood Hotels and Resorts Worldwide, Inc., a publicly
traded hotel paired share real estate investment trust. From 1993 to 1995, Mr.
Margalit was Vice President, Development and Special Counsel of Capstar Hotels.
Prior thereto Mr. Margalit was an attorney in private practice.
Terry Troxell has served as Executive Vice President, Operations since
October 1, 1998. Ms. Troxell joined RainTree when it commenced operations in
July 1992, as Director of Professional Services. In November 1994, she became
Vice President of Clinical Operations and in September 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. 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 Gerontological Clinical Specialist.
She sits on the American Health Care Association's National Board as Regional
Vice President and serves on its Advocacy Panel 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.
Clayton Kloehr has served as Senior Vice President and Treasurer since July
1, 1997 and was a director from February 1998 until March 4, 1999. From August
1995 through June 30, 1997, Mr. Kloehr was an independent financial consultant.
From February 1995 until August 1995, Mr. Kloehr was Treasurer of BritWill
Healthcare Company. During the 14 years prior thereto Mr. Kloehr was employed by
Placid Oil
35
<PAGE> 38
Company, a privately held oil exploration and production company based in
Dallas, Texas, most recently as Manager of Treasury Operations.
John S. Belisle has served as a director of RainTree since March 3, 1999.
Mr. Belisle heads Belisle & Associates, LLC, a consulting firm specializing in
corporate reorganization issues. From 1979 to 1996, Mr. Belisle was employed by
Chemical Bank, most recently as Managing Director and Chief Workout Officer. In
this capacity, Mr. Belisle managed Chemical Bank's problem loan portfolio, which
involved resolution of problem credits through debt restructuring, business
turnaround initiatives, bankruptcy plan negotiations, owning and operating
nonmonetary assets, and other activities.
Martin Fenton has served as a director of RainTree since March 3, 1999. Mr.
Fenton founded Senior Resource Group in 1988. Senior Resource Group builds,
markets and manages full service retirement communities in Arizona, California,
Nevada and Oregon. From 1958 to 1988, Mr. Fenton was employed by The Christiana
Companies, Inc., serving as president since 1968. Christiana was a publicly held
company primarily engaged in the planning and development of master planned
residential communities. Mr. Fenton is a director of American Mutual Fund and
AMCAP Fund. He is also a director/trustee of the Fixed Income Funds of the
American Funds Group as well as the funds that make up the American Variable
Insurance Series.
A. Whitman Marchand has served as a director of RainTree since March 3,
1999. Mr. Marchand retired from Bankers Trust Company in 1998 after serving the
bank for 38 years. Most recently, Mr. Marchand was the Managing Director and
Group Head of the bank's Special Loan Group. In this capacity, Mr. Marchand was
responsible for the bank's problem assets in North America. Mr. Marchand oversaw
the development and implementation of workout strategies related to the bank's
problem loans. He also served as President and Director of approximately 33
Bankers Trust special purpose corporations. Mr. Marchand is a Director of
Coleman Company, Inc., a publicly-held manufacturer and marketer of consumer
products for outdoor recreation and home hardware.
Mark Penn has served as a director of RainTree since March 3, 1999. In
1975, Mr. Penn founded Penn + Schoen Associates, Inc. (now Penn, Schoen &
Berland Associates, Inc.), a strategic research and analysis firm active in the
public, private and international sectors. Currently, Mr. Penn serves as the
pollster and strategist to the President and Vice President of the United
States. Mr. Penn's clients have also included numerous U.S. Senators,
Representatives, governors and other state and local officials. Mr. Penn is also
the President of Neuro Group, a retail site location analysis firm.
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, 1997, except that Messrs. Brown, Finney and Patton each filed a
delinquent Form 3 in 1998.
36
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, with respect to the years ended December
31, 1998, 1997 and 1996, compensation awarded to, earned by or paid to
RainTree's Chief Executive Officer and the four other most highly compensated
executive officers who were serving as executive officers at December 31, 1998.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
SALARY BONUS OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(2) COMPENSATION
- --------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Michael A. Jeffries................. 1998 $315,000 $ -- -- $ --
President, Chief Executive Officer 1997 99,148 -- 320,000 --
Paul G. Henderson(3)................ 1998 175,000 -- -- --
President, Sunbelt Therapy 1997 175,000 -- 4,000 --
Management Services, Inc. 1996 160,417 -- 10,000 --
L. Robert Oberfield(4).............. 1998 172,000 -- -- --
President, Quest Pharmacies, Inc. 1997 136,800 20,550 24,046 --
1996 136,800 -- 16,185 --
Clayton Kloehr...................... 1998 154,000 -- -- --
Senior Vice President and
Treasurer 1997 77,225 -- 25,000 28,998
Nir E. Margalit..................... 1998 148,750 -- 105,000 --
Executive Vice President, General
Counsel and Secretary
</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. All options were cancelled on the Effective Date of the Plan.
(3) Mr. Henderson resigned as President of Sunbelt and as an employee of the
Company effective April 1, 1999.
(4) Effective March 29, 1999, Mr. Oberfield is no longer an executive officer of
the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information about stock option grants during
the last fiscal year to the executive officers named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------
NAME (#)(1) YEAR(2) ($/SH) DATE 5% 10%
- ---- ---------- ----------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nir E. Margalit(4)....... 105,000 100.0% $0.531 02/15/01 $35,064 $88,859
</TABLE>
- ---------------
(1) Consists entirely of stock options.
(2) Based on total grants during the year of 105,000.
(3) 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%
37
<PAGE> 40
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 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.
(4) All stock options were cancelled on the Effective Date of the Plan.
FISCAL YEAR-END OPTION VALUE TABLE(1)
The following table sets forth information with respect to the 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 in 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED OPTIONS
AT FISCAL YEAR-END
(#) EXERCISABLE/
NAME UNEXERCISABLE(1)
- ---- -------------------
<S> <C>
Michael A. Jeffries......................................... 128,000/192,000
Paul G. Henderson........................................... 7,600/ 6,400
L. Robert Oberfield......................................... 9,619/ 14,427
Clayton Kloehr.............................................. 48,000/ 12,000
Nir E. Margalit............................................. 0/105,000
</TABLE>
- ---------------
(1) None of the options were in the money as of December 31, 1998, based upon
the closing bid price on that date of $0.01 as reported by Bloomberg. All
stock options were cancelled on the Effective Date of the Plan.
COMPENSATION OF DIRECTORS
The nonemployee directors of RainTree receive an annual retainer of
$25,000, plus $2,000 for each Board meeting and $1,500 for each Committee
meeting attended (in person or by telephone), and reimbursement of expenses. Mr.
Jeffries receives no additional compensation for serving on the Board of
Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
In October 1998, RainTree obtained Bankruptcy Court approval to adopt and
implement severance benefit packages for its key management personnel. Under the
terms of the severance agreements, Messrs. Jeffries, Margalit, Fields, Kloehr
and Ms. Troxell (together, "Senior Management") may each receive, subject to the
conditions set forth below, a severance package comprised of one year's salary
payable in the event of an involuntary termination without cause on or before
three months after the Effective Date of the Plan (the "Senior Severance
Packages"). The Board of Directors of RainTree will evaluate Senior Management
within three months after the Effective Date to determine: (i) which members of
Senior Management will be given employment contracts ("New Contracts") after the
Effective Date; (ii) the terms of those New Contracts; and (iii) the terms of
participation in post-Effective Date stock options and cash bonuses. The New
Contracts must be substantially the same form as the previously existing
employment contracts between RainTree and Senior Management, at substantially
similar compensation terms and contain not less than 18 months severance.
Under the terms of the Plan, the Board of Directors of RainTree, within
three months of the Effective Date, will allocate to Senior Management retained
under New Contracts options to purchase or otherwise receive up to 5% of the New
Common Stock (on a fully diluted basis). In addition, within six months of the
Effective Date, Senior Management retained under New Contracts will be paid an
aggregate cash bonus of $250,000, with terms and conditions for such bonuses to
be set by the Board of Directors of RainTree. In
38
<PAGE> 41
addition to their Senior Severance Packages, RainTree will reimburse Mr.
Jeffries and Mr. Fields the closing costs for their homes in Albuquerque, New
Mexico and Tucson, Arizona, respectively, not to exceed $25,000 for Mr. Jeffries
and $30,000 for Mr. Fields (the "Closing Costs Reimbursement").
If any member of Senior Management declines to accept an offered New
Contract, that member may be terminated without a Senior Severance Package. Each
member of Senior Management has waived and released all other claims for
severance or other termination payments as may have existed before May 28, 1998
other than the Closing Costs Reimbursement. The terms of the Senior Severance
Packages supercede and replace, in their entirety, any pre-bankruptcy severance
or termination agreements or arrangements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
None.
The Compensation Committee currently consists of Messrs. Belisle, Marchand,
Penn and Fenton.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of RainTree Common Stock at April 9, 1999 with respect to each person
known to RainTree to own beneficially more than five percent of the outstanding
shares of RainTree Common Stock. As of April 9, 1999, none of RainTree's
directors or executive officers were beneficial owners of the Company's stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
IDENTITY OF STOCKHOLDER OR GROUP NUMBER PERCENT
- -------------------------------- --------- -------
<S> <C> <C>
BritWill Investments Company, Ltd.(2)....................... 659,369 8.7%
25 Highland Park Village Suite 100-372
Dallas, Texas 75205
Saulkeld & Co............................................... 515,940 6.8%
c/o Bankers Trust Company
16 Wall Street, 4th Floor, Window #41
New York, New York 10015
Bank of New York............................................ 2,721,311 35.8%
925 Patterson Plank Road
Secaucus, NJ 07094
Chase Manhattan Bank........................................ 2,413,669 31.8%
4 New York Plaza, 13th Floor
New York, NY 10004
Bear, Stearns Securities Corp............................... 593,106 7.8%
One Metrotech Center North Fourth Floor
Brooklyn, NY 11201-3862
State Street Bank and Trust Co.............................. 505,885 6.7%
Global Corp Action Department JAB5W
P.O. Box 1631
Boston, MA 02105-1631
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. 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 92,354 shares issued to UNHC Real Estate Holdings, Inc. and 567,015
shares issued to BritWill Investments Company, Ltd. These entities are
affiliates of Mr. Whitehead.
39
<PAGE> 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
When RainTree filed for bankruptcy, it had significant debt obligations
payable to Messrs. Kremser, Whitehead and Henderson and their affiliates. The
settlement of the claims under the terms of the Plan are as described in Item 7,
"Management Discussion and Analysis of Financial Condition and Results of
Operations".
Mr. Oberfield serves as the president and is the minority shareholder of
RainTree's Quest subsidiary. The Shareholders Agreement between Mr. Oberfield
and the Company contains a put and call feature annually whereby, beginning May
1, 1998 and each May thereafter, RainTree may require Mr. Oberfield to sell his
stock in the subsidiary (the "Quest Stock") to RainTree, or Mr. Oberfield may
require RainTree to purchase his Quest Stock based on a defined formula.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following consolidated financial statements of RainTree Healthcare
Corporation and subsidiaries are included in Item 8:
1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1998, 1997 and 1996...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
Schedule II Valuation and Qualifying Accounts............... S-1
</TABLE>
All other schedules are omitted because they are not applicable or
required.
3. EXHIBITS
<TABLE>
<C> <S>
2.1 Disclosure Statement in Support of Debtors' Joint Plan of
Reorganization Dated August 10, 1998 and Debtors' Joint Plan
of Reorganization Dated August 10 (incorporated by reference
to Exhibit 99.1 to Form 8-K filed on August 13, 1998)
2.2 Disclosure Statement in Support of Debtors' First Amended
Joint Plan of Reorganization Dated October 15, 1998 and
Debtors' First Amended Joint Plan of Reorganization Dated
October 15, 1998 (incorporated by reference to Exhibit 2.1
to Form 10-K filed on November 4, 1998)
3.1 Certificate of Incorporation of RainTree Healthcare
Corporation, as amended and restated (incorporated by
reference to Exhibit 2 of Amendment No. 1 to the Form 8-A
filed on April 8, 1999)
3.2 Bylaws of RainTree Healthcare Corporation, as amended and
restated (incorporated by reference to Exhibit 3 to
Amendment No. 1 to the Form 8-A filed on April 8, 1999)
4.1 Indenture dated as of January 31, 1999, among RainTree
Healthcare Corporation, the Guarantors and Norwest Bank
Minnesota, National Association, as Trustee
</TABLE>
40
<PAGE> 43
<TABLE>
<C> <S>
10.1 Omega New Master Lease dated December 31, 1998 among Omega
Healthcare Investors, Inc. and Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.2 First Amendment to Omega New Master Lease, dated as of
February 1, 1999, among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments I, Inc.,
BritWill Investments-II, Inc., Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.3 Revolving Credit Note dated February 8, 1999, among RainTree
Healthcare Corporation, Sunquest SPC, Inc., Safford Care,
Inc. Douglas Manor, Inc., Cornerstone Care, Inc. and
Arkansas, Inc., and HCFP Funding, Inc.
10.4 Loan and Security Agreement dated February 8, 1999, among
RainTree Healthcare Corporation, Sunquest SPC, Inc., Safford
Care, Inc. Douglas Manor, Inc., Cornerstone Care, Inc. and
Arkansas, Inc., and HCFP Funding, Inc.
10.5 Second Amendment To Omega New Master Lease, dated as of
February 2, 1999 among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments-I, Inc.,
BritWill Investments-II, Inc., Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.6 First Amendment To Omega New Master Lease Guarantee, dated
as of February 2, 1999 among RainTree Healthcare
Corporation, Signature Health Care Corporation, BritWill
HealthCare Company, BritWill Investments-I, Inc., Cedar
Care, Inc., and Sherwood HealthCare Corporation in favor of
Omega Healthcare Investors, Inc.
10.7 First Amendment To Security Agreement, dated as of February
1, 1999 among Omega Healthcare Investors, Inc. and BritWill
Indiana Partnership as successor in interest to BritWill
Investments-I, Inc.
10.8 Amended and Restated Security Agreement, dated as of
February 2, 1999 among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments-II, Inc.,
Amberwood Court, Inc., The Arbors Health Care Center, Inc.,
Brookshire House, Inc., Christopher Nursing Center, Inc.,
Los Arcos, Inc., Pueblo Norte, Inc., and Rio Verde Nursing
Center, Inc.
10.9 Indiana Returned Facilities Agreement, dated as of February
1, 1999 among Omega Healthcare Investors, Inc. and BritWill
Indiana Partnership
10.10 Indiana Returned Facility Note, dated as of January 31, 1999
among Omega Healthcare Investors, Inc. and BritWill Indiana
Partnership
10.11 Indiana Returned Facility Note Guarantee, dated as of
January 31, 1999 among RainTree Healthcare, BritWill
HealthCare Company and Omega Healthcare Investors, Inc.
10.12 Indiana Returned Facilities Interim Management Agreement,
dated as of February 1, 1999 by and between RainTree
Healthcare Corporation and Omega Healthcare Investors, Inc.
10.13 Amended Pledge Agreement, dated as of February 2, 1999 by
and between BritWill HealthCare Company and Omega Healthcare
Investors, Inc.
10.14 Second Amended and Restated Pledge Agreement, dated as of
February 2, 1999 by and between BritWill Investments-I, Inc.
and Omega Healthcare Investors, Inc.
10.15 Promissory Note dated as of January 31, 1999 among RainTree
Healthcare Corporation, American Professional Holding, Inc.,
Ampro Medical Services, Inc., Gamma Laboratories, Inc.,
Memphis Clinical Laboratory, Inc., Quest Pharmacies, Inc.,
and David Kremser, Bernice Kremser, Holly Kremser, Michael
Kremser, Stanley Kremser and Elk Meadows Investments, L.L.C.
</TABLE>
41
<PAGE> 44
<TABLE>
<C> <S>
10.16 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)
10.17 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)
10.18 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)
10.19 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)
10.20 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)
10.21 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)
10.22 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)
10.23 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)
10.24 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)
10.25 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)
10.26 Lease for Homestead of McKinney dated as of July 1, 1996
between Westminister Healthcare, Inc. and BritWill
Investments-II, Inc. (incorporated by reference to Exhibit
10.92 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996)
10.27 Security Agreement effective as of February 1, 1996 by among
RainTree 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)
10.28 Lease dated as of June 13, 1995, between AHP of Colorado,
Inc. and Arkansas, Inc. (incorporated by reference to
Exhibit 10.121 to the Registration Statement on Form S-4
filed on July 3, 1997, File No. 333-30793)
10.29 Lease dated as of June 13, 1995, between AHP of Colorado,
Inc. and Cornerstone Care, Inc. (incorporated by reference
to Exhibit 10.122 to the Registration Statement on Form S-4
filed on July 3, 1997, File No. 333-30793)
10.30 Lease dated as of July 28, 1995, between American Health
Properties of Arizona, Inc. and Safford Care, Inc.
(incorporated by reference to Exhibit 10.123 to the
Registration Statement on Form S-4 filed on July 3, 1997,
File No. 333-30793)
10.31 Lease dated as of July 28, 1995, between American Health
Properties of Arizona, Inc. and Douglas Manor, Inc.
(incorporated by reference to Exhibit 10.124 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996)
10.32 [Intentionally Omitted]
</TABLE>
42
<PAGE> 45
<TABLE>
<C> <S>
10.33 [Intentionally Omitted]
10.34 [Intentionally Omitted]
10.35 [Intentionally Omitted]
10.36 [Intentionally Omitted]
10.37 BritWill Acquisition Promissory Note A dated as of January 31, 1999, among RainTree Healthcare Corporation
and BritWill Investments Company, Ltd.
10.38 BritWill Acquisition Promissory Note B dated as of January 31, 1999, among RainTree Healthcare Corporation
and UNHC Real Estate Holdings, Ltd.
10.39 Pledge Agreement effective January 31, 1999, among RainTree Healthcare Corporation and Norwest Bank
Minnesota, National Association
10.40 Registration Rights Agreement dated as of January 31, 1999, among RainTree Healthcare Corporation and
Morgan Stanley Dean Witter High Yield Securities, Inc., Morgan Stanley Dean Witter Diversified Income
Fund, Morgan Stanley Dean Witter Variable Investment Series--High Yield Portfolio, High Income Advantage
Trust II, High Income Advantage Trust, High Income Advantage Trust III, Morgan Stanley Dean Witter Select
Dimensions Investment Series--The Diversified Income Portfolio and Capital Research and Management Company
10.41 Security Agreement effective January 31, 1999 by and between Quest Pharmacies, Inc., Sunbelt Therapy
Management Services, Inc. (Arizona), Decatur Sports Fit & Wellness Center, Inc., Therapy Health Systems,
Inc., Henderson & Associates Rehabilitation, Inc., Sunbelt Therapy Management Services, Inc. (Alabama),
RainTree Healthcare Corporation and Norwest Bank Minnesota, National Association
10.42 Security Agreement dated as of January 31, 1999 by and between American Professional Holding, Inc. and
David Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.43 Stock Pledge Agreement (American Professional Holding, Inc.) dated January 31, 1999 by and between
RainTree Healthcare Corporation and David Kremser, Bernice Kremser, Holly Kremser, Michael Kremser,
Stanley Kremser and Elk Meadows Investments, L.L.C.
10.44 Security Agreement dated as of January 31, 1999 by and between Ampro Medical Services, Inc. and David
Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and Elk Meadows Investments,
L.L.C.
10.45 Stock Pledge Agreement (Ampro Medical Services, Inc.) dated January 31, 1999 by and between American
Professional Holding, Inc. and David Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley
Kremser and Elk Meadows Investments, L.L.C.
10.46 Security Agreement dated as of January 31, 1999 by and between Gamma Laboratories, Inc. and David Kremser,
Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and Elk Meadows Investments, L.L.C.
10.47 Stock Pledge Agreement (Gamma Laboratories, Inc.) dated January 31, 1999 by and between American
Professional Holding, Inc. and David Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley
Kremser and Elk Meadows Investments, L.L.C.
10.48 Security Agreement dated as of January 31, 1999 by and between Memphis Clinical Laboratory, Inc. and David
Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and Elk Meadows Investments,
L.L.C.
10.49 Stock Pledge Agreement (Memphis Clinical Laboratory, Inc.) dated January 31, 1999 by and between RainTree
Healthcare Corporation and David Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser
and Elk Meadows Investments, L.L.C.
10.50 Security Agreement dated as of January 29, 1999 by and between Quest Pharmacies, Inc. and David Kremser,
Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and Elk Meadows Investments, L.L.C.
</TABLE>
43
<PAGE> 46
<TABLE>
<C> <S>
10.51 Stock Pledge Agreement (Quest Pharmacies, Inc.) dated January 31, 1999 by and between
RainTree Healthcare Corporation and David Kremser, Bernice Kremser, Holly Kremser, Michael
Kremser, Stanley Kremser and Elk Meadows Investments, L.L.C.
10.52 Sharing Agreement dated January 31, 1999, by and between Northwest Bank Minnesota,
National Association, RainTree Healthcare Corporation, BritWill Healthcare Company,
BritWill Indiana Partnership and Omega Healthcare Investors, Inc.
21 List of subsidiaries (incorporated by reference to Exhibit 21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997)
27 Financial Data Schedule (included only in the EDGAR filing)
</TABLE>
(b) Reports on Form 8-K
None
44
<PAGE> 47
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.
RainTree Healthcare Corporation
By: /s/ MICHAEL A. JEFFRIES
------------------------------------
Michael A. Jeffries
President and Chief Executive
Officer
Date: April 15, 1999
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/ MICHAEL A. JEFFRIES President and Chief Executive April 15, 1999
- --------------------------------------------------- Officer, Director (principal
Michael A. Jeffries executive officer)
/s/ JIMMY L. FIELDS Executive Vice President and Chief April 15, 1999
- --------------------------------------------------- Financial Officer (principal
Jimmy L. Fields financial officer)
/s/ WARREN K. JERREMS Vice President, Controller, Chief April 15, 1999
- --------------------------------------------------- Accounting Officer (principal
Warren K. Jerrems accounting officer)
/s/ MARK PENN Director April 15, 1999
- ---------------------------------------------------
Mark Penn
/s/ JOHN S. BELISLE Director April 15, 1999
- ---------------------------------------------------
John S. Belisle
/s/ A. WHITMAN MARCHAND Director April 15, 1999
- ---------------------------------------------------
A. Whitman Marchand
/s/ MARTIN FENTON Director April 15, 1999
- ---------------------------------------------------
Martin Fenton
</TABLE>
45
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1998, 1997 and 1996...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
2. FINANCIAL STATEMENT SCHEDULES
Schedule II Valuation and Qualifying Accounts............... S-1
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
RainTree Healthcare Corporation
We have audited the accompanying consolidated balance sheets of RainTree
Healthcare Corporation and subsidiaries (formerly Unison HealthCare Corporation)
as of December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These
consolidated financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule 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, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of RainTree Healthcare Corporation and subsidiaries as of
December 31, 1998 and 1997, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. Also, in our
opinion, based on our audits, the related financial statement schedule, as it
relates to December 31, 1998 and 1997 and each of the three years in the period
ended December 31, 1998, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
The accompanying financial statements have been prepared assuming that
RainTree Healthcare Corporation and subsidiaries will continue as a going
concern. As shown in the consolidated financial statements, RainTree HealthCare
Corporation incurred substantial losses in each of the past three years. In
addition, on May 28, 1998, RainTree Healthcare Corporation filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. These
matters raise substantial doubt about RainTree Healthcare Corporation's ability
to continue as a going concern. During 1998, RainTree Healthcare Corporation and
its subsidiaries were operating as debtors-in-possession under the jurisdiction
of the Chapter 11 Trustee appointed by the United States Bankruptcy Court. The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classifications of liabilities that might result from the outcome of these
uncertainties.
ERNST & YOUNG LLP
Phoenix, Arizona
March 26, 1999
F-2
<PAGE> 50
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- --------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS (Note 2)
Current assets:
Cash and cash equivalents................................. $ 16,863 $ 5,295
Accounts receivable....................................... 22,621 32,855
Prepaid expenses and other current assets................. 8,670 7,768
--------- --------
Total current assets................................... 48,154 45,918
Property and equipment, net................................. 29,227 25,588
Lease operating rights and other intangible assets, net..... 58,960 84,487
Goodwill, net............................................... 24,816 28,357
Security deposits........................................... 9,383 7,817
--------- --------
$ 170,540 $192,167
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 10,815 $ 7,592
Accrued expenses.......................................... 15,175 24,617
Current portion of notes payable and long-term debt due to
related parties........................................ -- 20,500
Current portion of other notes payable and long-term
debt................................................... 1,012 144,277
--------- --------
Total current liabilities.............................. 27,002 196,986
Liabilities subject to compromise........................... 166,870 --
Other notes payable and long-term debt...................... 7,132 8,020
Lease financing obligation.................................. 38,200 --
Deferred taxes.............................................. 5,456 16,013
Leasehold liability, net.................................... 4,058 4,246
Other liabilities........................................... 899 936
--------- --------
Total liabilities...................................... 249,617 226,201
Stockholders' deficit:
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; 6,422,096 shares issued and outstanding in 1998
and 1997............................................... 5 5
Additional paid-in capital................................ 36,211 36,211
Accumulated deficit....................................... (115,293) (70,250)
--------- --------
Net stockholders' deficit.............................. (79,077) (34,034)
--------- --------
$ 170,540 $192,167
========= ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 51
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS, EXCEPT COMMON SHARES AND
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues:
Net patient service revenues.............................. $ 182,537 $ 221,072 $ 146,379
Other operating revenues.................................. 1,494 3,294 2,295
--------- --------- ---------
Total operating revenues............................... 184,031 224,366 148,674
Expenses:
Wages and related......................................... 99,668 116,137 85,789
Other operating........................................... 73,528 84,566 64,771
Rent...................................................... 14,644 16,119 15,658
Interest (excludes contractual interest not accrued on
prepetition debt of $10,961 in 1998)................... 12,140 20,076 5,824
Depreciation and amortization............................. 8,970 9,974 4,561
Impairment losses and other charges....................... 23,385 27,185 3,865
--------- --------- ---------
Total expenses......................................... 232,335 274,057 180,468
--------- --------- ---------
Loss from operations........................................ (48,304) (49,691) (31,794)
Reorganization expenses..................................... 5,487 -- --
--------- --------- ---------
Loss before income taxes and extraordinary charge........... (53,791) (49,691) (31,794)
Income tax benefit.......................................... (9,842) (2,480) (8,356)
--------- --------- ---------
Loss before extraordinary charge............................ (43,949) (47,211) (23,438)
Extraordinary charge -- early extinguishment of debt........ 1,094 -- --
--------- --------- ---------
Net loss.................................................... $ (45,043) $ (47,211) $ (23,438)
========= ========= =========
Net loss per share:
Loss before extraordinary charge.......................... $ (6.84) $ (7.41) $ (5.01)
Extraordinary charge -- early extinguishment of debt...... (0.17) -- --
--------- --------- ---------
Net loss............................................... $ (7.01) $ (7.41) $ (5.01)
========= ========= =========
Weighted average common shares used in per share
calculation............................................... 6,422,096 6,370,834 4,676,037
</TABLE>
See accompanying notes.
F-4
<PAGE> 52
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------ ADDITIONAL EARNINGS
NUMBER OF PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- ------ ---------- ------------ --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............ 4,213,748 $3 $20,501 $ 399 $ 20,903
Costs of initial public offering........ -- -- (93) -- (93)
Stock warrants exercised................ 178,503 -- -- -- --
Conversion of debenture................. 137,564 -- 1,714 -- 1,714
Common stock issued for acquisitions.... 1,537,376 2 12,701 -- 12,703
Stock options exercised................. 11,307 -- 102 -- 102
Tax benefit associated with exercise of
stock options......................... -- -- 11 -- 11
Repurchase of stock warrants............ -- -- (213) -- (213)
Net loss................................ -- -- -- (23,438) (23,438)
--------- -- ------- --------- --------
BALANCE AT DECEMBER 31, 1996............ 6,078,498 5 34,723 (23,039) 11,689
Common stock issued for acquisition..... 238,052 -- 685 -- 685
Conversion of Sunbelt notes payable..... 105,196 -- 800 -- 800
Stock options exercised................. 350 -- 3 -- 3
Net loss................................ -- -- -- (47,211) (47,211)
--------- -- ------- --------- --------
BALANCE AT DECEMBER 31, 1997............ 6,422,096 5 36,211 (70,250) (34,034)
Net loss................................ -- -- -- (45,043) (45,043)
--------- -- ------- --------- --------
BALANCE AT DECEMBER 31, 1998............ 6,422,096 $5 $36,211 $(115,293) $(79,077)
========= == ======= ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 53
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................. $(45,043) $(47,211) $(23,438)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Impairment losses and other charges.................... 23,385 27,185 3,865
Depreciation and amortization.......................... 8,970 9,974 4,561
Provision for doubtful accounts........................ 6,210 2,039 2,742
Change in deferred taxes............................... (10,934) (3,286) (9,238)
Minority interest expense.............................. 386 299 138
Leasehold liability amortization....................... (188) (188) (188)
Other charges and credits, net......................... 52 41 (69)
Changes in operating assets and liabilities, net of
acquisitions:
Net accounts receivable............................. 4,024 (8,263) (5,310)
Prepaids and other current assets................... (525) (136) 825
Accounts payable and accrued expenses............... 15,624 1,238 2,454
-------- -------- --------
Net cash provided by (used in) operating activities...... 1,961 (18,308) (23,658)
-------- -------- --------
INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements......... (2,965) (1,535) (3,587)
Increase in intangibles and other assets................. -- (205) (2,707)
Increase in lease and insurance deposits................. (1,566) (1,840) (1,204)
Acquisitions, net of cash acquired....................... (3,236) (659) (41,225)
-------- -------- --------
Net cash used in investing activities.................... (7,767) (4,239) (48,723)
-------- -------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in revolving line of credit...... (113) 7,117 (789)
Proceeds from sale leaseback transaction................. 38,200 -- --
Proceeds from long-term borrowings....................... -- 23,950 113,567
Payments on long-term borrowings......................... (19,615) (16,868) (24,808)
Repayment of other long-term liabilities................. -- -- (2,779)
Change in bank overdrafts................................ (19) (780) 3,043
Repurchase of stock warrants............................. -- -- (213)
Exercise of stock options................................ -- 3 102
Increase in deferred financing costs..................... (1,079) (2,989) (4,502)
-------- -------- --------
Net cash provided by financing activities................ 17,374 10,433 83,621
-------- -------- --------
Net increase (decrease) in cash..................... 11,568 (12,114) 11,240
Cash and cash equivalents at beginning of year........... 5,295 17,409 6,169
-------- -------- --------
Cash and cash equivalents at end of year................. $ 16,863 $ 5,295 $ 17,409
======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 54
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT COMMON SHARE AND PER SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS
RainTree Healthcare Corporation, ("RainTree" or the "Company") is a
provider of long-term and specialty healthcare services. At December 31, 1998,
RainTree operated 42 facilities, including long-term care and specialty care and
independent/assisted living facilities. RainTree's facilities are located in six
states, principally in the midwest and southwest regions of the United States.
RainTree also provides, either directly or through third-party contracts,
pharmaceutical services, rehabilitation therapy services, medical supplies and
laboratory testing, both to its facilities and to nonaffiliated entities.
On January 31, 1999, RainTree changed its name from Unison HealthCare
Corporation.
2. PLAN OF REORGANIZATION
Bankruptcy Proceedings
On January 7, 1998, three of RainTree's subsidiaries with operations in
Texas and Indiana filed voluntary petitions for reorganization under Chapter 11
of Title 11 ("Chapter 11") of the United States Code with the United States
Bankruptcy Court for the District of Arizona (the "Bankruptcy Court"). On May
28, 1998, RainTree and 29 of its other subsidiaries also filed for
reorganization under Chapter 11. In January 1999, the Bankruptcy Court confirmed
the Company's Plan of Reorganization (the "Plan") and on January 31, 1999, (the
"Effective Date"), RainTree emerged from bankruptcy.
During the Chapter 11 process, RainTree and its subsidiaries (the
"Debtors") operated their businesses and managed their properties as
debtors-in-possession under authority of the Bankruptcy Code. Under Chapter 11,
certain claims against the Debtors in existence prior to the filing of the
petitions for reorganization are stayed while the Debtors are in bankruptcy.
These claims are set forth in the December 31, 1998 balance sheet as
"liabilities subject to compromise". Additional claims may arise subsequent to
the filing date resulting from rejection of executory contracts, including
leases, and from the determination by the Bankruptcy Court (or agreed to by
parties in interest) of allowed claims for contingencies and other disputed
amounts. Claims secured against the Company's assets also are stayed, although
the holders of such claims have the right to move the Bankruptcy Court for
relief from the stay. Secured claims are secured primarily by liens on the
Debtors' property and equipment. In accordance with the American Institute of
Certified Public Accountants Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"),
interest on unsecured, prepetition obligations of the Debtors ceased to accrue
on the filing date.
The Company received approval from the Bankruptcy Court to pay or otherwise
honor certain of its prepetition obligations, including payables to vendors
deemed essential to the continued operation of RainTree's business ("Essential
Vendor Claims") and employee wages and benefits.
Liabilities subject to compromise consist of the following:
<TABLE>
<S> <C>
12 1/4% Senior Notes........................................ $100,000
13% Senior Notes............................................ 20,000
Notes payable and long-term debt............................ 24,495
Trade payables.............................................. 4,661
Accrued interest............................................ 11,486
Other....................................................... 6,228
--------
$166,870
========
</TABLE>
F-7
<PAGE> 55
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Implementing the Plan of Reorganization
The implementation of the Plan allowed RainTree to restructure its balance
sheet, significantly reduce its debt burden and dispose of unprofitable
facilities. Prior to the confirmation of the Plan, the Company reached agreement
with respect to its restructuring with its major creditors including, among
others:
- Omega Healthcare Investors, Inc. ("Omega"), from whom RainTree leases
long-term care facilities;
- The holders of $100,000 of 12 1/4% Senior Notes due 2006 (the "12 1/4%
Senior Notes") and $20,000 of 13% Senior Notes due 1999 (the "13% Senior
Notes");
- Health Care Financial Partners ("Health Partners"), who provided an
$11,000 accounts receivable-backed line of credit facility (the "HCFP DIP
Facility") for working capital during the Chapter 11 proceedings;
- Bruce H. Whitehead, a major stockholder and creditor of the Company and,
until May 29, 1998, the Chairman of RainTree's board of directors; and
- David A. Kremser, a major stockholder and creditor of the Company and,
until May 29, 1998, a director of RainTree.
Prior to the Effective Date, the Company leased six facilities from
BritWill Investments Texas, Ltd. ("BritWill Texas"), an affiliate of Mr.
Whitehead, which were subject to a mortgage in favor of Omega (the "BritWill
Texas Leases").
The major provisions of the Plan are as follows.
- All of RainTree's common stock was cancelled on the Effective Date. As
described below, RainTree will issue up to 8,000,000 new common shares
(the "New Common Stock"). RainTree will also issue up to $26,000 of new
debt securities (the "Senior Secured Notes") in satisfaction of
bankruptcy claims. The Senior Secured Notes bear interest at 11.0%, will
mature four years from the Effective Date, and are secured by the stock
and personal property of certain RainTree subsidiaries.
- On December 31, 1998, Omega purchased seven facilities owned and operated
by RainTree for a purchase price of $38,200. The facilities were then
leased back to RainTree (the "Sale Leaseback"). A portion of the proceeds
were used to (i) repay the mortgage note related to six of these
facilities amounting to approximately $19,335, including a prepayment
penalty (the "Mortgage Note") and (ii) exercise the Company's option to
purchase The Arbors Health Care Center for approximately $3,236. The
Arbors facility was included in the Sale Leaseback. The remaining
proceeds from the sale were held in escrow until the Effective Date, when
they were used to settle bankruptcy claims as provided for in the Plan
and described below. Omega received closing costs, financing fees and
reimbursement of expenses in the amount of $1,000. These seven facilities
and eleven other facilities leased from Omega and BritWill Texas were
combined into a single master lease (the "Omega Master Lease"). RainTree
realized no gain or loss on the Sale Leaseback, which was accounted for
as a financing transaction (Note 15).
- Six leased facilities were returned to Omega and three BritWill Texas
facilities that RainTree disposed of in March 1997 via a sublease
agreement are excluded from the Master Lease. In return, Omega received
$2,000 in cash, a seven-year, $3,000 promissory note bearing interest at
7.0% and a guarantee by RainTree that supersedes and replaces all
previous guarantees of BritWill Texas obligations. RainTree also paid to
Omega, in cash, prepetition rent payments and other obligations in the
amount of approximately $2,061.
F-8
<PAGE> 56
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- In settlement of approximately $15,811 of allowed claims, Mr. Whitehead
and affiliates (the "Whitehead Affiliates") received $541 in cash and
unsecured promissory notes totaling $1,530 and will receive Senior
Secured Notes amounting to $292 and approximately 729,000 shares of New
Common Stock. The promissory note bears interest at 9.0%, payable
quarterly, and the principal amount will be due and payable at the end of
four years.
- In settlement of approximately $5,370 of allowed claims, Mr. Kremser and
affiliates (the "Kremser Affiliates") received $541 in cash and a
promissory note amounting to $1,354. The promissory note bears interest
at 9.0%, payable quarterly, and the principal amount will be due and
payable at the end of five years.
- Convenience Claims, defined in the Plan as payables due to general
unsecured creditors amounting to one thousand dollars or less (or two
thousand dollars or less whose holders elect to reduce their claims to
one thousand dollars), were paid in cash. RainTree paid approximately
$520 to settle Convenience Claims. Essential Vendor Claims were paid in
cash in the aggregate amount of approximately $2,457.
- Trade Unsecured Claims are defined in the Plan as payables to other trade
vendors. RainTree is currently in the process of settling Trade Unsecured
Claims and other general unsecured claims. Each holder of a Trade
Unsecured Claim will receive, in cash, the lesser of 35% of the allowed
amount of the claim or a pro rata portion of $1,400, plus shares of New
Common Stock. The total amount of Trade Unsecured Claims was
approximately $3,400.
- All other general unsecured creditors will share pro rata in
approximately 91% of the New Common Stock and the Senior Secured Notes. A
subordination agreement related to the 13% Senior Notes resulted in a
reallocation among the holders of the 13% Senior Notes and those holders
of the 12 1/4% Senior Notes who had consented to a subordination
agreement (the "Consenting Noteholders"). As a result of this
reallocation, the holders of the 13% Senior Notes will receive Senior
Secured Notes equal to 100% of their allowed claims ($22,053) and the
Consenting Noteholders will receive only New Common Stock totaling
approximately 6,343,000 shares. The holders of the 12 1/4% Senior Notes
who did not consent to the subordination agreement will receive Senior
Secured Notes totaling $1,848 and approximately 522,000 shares of New
Common Stock. The aggregate amount of these general unsecured claims was
approximately $137,500.
- Secured claims included the Mortgage Note, the HCFP DIP Facility, claims
of Omega, property tax liabilities and other secured loans. Secured
claims were either: (i) paid in cash; (ii) the liability was continued in
accordance with its original terms after defaults, if any, were cured; or
(iii) the collateral securing such liability was returned to the creditor
in full satisfaction of the claim. The aggregate amount of secured claims
was approximately $34,700.
- The Company's stockholders will share pro rata in the issuance of
warrants to purchase approximately 400,000 shares of New Common Stock.
- On the Effective Date, RainTree obtained a new $12,000 line of credit
from Health Partners that replaced the HCFP DIP Facility. See Note 12.
Fresh Start Reporting (Unaudited)
In accordance with SOP 90-7, RainTree adopted fresh start reporting as of
the Effective Date. RainTree, with the assistance of its financial advisors,
determined its reorganization value, which represents the fair market value of
the Company before considering liabilities. Reorganization value is intended to
represent the amount a willing buyer would pay for the assets of RainTree
immediately after its emergence from Chapter 11. The reorganization value was
based on, among other things, discounted cash flows for the
F-9
<PAGE> 57
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reorganized Company over a 14-year period. The projected cash flows included
assumptions as to anticipated revenues, operating expenses and capital
expenditures. A discount rate of 16% was used, which reflects the uncertainty of
the cash flows, the general inherent risk of the long-term care industry, and
general business conditions.
Under fresh start reporting, the reorganization value of the Company has
been allocated to RainTree's assets and liabilities on a basis substantially
consistent with purchase accounting. The excess of the reorganization value over
the value of identifiable assets is reported as "reorganization value in excess
of amounts allocable to identifiable assets". All identifiable assets were
recorded at fair value, which approximated carrying value. The new Senior
Secured Notes and all other liabilities were recorded at fair value, which
approximated carrying value.
The adjustments made to give effect to the discharge of prepetition
liabilities and fresh-start reporting are as follows. The reorganized balance
sheet gives pro forma effect to New Common Stock and Senior Secured Notes yet to
be issued under the Plan.
<TABLE>
<CAPTION>
JANUARY 31, 1999
PRECONFIRMATION DEBT FRESH START REORGANIZED
BALANCE SHEET DISCHARGE ADJUSTMENTS BALANCE SHEET
---------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 17,308 $ (15,684)(a) $ -- $ 1,624
Accounts receivable, net............... 22,579 -- -- 22,579
Prepaid expenses and other current
assets.............................. 8,815 -- (5,465)(g) 3,350
--------- --------- -------- --------
Total current assets................ 48,702 (15,684) (5,465) 27,553
Property and equipment, net.............. 29,255 (3,117)(b) 23,500(h) 49,638
Lease operating rights and other
intangibles, net....................... 58,608 (4,728)(c) (52,858)(h) 1,022
Goodwill, net............................ 24,727 -- (24,727)(h) --
Security deposits........................ 9,675 (279)(d) -- 9,396
Reorganization value in excess of amounts
allocable to identifiable assets....... -- -- 47,997(h) 47,997
--------- --------- -------- --------
$ 170,967 $ (23,808) $(11,553) $135,606
========= ========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 11,087 $ -- $ -- $ 11,087
Accrued expenses....................... 16,319 5,957(e) -- 22,276
Current portion of long-term debt...... 1,012 (311)(e) -- 701
--------- --------- -------- --------
Total current liabilities........... 28,418 5,646 -- 34,064
Liabilities subject to compromise........ 166,870 (166,870)(e) -- --
Notes payable and long-term debt......... 8,144 24,307(a) -- 32,451
Lease financing obligation............... 38,200 -- -- 38,200
Deferred taxes........................... 5,465 -- 3,535(g) 9,000
Leasehold liability, net................. 4,058 -- (4,058)(h) --
Other liabilities........................ 897 -- -- 897
--------- --------- -------- --------
Total liabilities................... 252,052 (136,917) (523) 114,612
</TABLE>
F-10
<PAGE> 58
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 31, 1999
PRECONFIRMATION DEBT FRESH START REORGANIZED
BALANCE SHEET DISCHARGE ADJUSTMENTS BALANCE SHEET
---------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Stockholders' equity (deficit):
Common stock, Predecessor Company...... 5 -- (5)(i) --
Common stock, Reorganized Company...... -- 8(a) -- 8
Additional paid-in capital............. 36,211 20,986(a) (36,211)(i) 20,986
Retained earnings (accumulated
deficit)............................ (117,301) 92,115(f) 25,186(i) --
--------- --------- -------- --------
Net stockholders' equity
(deficit)......................... (81,085) 113,109 (11,030) 20,994
--------- --------- -------- --------
$ 170,967 $ (23,808) $(11,553) $135,606
========= ========= ======== ========
</TABLE>
- ---------------
(a) To record the settlement of bankruptcy claims through payment of cash,
issuance of Senior Secured Notes and issuance of New Common Stock.
(b) To reflect property and equipment returned to creditors in satisfaction of
bankruptcy claims.
(c) To record the write-off of deferred debt issue costs.
(d) To record adjustments to security deposits related to the Omega Master
Lease.
(e) To record the discharge or reclassification of prepetition obligations.
(f) To record the estimated gain on discharge of indebtedness.
(g) To record adjustment to deferred tax assets and liabilities.
(h) To record adjustments to reflect assets and liabilities at fair market
values and to record reorganization value in excess of amounts allocable to
identifiable assets.
(i) To record the cancellation of Predecessor Company common stock and
elimination of retained earnings.
In accordance with SOP 90-7, reorganization items are reported separately
in the consolidated statement of operations. Reorganization items are comprised
primarily of professional fees related to the bankruptcy and restructuring (Note
5).
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
RainTree and its subsidiaries. Significant intercompany transactions and
balances have been eliminated in consolidation.
Revenues and expenses related to the operations of acquired entities (Note
4) are included in RainTree's results of operations for periods subsequent to
the date of acquisition. The merger with American Professional Holding, Inc.
("Ampro") and Memphis Clinical Laboratory, Inc. ("Memphis") has been accounted
for as a pooling of interests. Accordingly, the consolidated financial
statements of RainTree include the accounts of Ampro and Memphis for all periods
presented.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments that might
result should the Company be unable to continue as a going concern. The recent
losses from operations and the related bankruptcy proceedings raise substantial
doubt about the Company's ability to continue as a going concern. The
appropriateness of using the going concern basis is dependent upon, among other
things, the Company's ability to achieve profitable operations
F-11
<PAGE> 59
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
after emerging from bankruptcy and the Company's ability to generate sufficient
cash from operations to meet its obligations.
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. Estimates
are used when accounting for, among other things, the collectibility of
receivables and third party settlements, depreciation and amortization, employee
benefit plans, taxes, contingencies and evaluation of impairment of long-lived
assets.
Net Operating Revenues
Revenues are recognized when services are provided and products are
delivered. RainTree'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.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. RainTree believes that it is
substantially in compliance with all applicable laws and regulations and is not
aware of any pending or threatened investigations involving allegations of
potential wrongdoing which would have a material impact on RainTree's
consolidated financial condition or results of operations. While no such
regulatory inquiries have been made, compliance with such laws and regulations
can be subject to future government review and interpretation as well as
significant regulatory action including fines, penalties and exclusion from the
Medicare and Medicaid programs.
The Company has submitted to the Health Care Financing Administration
("HCFA") various requests for exceptions to the Medicare established routine
cost limitations for reimbursement ("RCLs"). These exceptions are permitted
under the Medicare regulations to allow providers reimbursement for treating
higher acuity patients. As of December 31, 1998, approximately $5,048 of
receivables related to Medicare RCL exception revenues remain subject to audit
and final approval by the fiscal intermediary. Based on consultation with
outside reimbursement specialists, management believes 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
RainTree.
RainTree receives fees for the management of long-term care facilities on
behalf of the owners. Other operating revenues include management fees amounting
to $395, $1,725 and $1,200 in 1998, 1997 and 1996, respectively.
Provision for doubtful accounts is made when the related revenue is
recorded and is included in other operating expense. The provisions totaled
$6,210, $2,039 and $2,742 in 1998, 1997 and 1996, respectively. 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 $9,663 and $7,423 at December 31, 1998 and 1997, respectively.
F-12
<PAGE> 60
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Included in cash and cash equivalents at
December 31, 1998 is $12,996 that was held in escrow until the Effective Date of
the Plan (Note 2) and subsequently used to settle bankruptcy claims and for
working capital.
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. Major renewals or improvements
are capitalized, whereas ordinary maintenance and repairs are expensed as
incurred. Depreciation and amortization is computed using the straight-line
method for the lesser of the 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 have been recorded in connection with
the acquisitions of BritWill and Signature (Note 4) and represent the difference
between the aggregate consideration given for all of the acquired companies'
assets and the value of those assets which were identified and discretely valued
as defined by an independent valuation. Lease operating rights 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, the 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 (Note 2).
F-13
<PAGE> 61
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill resulting from various acquisitions is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION ------------------
PERIOD (YEARS) 1998 1997
-------------- ------- -------
<S> <C> <C> <C>
BritWill.......................................... 40 $ 7,000 $ 7,000
Pharmacies........................................ 20 1,402 1,402
Gamma Labs........................................ 15 1,087 1,087
Sunbelt........................................... 20 5,425 5,425
Signature......................................... 40 6,881 9,300
RehabWest......................................... 20 5,029 5,029
Spine Rehab....................................... 20 845 845
------- -------
27,669 30,088
Amortization...................................... (2,853) (1,731)
------- -------
$24,816 $28,357
======= =======
</TABLE>
Costs incurred in obtaining long-term financing are amortized on a
straight-line basis, which approximates the effective interest rate method, over
the terms of the related indebtedness. RainTree 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. The Company adopted 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 121"), on January 1,
1996. Under SFAS 121, an impairment loss is recognized if the sum of the
expected long-term cash flows is less than the carrying amount of the goodwill
and other assets being evaluated (Note 21).
Extraordinary Charges
Extraordinary charges represent prepayment penalties incurred on the early
extinguishment of debt (Note 12). As discussed in Note 17, RainTree has
established a full valuation reserve against its net operating loss carryforward
benefits. Therefore, no tax effect has been applied to the extraordinary charge.
Income Taxes
RainTree accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Deferred income taxes represent the impact of temporary differences
between the amount of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes.
Net Loss Per Share
Net loss per share is calculated by dividing net loss by the weighted
average number of common and dilutive equivalent shares outstanding.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 replaces the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings per share is computed
by dividing income available to common stockholders by the weighted average
number of common shares actually outstanding during the period. Diluted earnings
per share include the dilutive effect of options,
F-14
<PAGE> 62
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
warrants and convertible securities. RainTree's options, warrants and
convertible notes are not included in the calculation of net loss per share
because they are antidilutive.
Reclassifications
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 presentation.
4. ACQUISITIONS AND DISPOSITIONS
In August 1995, RainTree acquired BritWill Healthcare Company and
subsidiaries ("BritWill"), a long-term care company operating approximately 28
facilities located in Texas and Indiana (the "BritWill Acquisition").
Consideration for the BritWill Acquisition included: (i) a debenture that was
subsequently converted into 561,815 shares of RainTree common stock; (ii) a
combination of promissory notes and lump sum contingent payment obligations
totaling approximately $25,000; (iii) a monthly contingent payment obligation
that subsequently became a fixed obligation (the "Additional Payment
Obligation"); and (iv) indemnifications and guarantees by RainTree of certain
debts and obligations of BritWill. An affiliate of Mr. Whitehead was the
majority shareholder of BritWill. As of December 31, 1998, the remaining
obligation related to the BritWill Acquisition was the Additional Payment
Obligation amounting to $9,588, which is included in liabilities subject to
compromise in the consolidated balance sheet.
The BritWill Acquisition was accounted for as a purchase. The contingent
portions of the purchase price were added to lease operating rights when paid or
accrued. At December 31, 1998 and 1997, contingent payments and accruals
amounting to $19,523 had been added to lease operating rights.
Effective February 1, 1996, RainTree acquired 90% of the common stock of
Sunbelt Therapy Management Services, Inc. and subsidiaries ("Sunbelt"), paying
$800 in cash and issuing term notes and subordinated convertible debentures
totaling $2,800. The transaction was accounted for as a purchase. In November
1996, RainTree purchased the remaining 10% of Sunbelt effective February 1,
1996. The aggregate purchase price amounted to $2,127. Consideration for the
purchase was comprised of promissory notes in the aggregate amount of $1,876 and
27,942 shares of RainTree common stock (Note 13). As of December 31, 1998, the
balance of these promissory notes was $1,626, which is included in liabilities
subject to compromise in the consolidated balance sheet.
On October 31, 1996, RainTree simultaneously completed mergers with Ampro
and Memphis for aggregate consideration of $4,942. The outstanding shares of
Ampro common stock were converted into the right to receive 521,000 shares of
RainTree common stock. Three shareholders who owned approximately 35% of the
outstanding shares of Memphis received pro rata portions of 19,000 shares of
RainTree common stock and the holder of the remaining shares of Memphis received
cash in the amount of $237 and a promissory note in the amount of $250. The
total amount assigned to the 540,000 shares of RainTree common stock issued was
$4,455, based on the closing market price on October 31, 1996 of $8.25. The
transaction was recorded as a pooling of interests.
On October 31, 1996, RainTree acquired Signature Health Care Corporation
and subsidiaries ("Signature"), which operates 13 long-term care facilities in
Colorado and Arizona. The initial aggregate purchase price of Signature amounted
to approximately $50,653, comprised of cash and promissory notes totaling
approximately $38,200 and 1,509,434 shares of RainTree common stock. The amount
assigned to the shares of RainTree common stock issued was $12,453, based on the
closing market price on October 31, 1996 of $8.25. 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, paid in convertible promissory
notes of $1,827 (the "Convertible Notes") and 238,052 shares of RainTree common
F-15
<PAGE> 63
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stock with a market value of $2.875 per share or $685 (Note 13). The adjustment
was recorded as an addition to the purchase price of Signature and added to
lease operating rights. In connection with the Signature acquisition, RainTree
also acquired all of the outstanding stock of RehabWest, Inc. ("RehabWest"), a
related rehabilitation services company, for a cash purchase price of $6,100.
These acquisitions were accounted for as purchases. Mr. Kremser was Signature's
majority shareholder. The Convertible Notes are included in liabilities subject
to compromise in the consolidated balance sheet.
Effective January 1, 1997, RainTree, through its Sunbelt subsidiary,
purchased the assets of Spine Rehab, a rehabilitation therapy services company
located in Mississippi. Consideration for the purchase was comprised of cash
amounting to $600 and a $300 promissory note. The promissory note is included in
liabilities subject to compromise in the consolidated balance sheet.
In 1996, the Company announced a plan to dispose of eight long-term care
facilities that failed to meet RainTree's operational or financial criteria due
to inadequate Medicaid reimbursement, low occupancy rates or adverse local
market conditions. On March 1, 1997, four of these facilities were disposed of
via sublease agreement. In 1998, as part of the Company's restructuring plans,
RainTree modified its original disposition plan and identified additional
facilities for disposition. As part of these plans, in 1998 the Company
terminated the leases of 12 facilities. RainTree's facility disposition program
was concluded in the first quarter of 1999, when the Company terminated the
leases of seven additional facilities, six of which were leased from Omega (Note
2).
The provision for losses on disposal of long-term care facilities is
included in impairment losses and other charges in the consolidated statement of
operations (Note 21). Revenues and expenses related to these facilities are
included in the consolidated statements of operations for the years ended
December 31 as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Total revenues........................................ $21,797 $44,220 $44,176
Total expenses........................................ 24,769 48,450 49,114
</TABLE>
5. STATEMENTS OF CASH FLOWS
Supplemental information related to the statements of cash flows is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------- ------
<S> <C> <C> <C>
Cash paid during year ended December 31 for:
Interest.............................................. $4,417 $19,377 $3,014
Income taxes.......................................... -- 799 124
</TABLE>
Cash paid for reorganization items related to the Chapter 11 proceedings
were as follows:
<TABLE>
<S> <C>
Professional fees........................................... $1,912
Bankruptcy Trustee fees..................................... 208
Other....................................................... 120
------
$2,240
======
</TABLE>
F-16
<PAGE> 64
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's acquisitions involved the following noncash activities for
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ------ --------
<S> <C> <C> <C>
Fair value of assets acquired............................ $-- $1,100 $122,420
Liabilities assumed and incurred......................... -- 441 68,492
Common stock issued...................................... -- -- 12,703
-- ------ --------
$-- $ 659 $ 41,225
== ====== ========
</TABLE>
Other noncash financing activities for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ------ ------
<S> <C> <C> <C>
Conversion of debentures into shares of common stock....... $-- $ 800 $1,174
Property and equipment acquired under capital leases....... -- 729 7,205
Accounts payable converted to debt......................... -- 3,206 --
</TABLE>
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of December 31 are follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Prepaid expenses............................................ $1,741 $ 870
Deferred taxes (Note 18).................................... 5,456 5,079
Inventories................................................. 1,473 1,819
------ ------
$8,670 $7,768
====== ======
</TABLE>
7. PROPERTY AND EQUIPMENT
Property and equipment as of December 31 are as follows:
<TABLE>
<CAPTION>
LIFE (YEARS) 1998 1997
------------ ------- -------
<S> <C> <C> <C>
Land and building................................... 15-25 $20,439 $17,863
Equipment........................................... 5-15 14,135 11,652
Leasehold improvements.............................. 12-15 4,009 3,066
------- -------
38,583 32,581
Accumulated depreciation............................ (9,356) (6,993)
------- -------
$29,227 $25,588
======= =======
</TABLE>
Property and equipment includes assets acquired under capitalized leases of
approximately $4,477 at December 31, 1998 and 1997. Accumulated depreciation
related to capital leases amounted to $1,973 and $1,170 at December 31, 1998 and
1997, respectively.
Property and equipment also includes land and buildings leased from Omega
in the aggregate amount of $20,156 (Note 2). The Sale Leaseback was accounted
for as a financing transaction (Note 15).
F-17
<PAGE> 65
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASE OPERATING RIGHTS AND OTHER INTANGIBLE ASSETS
Lease operating rights and other intangible assets as of December 31 are as
follows:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD (YEARS) 1998 1997
-------------- ------- -------
<S> <C> <C> <C>
Lease operating rights............................ 25-30 $56,648 $79,723
Capitalized assembled workforce................... 3 1,845 1,845
Debt and bond issue costs......................... 3-10 8,786 7,882
Covenants not to compete.......................... 5 100 850
Other............................................. 5-20 792 956
------- -------
68,171 91,256
Accumulated amortization.......................... (9,211) (6,769)
------- -------
$58,960 $84,487
======= =======
</TABLE>
The reduction in lease operating rights from 1997 to 1998 is primarily a
result of the Company's evaluation of its long-lived assets for impairment in
accordance with SFAS 121 (Note 21).
9. SECURITY DEPOSITS AND OTHER ASSETS
Security deposits and other assets as of December 31 are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Security deposits -- leases................................. $5,322 $4,373
Security deposits -- insurance.............................. 4,061 3,444
------ ------
$9,383 $7,817
====== ======
</TABLE>
In connection with its lease agreements with Omega, RainTree is required to
maintain security deposits. Deposits held by Omega amounted to $4,646 and $3,739
at December 31, 1998 and 1997, respectively.
10. ACCOUNTS PAYABLE
Accounts payable as of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Trade payables.............................................. $ 8,571 $5,329
Checks drawn in excess of bank balances..................... 2,244 2,263
------- ------
$10,815 $7,592
======= ======
</TABLE>
F-18
<PAGE> 66
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. ACCRUED EXPENSES
Accrued expenses as of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accrued compensation and benefits........................... $ 8,266 $ 9,843
Accrued interest............................................ -- 3,603
Accrued professional fees................................... 113 1,585
Income and gross receipt taxes.............................. 2,329 3,340
Reserve for dispositions.................................... 1,103 2,023
Other....................................................... 3,364 4,223
------- -------
$15,175 $24,617
======= =======
</TABLE>
12. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt due to related parties as of December 31
are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Additional Payment Obligation............................... $ 9,588 $ 9,588
Working capital notes....................................... 3,950 3,950
Notes in escrow............................................. 1,146 1,146
Convertible Notes........................................... 1,826 1,826
Subordinated notes payable to a related party............... 2,312 2,320
Other notes................................................. 1,670 1,670
-------- --------
20,492 20,500
Less amounts included in liabilities subject to
compromise................................................ (20,492) --
Less current portion........................................ -- (20,500)
-------- --------
$ -- $ --
======== ========
</TABLE>
When RainTree and its subsidiaries filed for bankruptcy in 1998, the
Company was in payment default of all of the related party obligations listed
above. Therefore, these obligations are included in liabilities subject to
compromise in the consolidated balance sheet as of December 31, 1998. Under the
terms of the Plan, the claims of Messrs. Kremser and Whitehead and their
respective affiliates were settled as described in Note 2. Other notes payable
to related parties were general unsecured claims of RainTree.
In connection with the BritWill Acquisition (Note 4), RainTree incurred the
Additional Payment Obligation in the original amount of $11,500.
On April 21, 1997, RainTree obtained a $2,950 loan for general working
capital purposes from affiliates of Messrs. Kremser and Whitehead. This loan
matured on August 1, 1997. On September 25, 1997, RainTree borrowed an
additional $1,000 from Messrs. Whitehead and Kremser which was due on October 7,
1997.
A portion of the purchase consideration for Signature was comprised of
promissory notes totaling $1,146, which were placed in escrow (the "Escrow
Notes"). Of this amount, $500 was due to be paid to Mr. Kremser and the other
former shareholders of Signature on October 31, 1997 and the remaining $646 was
due and payable on October 31, 1998.
F-19
<PAGE> 67
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1997, the former shareholders of Signature received additional
consideration of $2,511, paid in the form of the Convertible Notes amounting to
$1,826 and 238,052 shares of RainTree common stock with a conversion price of
$2.875 per share. The Convertible Notes were due on December 31, 1997.
Subordinated notes payable were incurred in connection with the BritWill
Acquisition and are payable to BritWill Texas, an affiliate of Mr. Whitehead.
Other notes include obligations to the former owners of Sunbelt amounting
to $1,626 (Note 4).
Other notes payable and long-term debt as of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------ --------
<S> <C> <C>
12 1/4% Senior Notes........................................ $ -- $100,000
13% Senior Notes............................................ -- 20,000
Mortgage Note............................................... -- 18,422
Revolving line of credit.................................... 7,004 7,117
Capital lease obligations (Note 16)......................... 665 3,429
Notes payable to trade vendors.............................. -- 1,100
Term loans and other........................................ 475 2,229
------ --------
8,144 152,297
Less current portion........................................ (1,012) (144,277)
------ --------
$7,132 $ 8,020
====== ========
</TABLE>
When RainTree filed for bankruptcy in 1998, it was in payment and/or
covenant default of substantially all of its debt obligations. Therefore,
prepetition unsecured debt obligations and capital leases that were rejected are
included in liabilities subject to compromise in the consolidated balance sheet
as of December 31, 1998. The settlement of bankruptcy claims related to these
obligations is described in Note 2.
Other notes and long-term debt included in liabilities subject to
compromise are as follows:
<TABLE>
<CAPTION>
AT
DECEMBER 31,
1998
------------
<S> <C>
12 1/4% Senior Notes........................................ $100,000
13% Senior Notes............................................ 20,000
Notes payable to trade vendors.............................. 1,061
Capital lease obligations................................... 2,411
Term loans and other........................................ 531
--------
$124,003
========
</TABLE>
When RainTree filed for bankruptcy, it obtained an extension of its
revolving line of credit with Health Partners. Borrowings under the $11,000 HCFP
DIP Facility accrued interest at the prime rate plus 3.0% and were secured by
the Company's eligible accounts receivable. On the Effective Date, the
outstanding balance of $8,145 was repaid. The HCFP DIP Facility was partially
replaced with a new $7,000 revolving line of credit with Health Partners (the
"First Line"). Interest on amounts outstanding under the First Line accrues at
the prime rate plus 0.85%. A commitment fee of 0.5% per annum is payable on the
unused portion. The Company is in the process of negotiating with Health
Partners with respect to another $7,000 line of credit (the "Second Line").
Total combined borrowings under the First Line and Second Line cannot exceed
$12,000. The lines of credit will expire in January 2002.
F-20
<PAGE> 68
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Signature acquisition, RainTree assumed the 10.5%
Mortgage Note collateralized by property and equipment of six of the Signature
facilities. In connection with the Sale Leaseback transaction on December 31,
1998 (Note 2), the Mortgage Note was repaid in the amount of $18,240 plus
interest and a prepayment penalty of $1,094.
Future maturities of notes payable and long-term debt at December 31, 1998,
excluding amounts included in liabilities subject to compromise, are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1999................................................ $1,012
2000................................................ 128
2001................................................ --
2002................................................ 7,004
2003................................................ --
------
$8,144
======
</TABLE>
13. STOCKHOLDER'S EQUITY
Since 1995, RainTree has issued a number of warrants to purchase its common
stock, as described below. Under the terms of the Plan, all warrants were
cancelled on the Effective Date.
In December 1995 and January 1996, RainTree completed its initial public
offering (the "IPO"), issuing 2,000,000 shares of common stock at $9.00 per
share. In connection with the IPO, RainTree issued warrants to purchase of up to
120,000 shares of common stock to the representatives of the underwriters in
exchange for certain advisory services provided to the Company during the
twelve-month period following the IPO. The exercise price of the warrants was
$11.70 per share (market value at the date of grant), which approximates the
fair value of consideration received at the date of issuance. The warrants were
exercisable for a five-year period beginning in December 1996.
On August 10, 1995, RainTree entered into a stock purchase agreement with
Health Partners. The agreement entitled HealthPartners to purchase shares of
RainTree's common stock with an aggregate market value of $150, or approximately
16,667 shares based on the IPO price of $9.00 per share. The $150 was
capitalized as a deferred financing cost. In December 1996, HealthPartners
exercised its option to require RainTree to repurchase the warrants for $213 in
cash, which was recorded as a reduction of additional paid-in capital.
Effective December 31, 1994, RainTree completed a stock purchase agreement
to satisfy amounts due to an individual who actively negotiated several of
RainTree's management and operating lease agreements. The warrants were
exercised in 1996, whereby 178,000 shares of RainTree common stock were
purchased for two hundred dollars. Since the warrants were granted at less than
fair market value, leasehold rights totaling $43 were 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 RainTree common stock were issued to a commercial bank in connection
with a short-term loan agreement. The exercise prices of the warrants were
$12.80 and $13.00 (market value at the date of grant), which approximates the
fair value of consideration received at the date of issuance.
RainTree's common stock was traded on The Nasdaq Stock Market's National
Market System from December 19, 1995 to August 21, 1997. Effective August 22,
1997, Nasdaq moved RainTree's securities to its SmallCap Market because the
Company did not satisfy the minimum tangible net asset requirement for the
listing of its stock on the National Market System. On February 23, 1998, new,
more stringent quantitative
F-21
<PAGE> 69
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maintenance requirements for continued listing on the Nasdaq SmallCap Market
went into effect. RainTree did not meet these requirements, and on April 15,
1998, Nasdaq delisted the Company's securities.
14. STOCK OPTIONS
Prior to the Effective Date, RainTree issued stock options pursuant to the
1995 Stock Option Plan (the "1995 Plan"). On the Effective Date, all outstanding
stock options were cancelled, as was the 1995 Plan.
The 1995 Plan offered two types of options. The discretionary option grant
program (the "Discretionary Program") provided that eligible individuals could,
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. The automatic option grant program (the "Automatic Program") provided
that grants of options were automatically 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 vested over two years and was exercisable for ten
years. Options granted under the Discretionary Program vested over periods of
two to four years.
RainTree 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. The alternative
fair value accounting provided for under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
RainTree's employee stock options equaled 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 RainTree had accounted for
its employee stock options under the fair value method of that Statement. The
fair value of the options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates of
5.0%, 5.0% and 5.0%; dividend yields of 0%, 0% and 0%; volatility factors of the
expected market price of the Company's common stock of 11.17, 1.32 and .64 and a
weighted-average expected life of the option of eight years.
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that 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
RainTree'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.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Because
outstanding stock options were cancelled on the Effective Date, all unamortized
amounts are assumed to be charged to expense in 1998. RainTree's pro forma
information follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Pro forma net loss.................................... $46,065 $48,415 $24,157
Pro forma net loss per share.......................... $ 7.17 $ 7.60 $ 5.16
</TABLE>
F-22
<PAGE> 70
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 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
Granted............................ 913,466 2.63 122,500 2.44
Canceled........................... (696,730) 8.06 (139,980) 9.33
Exercised.......................... (350) 9.00 --
--------- --------
Outstanding at December 31, 1997... 829,663 3.13 122,500 2.44
Granted............................ 105,000 0.53 --
Canceled........................... (118,485) 3.74 (41,250) 2.44
Exercised.......................... -- --
--------- --------
Outstanding at December 31,
1998............................ 816,178 2.63 81,250 2.44
========= ========
Exercisable at December 31, 1996..... 127,998 $9.00 23,740 $9.00
1997............................... 198,138 3.79 61,250 2.44
1998............................... 403,320 2.65 81,250 2.44
Weighted-average fair value of
options granted:
1996............................... $ 6.39
1997............................... 2.38
1998............................... 0.53
</TABLE>
Exercise prices for options outstanding at December 31, 1998 ranged from
$0.53 to $9.50. The weighted-average remaining contractual life of those options
is 8.7 years.
At December 31, 1998, 590,915 shares of common stock were available under
the 1995 Plan for future awards.
15. LEASES
As of December 31, 1998, RainTree operated 35 facilities under
noncancelable operating leases with lease terms ranging from five to twenty
years plus renewal options. The lease agreements provide for either scheduled
rent increases or contingent rent based on increases in the Consumer Price Index
("CPI"), Medicaid reimbursement rates, and number of licensed beds. Certain of
the leases have purchase options determined by a specified formula. RainTree is
responsible for all taxes, maintenance and other executory costs.
As of December 31, 1998, RainTree leased 21 facilities from Omega. RainTree
also leased six facilities from BritWill Texas that were subject to a mortgage
in favor of Omega. RainTree entered into the Omega Master Lease on December 31,
1998 covering seven facilities sold to Omega in the Sale Leaseback transaction
(Note 2). On the Effective Date, 11 facilities were added to the Omega Master
Lease, including three
F-23
<PAGE> 71
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facilities previously leased from BritWill Texas. As described in Note 2, six
facilities previously leased from Omega were excluded from the Omega Master
Lease.
The initial term of the Omega Master Lease is 14 years with one 14 -year
renewal option. The Omega Master Lease grants RainTree the option to purchase
the Omega facilities upon the expiration of the initial lease term. At January
31, 1999, the annual minimum rent under the Omega Master Lease (before
escalations) was approximately $8,276 during the initial lease term. The minimum
rent is subject to increase annually based upon increases in facility revenue
and the CPI. The Omega Master Lease requires the Company to maintain specified
cash flow to debt service and current ratios and minimum levels of tangible net
worth.
The Sale Leaseback with Omega was accounted for as a financing transaction.
Therefore, RainTree recorded a lease financing obligation amounting to $38,200,
which was the sales price of the seven buildings sold to Omega. Rent associated
with these facilities, which will total approximately $4,429 in 1999, will be
recorded as interest expense.
In connection with the BritWill Acquisition (Note 4), RainTree recorded a
leasehold liability in the amount of $4,700. This adjustment was based on an
independent appraisal that 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.
Future minimum lease payments at December 31, 1998 under noncancelable
lease arrangements with initial or remaining terms of one year or more,
including the Omega Master Lease, consist of the following. Capital lease
payments include rent related to the seven facilities included in the Sale
Leaseback.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL OPERATING
- ------------------------ -------- ---------
<S> <C> <C>
1999........................................................ $ 3,862 $ 11,701
2000........................................................ 3,854 11,745
2001........................................................ 3,967 11,877
2002........................................................ 4,082 11,998
2003........................................................ 4,201 11,995
Thereafter.................................................. 42,914 78,613
-------- --------
Total minimum lease payments................................ 62,880 $137,929
========
Less amount representing interest........................... (62,215)
--------
Present value of net minimum lease payments................. 665
Less current portion........................................ (171)
--------
Long-term obligations....................................... $ 494
========
</TABLE>
RainTree's lease payments are senior to all unsecured debt.
16. RELATED PARTY TRANSACTIONS
The notes, debentures and Additional Payment Obligation issued as
consideration for the BritWill Acquisition were issued to the former
shareholders of BritWill (Notes 4 and 12). The majority shareholder of BritWill
was Whitehead Family Investments, Ltd. ("WFI"), which owned 81.5% of the stock
of BritWill prior to the BritWill Acquisition. Mr. Whitehead is the president of
the general partner of WFI and, together with a family trust, owns 100% of WFI.
With the BritWill Acquisition, RainTree also assumed unsecured subordinated
notes payable to BritWill Texas with an aggregate balance at December 31, 1998
of $2,312 (Note 12).
F-24
<PAGE> 72
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of Signature, RainTree incurred debt
obligations to Mr. Kremser and the other shareholders of Signature, including
the Escrow Notes and Convertible Notes. In 1997, RainTree obtained working
capital loans in the aggregate amount of $3,950 from affiliates of Mr. Kremser
and Mr. Whitehead (Note 12).
As of December 31, 1998, RainTree was in default of its debt obligations to
Messrs. Whitehead and Kremser and their affiliates in the aggregate amount of
$18,822 (Note 12). These obligations were settled under the terms of the Plan
(Note 2). RainTree recorded interest expense on obligations to the Kremser
Affiliates in the amount of $268, $348 and $15 in 1998, 1997 and 1996,
respectively. Interest expense related to obligations to the Whitehead
Affiliates amounted to $581, $1,327 and $1,215 in 1998, 1997 and 1996,
respectively.
In connection with the BritWill Acquisition, RainTree paid a financial
advisory fee to Trouver Capital Partners, L.P. ("Trouver") in the amount of
$675. One of Trouver's general partners was a director of RainTree until
December 1998. This individual is also the president and sole shareholder of
Woodhill Capital Corporation ("Woodhill"). RainTree paid an advisory fee of $350
to Woodhill in connection with the sale of the 13% Senior Notes.
Prior to the Effective Date, Mr. Whitehead personally guaranteed RainTree's
lease payments to Omega (Note 15) to $13,500. RainTree also leased six
facilities in Texas from BritWill Texas. Lease expense on the BritWill Texas
Leases amounted to $1,119, $1,241 and $2,661 in 1998, 1997 and 1996,
respectively.
17. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $ 772 $ 596 $ 698
State............................................... 320 210 61
Deferred:
Federal............................................. (9,408) (2,828) (7,777)
State............................................... (1,526) (458) (1,338)
------- ------- -------
$(9,842) $(2,480) $(8,356)
======= ======= =======
</TABLE>
F-25
<PAGE> 73
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between RainTree's effective income tax rates and statutory
rates are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax expense (benefit)..... $(18,661) $(16,895) $(10,810)
Increases (decreases) resulting from:
Change in effective tax rate..................... -- -- (495)
Amortization of intangibles and nondeductible
expenses...................................... 562 413 1,060
State tax expense (benefit), net of federal
benefit....................................... (1,843) (1,873) (876)
Change in valuation allowance.................... 9,387 16,024 1,528
Current federal income taxes of subsidiaries not
consolidated for tax purposes................. 772 596 698
Adjustments to tax bases of acquired companies... -- (539) --
Other............................................ (59) (206) 539
-------- -------- --------
Income tax expense (benefit)....................... $ (9,842) $ (2,480) $ (8,356)
======== ======== ========
</TABLE>
Significant components of deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred liabilities:
Intangibles............................................... $ (4,957) $(15,547)
Accelerated depreciation.................................. (499) (466)
State income taxes........................................ (271) --
Cash to accrual adjustment................................ (112) (224)
-------- --------
Total liabilities........................................... (5,839) (16,237)
-------- --------
Deferred assets:
Allowance for doubtful accounts........................... 3,650 2,796
Reserve for loss on disposition of assets................. 886 1,953
Vacation accruals......................................... 378 516
Net operating loss carryforward........................... 19,607 17,552
Taxable gain on sale leaseback............................ 6,935 --
Other, net................................................ 1,322 38
-------- --------
Total assets................................................ 32,778 22,855
-------- --------
Total net asset............................................. 26,939 6,618
Valuation allowance......................................... (26,939) (17,552)
-------- --------
Net deferred items.......................................... $ -- $(10,934)
======== ========
</TABLE>
SFAS No. 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. Given the Company's
history of losses for income tax purposes and certain other factors, the Company
has established a valuation allowance principally for the portion of its
deductible temporary differences, including net operating loss carryforwards
that may not be available due to expirations or other limitations after
consideration of net reversals of future taxable and deductible amounts. After
application of the valuation allowance, RainTree's net deferred tax assets and
liabilities are zero.
F-26
<PAGE> 74
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management has determined that its net operating loss carryforwards
amounting to $51,912 will be subject to substantial reduction in realizability
in future periods. Specifically, the Internal Revenue Service Code provides
that, in a Chapter 11 bankruptcy case, income normally arising from the
discharge of indebtedness is excluded from taxable income. However, to the
extent that income from discharge of indebtedness is excluded from income,
taxpayers must reduce specified tax attributes which include net operating
losses. The Company anticipates that, in connection with the implementation of
the Plan (Note 2), its net operating losses will be substantially reduced as a
result of the restructuring of its debt obligations. In addition, the Company
may have had a statutory ownership change (as defined for purposes of Section
382 of the Internal Revenue Code) as a result of the effectiveness of the Plan.
Accordingly, those net operating losses that may remain available as a result of
the income tax implications of the attribute reduction may be restricted.
If the Company, in future tax periods, were to recognize tax benefits
attributable to tax attributes of the Company prior to the Effective Date of the
Plan (such as net operating loss carryforwards), any such benefit would be
applied to reduce the balance of reorganization value in excess of amounts
allocable to identifiable assets.
18. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheet for cash,
accounts receivable, lease deposits, accounts payable and accrued expenses
approximate their fair value. The aggregate carrying amounts and fair values of
RainTree's other financial instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Notes payable and long-term debt,
excluding capital lease obligations.... $ 7,479 $ 7,479 $169,369 $155,446
Notes payable and long-term debt included
in liabilities subject to compromise,
excluding capital lease obligations.... 142,084 46,000 -- --
</TABLE>
The fair values of RainTree's borrowings not subject to compromise are
estimated based on quoted market prices or by discounting future cash flows at
current rates offered to RainTree for debt of comparable types and maturities.
Because no market exists for certain of these obligations, 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.
The fair values of borrowings included in liabilities subject to compromise
were determined based on the settlement of these items pursuant to the Plan
(Note 2).
19. 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. RainTree 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 coverage could have an
adverse effect on RainTree's business. However, based upon the evaluation of
RainTree's historical asserted
F-27
<PAGE> 75
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and unasserted claim experience, management does not believe that the Company
has a material, estimable and probable liability, regardless of insurance
coverage, at December 31, 1998.
In 1998, approximately 25% of employees enrolled in Company sponsored
health plans were covered under a self-insured plan. RainTree's liability for
losses under this plan is capped at $25 per claim and $2,500 per person through
a contract with an insurance company. The Company is also insured for Workers'
Compensation. The Company's liability for losses is capped at $250 per claim
through a contract with an insurance company. RainTree has a cash deposit of
$2,244 with this insurance company which is held as collateral.
RainTree is insured for professional and general liability claims under a
claims made, retrospective insurance policy. Beginning December 1, 1998, the
Company's liability for losses is capped at $1,750 in the aggregate. RainTree
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 RainTree. Management believes that 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.
20. COMMITMENTS AND CONTINGENCIES
Regulatory Environment
The health care industry is subject to numerous laws and regulations of
federal, state and local governments. Compliance with these laws and regulations
can be subject to future government review and interpretation as well as
regulatory actions unknown or unasserted at this time. Recently, government
activity has increased with respect to investigations and allegations concerning
possible violations by health care providers, which creates a possibility of
significant repayments for reimbursement of patient services previously billed.
The Company believes that it is in substantial compliance with the applicable
laws and regulations. However, if the Company is ever found to have engaged in
improper practices, it could be subjected to civil, administrative or criminal
fines, penalties or restitutionary relief.
Healthcare Reform Legislation
The Balanced Budget Act enacted in August 1997 (the "Budget Act") contains
extensive changes to the Medicare and Medicaid programs intended to reduce the
projected amount of increase in payments under those programs over the next five
years. The Budget Act also requires the establishment of a prospective payment
system for nursing facilities for cost reporting periods beginning on or after
July 1, 1998. During the first three years, the per diem rates for nursing
facilities will be based on a blend of facility-specific costs and Federal
costs. Thereafter, the per diem rates will be based solely on Federal costs. The
payments received under the new prospective payment system will cover all
services for Medicare patients, including all ancillary services, such as
respiratory therapy, physical therapy, occupational therapy, speech pathology
and certain covered drugs. Management has not completed the analysis to
determine the impact that the Budget Act will have on future operations.
However, the Company is actively implementing strategies and operational
modifications to address changes in the Federal reimbursement system.
There also continues to be state legislative proposals that would impose
more limitations on government and private payments to providers of healthcare
services such as RainTree. Many states have enacted or are considering enacting
measures that are designed to reduce their Medicaid expenditures including cost
caps and the establishment of Medicaid prospective payment systems for nursing
facilities.
Approximately 84% of RainTree's long-term care net patient service revenues
in 1998, 1997 and 1996 were derived from reimbursement under Medicare and
Medicaid programs, and approximately 90% and 88%
F-28
<PAGE> 76
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of RainTree's patient accounts receivable at December 31, 1998 and 1997,
respectively, were due from such programs.
There can be no assurance that the Budget Act or future healthcare
legislation will not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
21. ASSET IMPAIRMENT
In 1996, RainTree incurred operating losses and shortfalls of cash from
operations. The Company also announced the planned disposition of eight nursing
facilities whose performance did not meet RainTree's operational or financial
criteria (Note 4). Of these Disposition Facilities, one was closed in June 1996
and three others, which had incurred operating losses since the Company had
acquired them in August 1995, were disposed of in March 1997. These events, as
well as a history of operating losses at certain facilities, raised the
possibility of continuing losses associated with the Company's income producing
assets. Consequently, RainTree evaluated its long-lived assets, including
property and equipment, goodwill, lease operating rights and other intangible
assets, for impairment in accordance with SFAS No. 121. In 1997, the Company
continued to incur operating losses and cash shortfalls from operations and
identified additional facilities for disposition. In 1998, RainTree filed for
reorganization under Chapter 11 (Note 2). Accordingly, the Company reevaluated
its long-lived assets for impairment in 1997 and 1998.
To evaluate assets for impairment, RainTree estimated the undiscounted net
cash flows from all business units and determined that the carrying value of
certain of RainTree's long-lived assets exceeded such undiscounted cash flows.
RainTree then compared the fair value of the assets, based on the present value
of the estimated future cash flows for the facilities, with the carrying value.
The estimates of future cash flows were 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. RainTree determined that the fair value
of certain facilities was less than their carrying value and estimated the costs
to sublease and exit from facilities held for disposition (Note 4). Accordingly,
RainTree recorded impairment losses and other charges of $23,385, $27,185 and
$3,865 in 1998, 1997 and 1996, respectively.
22. LITIGATION
Various suits and claims arising in the ordinary course of business are
pending against the Company. Management believes that 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.
RainTree is a defendant in seven consolidated securities class action
lawsuits pending in the United States District Court in Phoenix, Arizona (the
"Federal Action"), and a securities class action lawsuit pending in California
Superior Court (the "State Action") (collectively, the "Class Actions"). The
Class Actions arise from the Company's announcement on March 11, 1997 that it
would be restating its financial results for the nine-month period ended
September 30, 1996. The Federal Action seeks damages for alleged violations of
federal and Arizona state securities laws; the State Action seeks damages for
alleged violations of the California state securities laws. The broadest class
period is that alleged in the Federal Action from December 18, 1995 (the date of
the Company's initial public offering) to May 30, 1997.
The parties in the Federal Action have reached a settlement in principle
that is expected to resolve both the Federal and State Actions in their
entirety, assuming appropriate court approval and acceptance by members of the
class. The settlement calls for a cash payment by the Company's primary insurer
amounting to $4,250 and 1,000,000 "pre-bankruptcy" common shares or the
post-bankruptcy equivalent of such shares.
F-29
<PAGE> 77
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the Plan, existing equity holders had their interests converted into
warrants; under the proposed settlement, class members who receive RainTree
shares will receive the same prorated treatment. The settlement was approved by
the Bankruptcy Court on December 30, 1998 and preliminary approval of the
settlement was granted by the district court in the Federal Action on February
24, 1999. A Notice of Settlement of Class Action and a Proof of Claim and
Release form has been mailed to the Company's shareholders of record immediately
before and after the class period and all purchasers of record of the Company's
common stock during the class period. A final settlement approval hearing is
scheduled for April 28, 1999.
23. OPERATING SEGMENTS
During the fourth quarter of 1998, RainTree adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 131 requires the presentation of
descriptive information about reportable segments that is consistent with that
made available to the management of the Company to assess performance.
RainTree's four reportable segments are strategic business units that involve
specialized healthcare services and require different marketing strategies.
The long-term care segment consists of RainTree's nursing facilities and
assisted and independent living facilities. Sunbelt conducts the Company's
rehabilitation therapy segment operations. The pharmacy segment is comprised of
RainTree's institutional pharmacy and Medicare Part B billing and supply
business units. The laboratory segment represents the combined operations of
Ampro and Memphis.
The accounting policies of the business segments are the same as those
described in the summary of significant accounting policies (Note 3).
Intersegment sales are accounted for at fair value as if the sales were to third
parties.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues from nonrelated entities:
Long-term care........................................... $140,549 $172,139 $121,970
Rehabilitation therapy................................... 12,073 10,505 8,701
Pharmacy................................................. 9,750 9,799 6,755
Laboratory............................................... -- -- --
Corporate................................................ 91 630 1,560
-------- -------- --------
Total................................................. $162,463 $193,073 $138,986
======== ======== ========
Total revenues:
Long-term care........................................... $140,549 $172,139 $121,970
Rehabilitation therapy................................... 22,988 31,091 13,213
Pharmacy................................................. 15,015 14,200 8,484
Laboratory............................................... 5,388 6,306 6,547
Corporate................................................ 9,332 11,763 7,578
Eliminations............................................. (9,241) (11,133) (9,118)
-------- -------- --------
Total................................................. $184,031 $224,366 $148,674
======== ======== ========
</TABLE>
F-30
<PAGE> 78
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Operating income (loss):
Long-term care........................................... $ (9,480) $ (3,297) $ (7,269)
Rehabilitation therapy................................... (4,456) 1,414 1,113
Pharmacy................................................. 2,708 2,500 1,346
Laboratory............................................... (1,628) (380) (565)
Unallocated corporate expenses........................... (12,063) (22,743) (22,554)
-------- -------- --------
Consolidated operating loss........................... (24,919) (22,506) (27,929)
Impairment losses and other charges........................ 23,385 27,185 3,865
Reorganization items....................................... 5,487 -- --
-------- -------- --------
Consolidated loss before income taxes and extraordinary
charge................................................... $(53,791) $(49,691) $(31,794)
======== ======== ========
Total assets:
Long-term care........................................... $ 79,624 $104,340 $122,049
Rehabilitation therapy................................... 13,266 14,472 14,004
Pharmacy................................................. 5,751 4,648 3,751
Laboratory............................................... 2,372 3,734 4,033
Corporate................................................ 73,732 67,915 90,297
Eliminations............................................. (4,205) (2,942) (3,213)
-------- -------- --------
Total................................................. $170,540 $192,167 $230,921
======== ======== ========
Interest expense:
Long-term care........................................... $ 3,800 $ 4,232 $ 532
Rehabilitation therapy................................... 20 68 399
Pharmacy................................................. 16 45 168
Laboratory............................................... 20 1 175
Corporate................................................ 8,284 15,730 3,287
-------- -------- --------
Total................................................. $ 12,140 $ 20,076 $ 4,561
======== ======== ========
Depreciation and amortization:
Long-term care........................................... $ 4,266 $ 6,360 $ 2,510
Rehabilitation therapy................................... 955 963 302
Pharmacy................................................. 183 146 92
Laboratory............................................... 248 252 194
Corporate................................................ 3,318 2,253 1,463
-------- -------- --------
Total................................................. $ 8,970 $ 9,974 $ 4,561
======== ======== ========
Routine capital expenditures:
Long-term care........................................... $ 1,635 $ 641 $ 2,147
Rehabilitation therapy................................... 139 163 116
Pharmacy................................................. 66 180 194
Laboratory............................................... 130 73 73
Corporate................................................ 995 1,207 4,044
-------- -------- --------
Total................................................. $ 2,965 $ 2,264 $ 6,574
======== ======== ========
</TABLE>
Corporate assets include lease operating rights amounting to $20,648.
Amortization expense related to this asset, amounting to $1,265 in 1998, was
allocated to the long-term care segment.
F-31
<PAGE> 79
SCHEDULE II
RAINTREE HEALTHCARE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
ADDITIONS
--------------------
CHARGED
BALANCE AT TO COSTS 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, 1996
Allowance for doubtful accounts .... $ 783 $2,742 $ 672 (1) $ (421) (2) $3,776
Year ended December 31, 1997
Allowance for doubtful accounts .... $3,776 $2,039 $1,967 (3) $ (359) (2) $7,423
Year ended December 31, 1998
Allowance for doubtful accounts .... $7,423 $6,210 -- $(3,970) (2) $9,663
</TABLE>
- ------------------
(1) Represents the allowance for doubtful accounts recorded by Signature at
October 31, 1996.
(2) Uncollectible accounts written off, net of recoveries.
(3) Included in impairment losses and other charges in the consolidated
statement of operations.
S-1
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<C> <S>
2.1 Disclosure Statement in Support of Debtors' Joint Plan of
Reorganization Dated August 10, 1998 and Debtors' Joint Plan
of Reorganization Dated August 10 (incorporated by reference
to Exhibit 99.1 to Form 8-K filed on August 13, 1998)
2.2 Disclosure Statement in Support of Debtors' First Amended
Joint Plan of Reorganization Dated October 15, 1998 and
Debtors' First Amended Joint Plan of Reorganization Dated
October 15, 1998 (incorporated by reference to Exhibit 2.1
to Form 10-K filed on November 4, 1998)
3.1 Certificate of Incorporation of RainTree Healthcare
Corporation, as amended and restated (incorporated by
reference to Exhibit 2 of Amendment No. 1 to the Form 8-A
filed on April 8, 1999)
3.2 Bylaws of RainTree Healthcare Corporation, as amended and
restated (incorporated by reference to Exhibit 3 to
Amendment No. 1 to the Form 8-A filed on April 8, 1999)
4.1 Indenture dated as of January 31, 1999, among RainTree
Healthcare Corporation, the Guarantors and Norwest Bank
Minnesota, National Association, as Trustee
10.1 Omega New Master Lease dated December 31, 1998 among Omega
Healthcare Investors, Inc. and Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.2 First Amendment to Omega New Master Lease, dated as of
February 1, 1999, among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments-I, Inc.,
BritWill Investments-II, Inc., Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.3 Revolving Credit Note dated February 8, 1999, among RainTree
Healthcare Corporation, Sunquest SPC, Inc., Safford Care,
Inc. Douglas Manor, Inc., Cornerstone Care, Inc. and
Arkansas, Inc., and HCFP Funding, Inc.
10.4 Loan and Security Agreement dated February 8, 1999, among
RainTree Healthcare Corporation, Sunquest SPC, Inc., Safford
Care, Inc. Douglas Manor, Inc., Cornerstone Care, Inc. and
Arkansas, Inc., and HCFP Funding, Inc.
10.5 Second Amendment To Omega New Master Lease, dated as of
February 2, 1999 among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments-I, Inc.,
BritWill Investments-II, Inc., Amberwood Court, Inc., The
Arbors Health Care Center, Inc., Brookshire House, Inc.,
Christopher Nursing Center, Inc., Los Arcos, Inc., Pueblo
Norte, Inc., and Rio Verde Nursing Center, Inc.
10.6 First Amendment To Omega New Master Lease Guarantee, dated
as of February 2, 1999 among RainTree Healthcare
Corporation, Signature Health Care Corporation, BritWill
HealthCare Company, BritWill Investments-I, Inc., Cedar
Care, Inc., and Sherwood HealthCare Corporation in favor of
Omega Healthcare Investors, Inc.
10.7 First Amendment To Security Agreement, dated as of February
1, 1999 among Omega Healthcare Investors, Inc. and BritWill
Indiana Partnership as successor in interest to BritWill
Investments-I, Inc.
10.8 Amended and Restated Security Agreement, dated as of
February 2, 1999 among Omega Healthcare Investors, Inc. and
BritWill Indiana Partnership, BritWill Investments-II, Inc.,
Amberwood Court, Inc., The Arbors Health Care Center, Inc.,
Brookshire House, Inc., Christopher Nursing Center, Inc.,
Los Arcos, Inc., Pueblo Norte, Inc., and Rio Verde Nursing
Center, Inc.
10.9 Indiana Returned Facilities Agreement, dated as of February
1, 1999 among Omega Healthcare Investors, Inc. and BritWill
Indiana Partnership
</TABLE>
<PAGE> 81
<TABLE>
<C> <S>
10.10 Indiana Returned Facility Note, dated as of January 31, 1999
among Omega Healthcare Investors, Inc. and BritWill Indiana
Partnership
10.11 Indiana Returned Facility Note Guarantee, dated as of
January 31, 1999 among RainTree Healthcare, BritWill
HealthCare Company and Omega Healthcare Investors, Inc.
10.12 Indiana Returned Facilities Interim Management Agreement,
dated as of February 1, 1999 by and between RainTree
Healthcare Corporation and Omega Healthcare Investors, Inc.
10.13 Amended Pledge Agreement, dated as of February 2, 1999 by
and between BritWill HealthCare Company and Omega Healthcare
Investors, Inc.
10.14 Second Amended and Restated Pledge Agreement, dated as of
February 2, 1999 by and between BritWill Investments-I, Inc.
and Omega Healthcare Investors, Inc.
10.15 Promissory Note dated as of January 31, 1999 among RainTree
Healthcare Corporation, American Professional Holding, Inc.,
Ampro Medical Services, Inc., Gamma Laboratories, Inc.,
Memphis Clinical Laboratory, Inc., Quest Pharmacies, Inc.,
and David Kremser, Bernice Kremser, Holly Kremser, Michael
Kremser, Stanley Kremser and Elk Meadows Investments, L.L.C.
10.16 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)
10.17 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)
10.18 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)
10.19 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)
10.20 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)
10.21 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)
10.22 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)
10.23 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)
10.24 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)
10.25 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)
10.26 Lease for Homestead of McKinney dated as of July 1, 1996
between Westminister Healthcare, Inc. and BritWill
Investments-II, Inc. (incorporated by reference to Exhibit
10.92 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996)
</TABLE>
<PAGE> 82
<TABLE>
<C> <S>
10.27 Security Agreement effective as of February 1, 1996 by among
RainTree 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)
10.28 Lease dated as of June 13, 1995, between AHP of Colorado,
Inc. and Arkansas, Inc. (incorporated by reference to
Exhibit 10.121 to the Registration Statement on Form S-4
filed on July 3, 1997, File No. 333-30793)
10.29 Lease dated as of June 13, 1995, between AHP of Colorado,
Inc. and Cornerstone Care, Inc. (incorporated by reference
to Exhibit 10.122 to the Registration Statement on Form S-4
filed on July 3, 1997, File No. 333-30793)
10.30 Lease dated as of July 28, 1995, between American Health
Properties of Arizona, Inc. and Safford Care, Inc.
(incorporated by reference to Exhibit 10.123 to the
Registration Statement on Form S-4 filed on July 3, 1997,
File No. 333-30793)
10.31 Lease dated as of July 28, 1995, between American Health
Properties of Arizona, Inc. and Douglas Manor, Inc.
(incorporated by reference to Exhibit 10.124 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996)
10.32 [Intentionally Omitted]
10.33 [Intentionally Omitted]
10.34 [Intentionally Omitted]
10.35 [Intentionally Omitted]
10.36 [Intentionally Omitted]
10.37 BritWill Acquisition Promissory Note A dated as of January
31, 1999, among RainTree Healthcare Corporation and BritWill
Investments Company, Ltd.
10.38 BritWill Acquisition Promissory Note B dated as of January
31, 1999, among RainTree Healthcare Corporation and UNHC
Real Estate Holdings, Ltd.
10.39 Pledge Agreement effective January 31, 1999, among RainTree
Healthcare Corporation and Norwest Bank Minnesota, National
Association
10.40 Registration Rights Agreement dated as of January 31, 1999,
among RainTree Healthcare Corporation and Morgan Stanley
Dean Witter High Yield Securities, Inc., Morgan Stanley Dean
Witter Diversified Income Fund, Morgan Stanley Dean Witter
Variable Investment Series--High Yield Portfolio, High
Income Advantage Trust II, High Income Advantage Trust, High
Income Advantage Trust III, Morgan Stanley Dean Witter
Select Dimensions Investment Series--The Diversified Income
Portfolio and Capital Research and Management Company
10.41 Security Agreement effective January 31, 1999 by and between
Quest Pharmacies, Inc., Sunbelt Therapy Management Services,
Inc. (Arizona), Decatur Sports Fit & Wellness Center, Inc.,
Therapy Health Systems, Inc., Henderson & Associates
Rehabilitation, Inc., Sunbelt Therapy Management Services,
Inc. (Alabama), RainTree Healthcare Corporation and Norwest
Bank Minnesota, National Association
10.42 Security Agreement dated as of January 31, 1999 by and
between American Professional Holding, Inc. and David
Kremser, Bernice Kremser, Holly Kremser, Michael Kremser,
Stanley Kremser and Elk Meadows Investments, L.L.C.
10.43 Stock Pledge Agreement (American Professional Holding, Inc.)
dated January 31, 1999 by and between RainTree Healthcare
Corporation and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.44 Security Agreement dated as of January 31, 1999 by and
between Ampro Medical Services, Inc. and David Kremser,
Bernice Kremser, Holly Kremser, Michael Kremser, Stanley
Kremser and Elk Meadows Investments, L.L.C.
</TABLE>
<PAGE> 83
<TABLE>
<C> <S>
10.45 Stock Pledge Agreement (Ampro Medical Services, Inc.) dated
January 31, 1999 by and between American Professional
Holding, Inc. and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.46 Security Agreement dated as of January 31, 1999 by and
between Gamma Laboratories, Inc. and David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and
Elk Meadows Investments, L.L.C.
10.47 Stock Pledge Agreement (Gamma Laboratories, Inc.) dated
January 31, 1999 by and between American Professional
Holding, Inc. and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.48 Security Agreement dated as of January 31, 1999 by and
between Memphis Clinical Laboratory, Inc. and David Kremser,
Bernice Kremser, Holly Kremser, Michael Kremser, Stanley
Kremser and Elk Meadows Investments, L.L.C.
10.49 Stock Pledge Agreement (Memphis Clinical Laboratory, Inc.)
dated January 31, 1999 by and between RainTree Healthcare
Corporation and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.50 Security Agreement dated as of January 31, 1999 by and
between Quest Pharmacies, Inc. and David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and
Elk Meadows Investments, L.L.C.
10.51 Stock Pledge Agreement (Quest Pharmacies, Inc.) dated
January 31, 1999 by and between RainTree Healthcare
Corporation and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and Elk Meadows
Investments, L.L.C.
10.52 Sharing Agreement dated February 1, 1999, by and between
Northwest Bank Minnesota, National Association, RainTree
Healthcare Corporation, BritWill Healthcare Company,
BritWill Indiana Partnership and Omega Healthcare Investors,
Inc.
21 List of subsidiaries (incorporated by reference to Exhibit
21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997)
27 Financial Data Schedule (included only in the EDGAR filing)
</TABLE>
<PAGE> 1
Exhibit 4.1
RAINTREE HEALTHCARE CORPORATION, as Issuer,
THE GUARANTORS (as defined herein), as Guarantors,
and
Norwest Bank Minnesota, National Association, as Trustee
INDENTURE
Dated as of January 31, 1999
Up to $26,000,000, Subject to Adjustment
11% Senior Secured Notes due 2003
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS................................................................................ 1
SECTION 1.2. OTHER DEFINITIONS.......................................................................... 20
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.......................................... 20
SECTION 1.4. RULES OF CONSTRUCTION...................................................................... 21
ARTICLE 2
THE SENIOR NOTES
SECTION 2.1. DATING; INCORPORATION OF FORM IN INDENTURE................................................. 21
SECTION 2.2. EXECUTION AND AUTHENTICATION............................................................... 22
SECTION 2.3. REGISTRAR AND PAYING AGENT................................................................. 23
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST........................................................ 23
SECTION 2.5. NOTEHOLDER LISTS........................................................................... 23
SECTION 2.6. TRANSFER AND EXCHANGE...................................................................... 24
SECTION 2.7. REPLACEMENT SENIOR NOTES................................................................... 24
SECTION 2.8. OUTSTANDING SENIOR NOTES................................................................... 25
SECTION 2.9. TEMPORARY SENIOR NOTES..................................................................... 25
SECTION 2.10. CANCELLATION............................................................................... 25
SECTION 2.11. DEFAULTED INTEREST......................................................................... 26
SECTION 2.12. DEPOSIT OF MONEYS.......................................................................... 26
SECTION 2.13. CUSIP NUMBER............................................................................... 26
SECTION 2.14. PAYMENTS TO HOLDERS........................................................................ 27
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES..................................................... 27
SECTION 2.16. RECORD DATE................................................................................ 28
SECTION 2.17. PORTALMARKET............................................................................... 29
ARTICLE 3
REDEMPTION
SECTION 3.1. NOTICES TO TRUSTEE......................................................................... 29
SECTION 3.2. SELECTION BY TRUSTEE OF SENIOR NOTES TO BE REDEEMED........................................ 29
SECTION 3.3. NOTICE OF REDEMPTION....................................................................... 29
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION............................................................. 30
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE................................................................ 30
SECTION 3.6. SENIOR NOTES REDEEMED IN PART.............................................................. 31
SECTION 3.7. OPTIONAL REDEMPTION........................................................................ 31
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF SENIOR NOTES.................................................................... 31
SECTION 4.2. REPORTS.................................................................................... 32
SECTION 4.3. WAIVER OF STAY, EXTENSION OR USURY LAWS.................................................... 33
SECTION 4.4. COMPLIANCE CERTIFICATE..................................................................... 33
SECTION 4.5. TAXES...................................................................................... 34
SECTION 4.6. LIMITATION ON ADDITIONAL INDEBTEDNESS...................................................... 34
SECTION 4.7. LIMITATION ON RESTRICTED PAYMENTS.......................................................... 34
SECTION 4.8. LIMITATION ON CERTAIN ASSET SALES.......................................................... 36
SECTION 4.9. LIMITATION ON TRANSACTIONS WITH AFFILIATES................................................. 38
SECTION 4.10. LIMITATIONS ON LIENS....................................................................... 38
SECTION 4.11. LIMITATIONS ON INVESTMENTS................................................................. 39
SECTION 4.12. LIMITATION ON CREATION OF SUBSIDIARIES..................................................... 39
SECTION 4.13. LIMITATION ON SUBSIDIARIES AND UNRESTRICTED SUBSIDIARIES................................... 39
SECTION 4.14. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.............. 40
SECTION 4.15. RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY EQUITY INTEREST............................. 41
SECTION 4.16. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS............................................. 41
SECTION 4.17. LINE OF BUSINESS........................................................................... 42
SECTION 4.18. LIMITATION ON STATUS AS INVESTMENT COMPANY................................................. 42
SECTION 4.19. CORPORATE EXISTENCE........................................................................ 42
SECTION 4.20. MAINTENANCE OF OFFICE OR AGENCY............................................................ 42
SECTION 4.21. MAINTENANCE OF PROPERTIES AND INSURANCE; BOOKS AND RECORDS; COMPLIANCE WITH LAWS........... 43
SECTION 4.22. FURTHER ASSURANCES TO THE TRUSTEE.......................................................... 43
SECTION 4.23. COLLATERAL DOCUMENTS....................................................................... 44
SECTION 4.24. CONDUCT OF CERTAIN BUSINESSES.............................................................. 44
SECTION 4.25. CONDITION SUBSEQUENT....................................................................... 45
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.1. MERGER, CONSOLIDATION OR SALE OF ASSETS.................................................... 45
SECTION 5.2. SUCCESSOR PERSON SUBSTITUTED............................................................... 46
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.......................................................................... 46
SECTION 6.2. ACCELERATION............................................................................... 48
SECTION 6.3. OTHER REMEDIES............................................................................. 48
SECTION 6.4. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT................................................... 49
SECTION 6.5. CONTROL BY MAJORITY........................................................................ 49
SECTION 6.6. LIMITATION ON SUITS........................................................................ 49
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT....................................................... 50
</TABLE>
ii
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<TABLE>
<S> <C> <C>
SECTION 6.8. COLLECTION SUIT BY TRUSTEE................................................................. 50
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM........................................................... 50
SECTION 6.10. PRIORITIES................................................................................. 51
SECTION 6.11. UNDERTAKING FOR COSTS...................................................................... 51
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES......................................................... 51
ARTICLE 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.......................................................................... 52
SECTION 7.2. RIGHTS OF TRUSTEE.......................................................................... 53
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE............................................................... 53
SECTION 7.4. TRUSTEE'S DISCLAIMER....................................................................... 54
SECTION 7.5. NOTICE OF DEFAULTS......................................................................... 54
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.............................................................. 54
SECTION 7.7. COMPENSATION AND INDEMNITY................................................................. 54
SECTION 7.8. REPLACEMENT OF TRUSTEE..................................................................... 55
SECTION 7.9. SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER OR CONVERSION................................... 56
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.............................................................. 56
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.......................................... 57
SECTION 7.12. PAYING AGENTS.............................................................................. 57
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.1. WITHOUT CONSENT OF HOLDERS................................................................. 57
SECTION 8.2. WITH CONSENT OF HOLDERS.................................................................... 58
SECTION 8.3. COMPLIANCE WITH TRUST INDENTURE ACT........................................................ 59
SECTION 8.4. REVOCATION AND EFFECT OF CONSENTS.......................................................... 59
SECTION 8.5. NOTATION ON OR EXCHANGE OF SENIOR NOTES.................................................... 60
SECTION 8.6. TRUSTEE TO SIGN AMENDMENTS, ETC............................................................ 60
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.1. DISCHARGE OF INDENTURE..................................................................... 61
SECTION 9.2. LEGAL DEFEASANCE........................................................................... 61
SECTION 9.3. COVENANT DEFEASANCE........................................................................ 62
SECTION 9.4. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE...................................... 62
SECTION 9.5. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS................................................................... 64
SECTION 9.6. REINSTATEMENT.............................................................................. 64
SECTION 9.7. MONEYS HELD BY PAYING AGENT................................................................ 64
SECTION 9.8. MONEYS HELD BY TRUSTEE..................................................................... 65
SECTION 9.9. SENIOR NOTE COLLATERAL..................................................................... 65
</TABLE>
iii
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<TABLE>
<S> <C> <C>
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.1. SECURITY................................................................................... 65
SECTION 10.2. RECORDING AND OPINIONS..................................................................... 66
SECTION 10.3. RELEASE OF COLLATERAL...................................................................... 67
SECTION 10.4. PROTECTION OF THE TRUST ESTATE............................................................. 68
SECTION 10.5. CERTIFICATES OF THE COMPANY................................................................ 69
SECTION 10.6. CERTIFICATES OF THE TRUSTEE................................................................ 69
SECTION 10.7. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS......... 69
SECTION 10.8. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS............ 69
SECTION 10.9. TERMINATION OF SECURITY INTEREST........................................................... 70
SECTION 10.10. COOPERATION OF TRUSTEE..................................................................... 70
SECTION 10.11. COLLATERAL AGENT........................................................................... 71
SECTION 10.12. LOCATION OF COLLATERAL..................................................................... 71
ARTICLE 11
GUARANTEE OF SENIOR NOTES
SECTION 11.1. GUARANTEE.................................................................................. 71
SECTION 11.2. EXECUTION AND DELIVERY OF GUARANTEES....................................................... 72
SECTION 11.3. LIMITATION OF GUARANTEE.................................................................... 73
SECTION 11.4. RELEASE OF GUARANTOR....................................................................... 73
SECTION 11.5. ADDITIONAL GUARANTORS...................................................................... 73
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS............................................................... 74
SECTION 12.2. NOTICES.................................................................................... 74
SECTION 12.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS............................................... 75
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT......................................... 75
SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION............................................. 76
SECTION 12.6. WHEN TREASURY SENIOR NOTES DISREGARDED..................................................... 76
SECTION 12.7. RULES BY TRUSTEE AND AGENTS................................................................ 76
SECTION 12.8. BUSINESS DAYS; LEGAL HOLIDAYS.............................................................. 76
SECTION 12.9. GOVERNING LAW.............................................................................. 77
SECTION 12.10. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.............................................. 77
SECTION 12.11. NO RECOURSE AGAINST OTHERS................................................................. 77
SECTION 12.12. SUCCESSORS................................................................................. 78
SECTION 12.13. MULTIPLE COUNTERPARTS...................................................................... 78
SECTION 12.14. TABLE OF CONTENTS, HEADINGS, ETC........................................................... 78
SECTION 12.15. SEPARABILITY............................................................................... 78
</TABLE>
iv
<PAGE> 6
EXHIBITS
Exhibit A Form of Guarantee Notation
Exhibit B Form of Senior Note
Exhibit C Global Notes Legend
SCHEDULE 1
v
<PAGE> 7
Reconciliation and Tie between Trust
Indenture Act of 1939 and Indenture, dated
as of January 31, 1999
Trust Indenture Indenture
Act Section Section
Section 310 (a)(1)................................................7.10
(a)(2)...................................................7.10
(a)(3)...................................................N.A.
(a)(4)...................................................N.A.
(b).................................................7.8; 13.2
(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)....................................................2.5
(b)......................................................12.3
(c)......................................................12.3
Section 313 (a)....................................................7.6
(b)(1)...................................................N.A.
(b)(2)....................................................7.6
(c).................................................7.6; 12.2
(d).......................................................7.6
Section 314 (a).........................................4.2; 4.4; 12.2
(b)......................................................N.A.
(c)(1).............................................12.4; 12.5
(c)(2).............................................12.4; 12.5
(c)(3).............................................12.4; 12.5
(d)......................................................N.A.
(e)......................................................11.5
(f)......................................................N.A.
Section 315 (a)...............................................7.1; 7.2
(b).................................................7.5; 12.2
(c).......................................................7.1
(d).............................................6.5; 7.1; 7.2
(e)......................................................6.11
Section 316 (a)(last sentence)....................................12.6
(a)(1)(A).................................................6.5
(a)(1)(B).................................................6.4
(a)(2)....................................................8.2
(b).......................................................6.7
<PAGE> 8
Trust Indenture Indenture
Act Section Section
(c)......................................................8.04
Section 317 (a)(1).................................................6.8
(a)(2)....................................................6.9
(b)......................................................7.12
Section 318(a)....................................................12.1
N.A. means Not Applicable
----------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be part of the Indenture.
Attention should also be directed to TIA Section 318(c), which provides
that the provisions of TIA Sections 310 to and including 317 of the TIA are a
part of and govern every qualified indenture, whether or not physically
contained therein.
<PAGE> 9
THIS INDENTURE is dated as of January 31, 1999, among RAINTREE
HEALTHCARE CORPORATION, a Delaware corporation, as Issuer (the "Company"), the
GUARANTORS listed on Schedule 1 hereto and Norwest Bank Minnesota, 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 (as hereinafter defined) of the
Senior Notes, which are unconditionally guaranteed by the Guarantors.
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.
"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 total amount of 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.
"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.
<PAGE> 10
"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
$500,000 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
5.1 (except as otherwise provided in Section 4.8 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
2
<PAGE> 11
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 and 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 and 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 and 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.
"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.
"Casualty" with respect to any Collateral, means loss of,
damage to or destruction of all or any part of such Collateral.
"Collateral" means all the capital stock and assets of Quest
Pharmacies, Inc. ("Quest") and Sunbelt Therapy Management Services, Inc., an
Arizona corporation ("Sunbelt"), and Sunbelt's Subsidiaries including, but not
limited to, assets defined as "Collateral" in the Collateral Documents.
"Collateral Agent" means any person appointed by the Trustee
as a collateral agent hereunder.
3
<PAGE> 12
"Collateral Documents" means the Pledge Agreement, the
Security Agreement, UCC-1s, together with all related filings, assignments and
instruments, as such agreements, filings, assignments and instruments may from
time to time be amended, supplemented or otherwise modified in accordance with
the terms of this Indenture and such other agreements.
"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; 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. Following the date of this Agreement, the
Company shall submit a Company Request, if needed, on at least a quarterly
basis, based on the need to issue additional Senior Notes under this Indenture
due to the resolution of Class 11 Allowed General Unsecured Claims as defined
and as set forth in the Plan of Reorganization. At its discretion, the Company
may submit Company Requests more frequently.
"Condemnation" means any taking of the Collateral or any part
thereof, in or by condemnation, expropriation or similar proceeding, eminent
domain proceedings, seizure or forfeiture, pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
the Collateral, or any part thereof, by a governmental authority.
"Condemnation Proceeds" means any awards, proceeds, payment or
other compensation arising out of a Condemnation.
"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) Consolidated Rental Payments, except
for lease payments relating to the Omega Master Lease, 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
4
<PAGE> 13
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 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, (iii)
Consolidated Rental Payments, except for lease payments relating to the Omega
Master Lease, and (iv) the aggregate of all mandatory scheduled payments,
prepayments and sinking fund payments with respect to principal paid or accrued
by such Person in respect of Indebtedness, including payments in the nature of
principal under Capitalized Leases Obligations, except for those leases relating
to the Omega Master Lease (as defined in the Plan of Reorganization).
"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.
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<PAGE> 14
"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.
"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).
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<PAGE> 15
"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, (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 Office" 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 Norwest Bank Minnesota, National Association, Sixth & Marquette, Minneapolis,
MN 55479, Attention: Corporate Finance Trust Services.
"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.
"Designated Facility" means any nursing facility, assisted and
independent living center or other asset of the Company designated as a
Designated Facility pursuant to an Officers' Certificate certifying that such
facility had negative operating income based on the financial statements of such
facility for the previous fiscal year.
"Designated Noncash Consideration" means the Fair Market Value
of noncash consideration received by the Company or one of its Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by an Officer of the Company, less the amount of cash
or Temporary Cash Investments received in connection with a subsequent sale of
such Designated Noncash Consideration.
"Disclosure Statement" means the Disclosure Statement in
Support of Debtors' First Amended Joint Plan of Reorganization dated October 15,
1998.
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<PAGE> 16
"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 mandatory 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.
"Equity Interests" means, with respect to any Person, any and
all shares or other equivalents (however designated) of capital stock,
partnership interests 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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"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.
"Global Note" means a Senior Note evidencing all or a part of
the Senior Notes issued to and registered in the name of the Depository and
bearing the legend prescribed in Exhibit C.
"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 11 hereof, substantially in the form set forth as part of Exhibit A.
"Guarantor" means each of the Subsidiaries of the Company on
the Issue Date; provided, however, that Amberwood Court, Inc., The Arbors
HealthCare Center, Inc., Britwill Investments-II, Inc., BritWill Indiana
Partnership, Brookshire House, Inc., Christopher Nursing Center, Inc., Los
Arcos, Inc., Pueblo Norte, Inc., BritWill Investments - I, Inc., Cedar Care,
Inc., Sherwood Healthcare Corporation and Rio Verde Nursing Center, Inc. are
excluded from this definition.
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<PAGE> 17
"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,"
"incurable," 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 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 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
9
<PAGE> 18
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.
"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.
"Initial Principal Payment" means $2,000,000, which shall
reduce the principal due with respect to the Senior Note.
"Initial Principal Payment Date" means January 1, 2002.
"Insurance Proceeds" means any payment, proceeds or other
amounts received at any time under any insurance policy as compensation in
respect of a Casualty provided, that, business interruption insurance proceeds
shall not constitute Insurance Proceeds.
"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 6.1(7)
and (8) or which would have accrued but for any such event.
"Interest Payment Date" means (1) each January 1 and July 1
commencing on July 1, 1999 through January 1, 2001, (2) January 1, 2002, and (3)
January 1, 2003.
"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
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<PAGE> 19
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.
"IRF Note" means the Indiana Returned Facilities Note in the
amount of $3 million payable by BritWill Indiana Partnership, an Arizona general
partnership, to Omega HealthCare Investors, Inc.
"Issue Date" means the Effective Date of the Plan of
Reorganization.
"Kremser Notes" means those certain notes dated January 31,
1999 issued by the Company and certain subsidiaries to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK Meadows
Investments, L.L.C., and any amendments, replacements or refinancings of such
notes.
"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).
"Loss Event" means a Condemnation or Casualty involving an
actual or constructive total loss or agreed or compromised actual or
constructive total loss of all or substantially all of any Property constituting
Collateral, except where the Company reasonably concludes that Restoration of
such Property can be made in accordance with this Indenture and elects to do so
in an Officers' Certificate delivered to the Trustee within 90 days of the
relevant Condemnation or Casualty.
"Maturity Date" means January 1, 2003.
"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
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<PAGE> 20
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).
"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.
"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;
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<PAGE> 21
(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 (x) $15 million plus (y) $15 million less the amount
of Permitted Secured Indebtedness;
(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;
(vii) Refinancing Indebtedness; and
(viii) Any Indebtedness provided for in the Plan of
Reorganization, including the addition of the Brit-Texas Facilities to
the Omega New Master Lease (as such terms are defined in the Plan of
Reorganization), but excluding the New Line of Credit (as defined in
the Plan of Reorganization).
"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 Sections 4.17 and 5.1 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 $5
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
4.8 hereof;
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<PAGE> 22
(vii) Investments in the Senior Notes;
(viii) Investments existing on the Issue Date;
(viii) Investments in connection with a Permitted Mortgage
Financing; and
(ix) Investments provided for in the Plan of
Reorganization.
"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; provided that if such liens are on any Collateral, that
such liens are either collaterally assigned to the Trustee or subordinated to
the lien in favor of the Trustee securing the Senior Notes, (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 and are not paid by an unaffiliated insurance
carrier pursuant to any insurance policy maintained by the Company, (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 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 a 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
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<PAGE> 23
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
indirectly acquired with the proceeds of such Acquisition Indebtedness and any
improvements thereto (unless such Liens are otherwise Permitted Liens), (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, (xv) Liens securing a Permitted Mortgage Financing, (xvi) Liens in
favor of the Trustee, and (xvii) any Lien provided for in the Plan of
Reorganization.
"Permitted Mortgage Financing" means a transaction in which
(i) the Company and/or certain of its Subsidiaries would transfer certain assets
to one or more Unrestricted Subsidiaries, (ii) in consideration for such
transfer of assets, the Company would retain, directly or indirectly, 100% of
the Equity Interests in such Unrestricted Subsidiary or Subsidiaries (iii) such
Unrestricted Subsidiary or Subsidiaries would use the assets contributed by the
Company and/or its Subsidiaries as security for a mortgage refinancing and (iv)
all net proceeds received by such Unrestricted Subsidiary or Subsidiaries in
such mortgage refinancing would be dividended or otherwise transferred to the
Company and applied to redeem the Senior Notes in the manner contemplated in
this Indenture.
"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, shall not exceed $15 million.
"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).
"Plan of Reorganization" means that certain Debtors' First
Amended Joint Plan of Reorganization, dated October 15, 1998, as amended,
modified and supplemented.
"Pledge Agreements" means that certain Pledge Agreement
executed by the Company to encumber certain stock and other property in favor of
the Trustee, on behalf of the Holders of Notes.
"Preferred Equity Interest" means any Equity Interest of a
Person, however designated, which entitles the holder thereof to a preference
with respect to dividends,
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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.
"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.
"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.
"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) 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) such Refinancing
Indebtedness is in an aggregate principal amount that is less than or equal to
the aggregate principal 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.
"Related Business" means the businesses carried out by the
Company or a Restricted Subsidiary on the date hereof and any reasonable
extensions thereof, including, without limitation, the ownership, operation and
management of nursing or assisted and independent living facilities.
"Restoration" means the restoration of all or any portion of
the Collateral in connection with any destruction or condemnation thereof.
"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
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Subsidiary thereof 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 or
any of the Kremser and Whiteland Notes or (iv) the making of any Investment or
guarantee of any Investment in any Person other than a Permitted Investment. 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.
"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.
"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 contemplation of such leasing and (ii) would constitute an Asset
Sale if such Property had been sold in an outright sale thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement
executed by Quest Pharmacies, Inc., an Arizona corporation, and Sunbelt Therapy
Management Services, Inc., an Arizona corporation and its Subsidiaries, to
encumber certain property in favor of the Trustee, on behalf of the Holders of
Senior Notes.
"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, any notes issued in accordance with
Section 2.2 hereof.
"Sharing Agreement" means that certain agreement dated as of
January 31, 1999 among the Trustee, BritWill Indiana Partnership, BritWill
HealthCare Company, the Company (collectively, the "IRF Obligors") and Omega
Healthcare Investors, Inc., a Maryland corporation ("Omega"), whereby if certain
conditions in the Sharing Agreement are satisfied, payments of principal by the
IRF Obligors with respect to the IRF Note shall be shared pari passu among Omega
and the Holders.
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"Subordinated Indebtedness" means Indebtedness of any Person
which is expressly subordinated in right of payment to any other Indebtedness of
such Person.
"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.
"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 8.3 hereof).
"Temporary Cash Investments" means (i) Investments in
marketable, direct obligations issued or fully guaranteed by the United States
of America, or of 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 totaling 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).
"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
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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.
"UCC-1s" means those financing statements and fixture filings
filed by the Company or any Guarantor in connection with any of the Collateral
Documents.
"Unrestricted Subsidiary" means (i) any Subsidiary of an
Unrestricted Subsidiary and (ii) any Subsidiary of the Company which shall have
been designated 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 4.13 hereof and an Unrestricted Subsidiary may be designated as a
Subsidiary (but only if such classification is in compliance with the definition
of "Subsidiary" contained in this Section 1.1). 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.
"Whitehead Notes" mean those certain notes dated January 31,
1999 issued by Company to UNHC Real Estate Holdings, Ltd. and to BritWill
Investment Company, Ltd. and any replacements, amendments or refinancing.
"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.
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Section 1.2. Other Definitions.
The definitions of the following terms may be found in the
Sections indicated as follows:
Term Defined in Section
"Agent Members" 2.15
"Bankruptcy Law" 6.1
"Business Day" 12.8
"Covenant Defeasance" 9.3
"Custodian" 6.1
"Event of Default" 6.1
"Legal Defeasance" 9.2
"Legal Holiday" 12.8
"Paying Agent" 2.3
"Physical Notes" 2.1
"Registrar" 2.3
"Required Filing Date" 4.2
"transfer" 5.1
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 Holder.
"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.
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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;
(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;
(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; and
(7) provisions apply to successive events and
transactions.
ARTICLE 2
THE SENIOR NOTES
Section 2.1. Dating; Incorporation of Form in Indenture.
The aggregate principal amount of Senior Notes which may be
delivered under this Indenture is limited to $26 million, subject to adjustment
as set forth in Section 8.1(7). The Senior Notes may be issued from time to
time. Any Senior Notes issued after the date of this Indenture shall be issued
pursuant to a Company Request. The Senior Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B 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, usage,
or agreements to which the Company or any Guarantor is subject. 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.
One or more permanent Global Notes issued and delivered
hereunder may be in registered form, substantially in the form set forth in
Exhibit B, having the legend set forth in Exhibit C, may be issued to the
Depository, to the extent such Depository is the Registered Holder of the
applicable Senior Notes. Otherwise, Senior Notes hereunder may be issued in the
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form of certificated Senior Notes in registered form in substantially the form
set forth in Exhibit B (the "Physical Notes").
The terms and provisions contained in the Senior Notes and the
Guarantees shall constitute, and are hereby expressly made, a part of this
Indenture and the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
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 up to $26
million, subject to adjustment pursuant to Section 8.1(7). The Trustee shall
issue Senior Notes 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 2.7 hereof. The Senior Notes shall be issuable only in
registered form without coupons and only in denominations of $100 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.
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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 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. The Company or 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 7.7. 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, premium if
any, and interest on any Senior Notes, the Company shall deposit with the Paying
Agent a sum sufficient to pay such principal, premium if any, and interest so
becoming due. Each Paying Agent shall hold in trust for the benefit of
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 Guarantor (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 6.1(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
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in such form and as 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
2.3 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
the 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
2.9, 3.6, 4.18 or 8.5 hereof. The Trustee shall not be required to register
transfers of Senior Notes or to exchange Senior 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 a 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.
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
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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 2.8 as not outstanding.
If a Senior Note is replaced pursuant to Section 2.7, 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 12.6, 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 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 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
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destruction to the Company. Subject to Section 2.7 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 any 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 4.1 hereof, to the
persons who are Noteholders on a subsequent special record date.
The Company shall fix the special record date and payment date for
payment of such defaulted amounts 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, as required, on (i) the
Initial Principal Payment Date, (ii) each Interest Payment Date, (iii) each date
that a payment is to be made pursuant to the Sharing Agreement, and (iv) the
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 Initial Principal Payment Date, Interest Payment Date, date of any
payment pursuant to the Sharing Agreement, or Maturity Date, as the case may be,
in a timely manner which permits the Trustee to remit payment to the Holders at
such times. 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. 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 may 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.
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Section 2.14. Payments to Holders.
Notwithstanding any provisions of this Indenture and the Senior Notes
to the contrary:
(a) Except for any payments to be made on a Redemption Date or the
Maturity Date, 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,
by check mailed to the Holder, at the address shown in the registrar of the
Senior Notes maintained by the Registrar pursuant to Section 2.3 hereof; or
(b) 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 10:00 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(b)
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(b) 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.
All payments made on a Redemption Date are subject to Section 2.8 and
Article 3 hereof. No later than fifteen (15) days prior to the Maturity Date,
the Trustee shall notify the Holder, at the address shown in the registrar of
the Senior Notes maintained by the Registrar pursuant to Section 2.3 hereof,
that the Company expects that the final installment of principal of and interest
on the Senior Notes will be paid on the Maturity Date. Such notice shall specify
that such final installment will be payable only upon presentation and surrender
of such Senior Note and shall specify the place where such Senior Notes may be
presented and surrendered for payment of such installment. Additionally, in
accordance with Section 2.8, such Senior Notes shall cease to be outstanding.
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 C.
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
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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) 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. Record Date.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided in TIA
Section 316(c).
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Section 2.17. Portal Market.
The Company shall use its best efforts to have the Senior Notes
designated for trading on the Portal Market.
ARTICLE 3
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Senior Notes pursuant to Section 3.7
hereof, (i) at least 30 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 3.7
hereof.
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 $100. Senior Notes and portions thereof the Trustee
selects shall be redeemed in amounts of $100 or whole multiples of $100. 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 15 days, but no more than 30 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 last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.3 hereof.
The notice shall identify the Senior Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
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(1) the Redemption Date;
(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 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 3.3 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.
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
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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 3.4, 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.
The Company may redeem the Senior Notes, in whole or in part, at any
time at a redemption price equal to 100% of the principal amount thereof, plus
any accrued and unpaid interest to the Redemption Date.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Senior Notes.
The Company shall pay the principal of, premium, if any, and interest,
which begins accruing on January 1, 1999, on the Senior Notes on the dates and
in the manner provided in the Senior Notes, the Sharing Agreement and this
Indenture, including the payment of the Initial Principal Payment on the Initial
Principal Payment Date. To the extent that the Company issues Senior Notes after
the Issue Date, the payment of interest on the first Interest Payment Date
subsequent to the issuance of such Senior Notes shall include interest accrued
from January 1, 1999 on such Senior Notes. An installment of principal, premium,
if any, 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.
If the Sharing Conditions (as set forth in the Sharing Agreement) have
been fulfilled, under the Sharing Agreement, the Holders are entitled to share
in any principal payments made by the IRF Obligors with respect to the IRF Note
(the "Shared Payments"), pari passu with Omega. Together with Holders' portion
of any Shared Payment, the Company shall submit to
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the Trustee an accounting of the Holders' portion of such Shared Payment.
Additionally, the Company shall designate the Holders' Shared Payment as either
interest or principal.
The Company shall pay additional 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 .75% per annum.
Any Shared Payments designated as interest by the Company shall be
deposited by the Company and paid to the Holders by the Trustee in accordance
with Section 2.12(iv) and 2.14. If any Shared Payments are designated as
principal by the Company, the Company shall further instruct the Trustee in
writing that such principal amount:
(i) shall be treated as part of the Initial Principal Payment,
in which case such principal amount shall be deposited by the Company
and paid to the Holders in accordance with Sections 2.12(i) and 2.14;
(ii) shall be treated as part of the repayment of principal on
the Maturity Date, in which case such principal amount shall be
deposited by the Company and paid to the Holders in accordance with
Sections 2.12(iv) and 2.14; or
(iii) shall be used to prepay principal pro rata among Holders
of the Senior Notes. Following any such pro rata prepayment of
principal, the records of the Trustee and the Registrar with respect to
the principal amount then outstanding of each Senior Note shall be
binding on the Holder thereof absent manifest error.
Section 4.2. Reports.
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 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
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).
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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 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 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 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 4.2
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.
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(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' 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.
Section 4.6. Limitation on Additional Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur (as defined herein) any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness; provided, however,
that the Company or its Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) (a) if (i) 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 1:4 to 1; and (ii) 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 and (b) in connection with a Permitted Mortgage Financing.
The Company will not, and will not permit any of its Subsidiaries to,
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 Subsidiary 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 or any Subsidiary 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,
other than a Restricted Payment in connection with the Company's exercise of an
option to acquire 25% of the Common Stock of Quest, 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
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Indebtedness (other than Permitted Indebtedness) under Section 4.6 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, and (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 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. 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 will be valued at its fair market value.
The provisions of this Section 4.7 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 an 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 Net
Proceeds of such Equity Interests so used shall no 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 and (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, provided, however, that in the case of the
immediately preceding clauses (ii) and (iii), 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 this subparagraph (c), amounts
expended pursuant to clauses (i) and (ii) of the immediately preceding paragraph
shall be included, but without duplication, in such calculation.
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
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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, plus 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 shall 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 4.7 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.
(a) Neither the Company nor any of its Subsidiaries will
consummate or permit, directly or indirectly, any Asset Sale, unless (i) the
Company or such Subsidiary, as the case may be, receives consideration at the
time of each such Asset Sale at least equal to the Fair Market Value of the
Property subject to such Asset Sale, (ii) (x), in the case of an Asset Sale of
Property constituting Collateral, at least 33% of the consideration received by
the Company or such Subsidiary is in the form of cash or Temporary Cash
Investments and the balance shall be in the form of obligations due no later
than two years after the Asset Sale, (y) in the case of an Asset Sale of a
Designated Facility, at least 20% of such consideration is in the form of cash
or Temporary Cash Investments, and (z) in the case of all other Asset Sales, at
least 50% of the consideration is in the form of cash or Temporary Cash
Investments, (iii) the Company shall cause the Asset Sale Proceeds received in
respect of a sale of Property Constituting Collateral to become Collateral as
and when received by the Company or by any Subsidiary, (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such proposed
Asset Sale or would result as a consequence of such Asset Sale and (v) such
Asset Sale will not materially adversely affect or materially impair the value
of the remaining Collateral or materially interfere with the Trustee's ability
to realize such value and will not materially impair the maintenance and
operation of the remaining Collateral; provided that the amount of (a) any notes
or other obligations received by the Company or such Subsidiary from such
transferee that are converted by the Company or such Subsidiary into cash (to
the extent of the cash received) within 30 days following the closing of such
Asset Sale, and (b) in the case of an Asset Sale of Property not constituting
Collateral, any Designated Noncash Consideration received by the Company or any
of its Subsidiaries in such Asset Sale having an aggregate Fair Market Value,
taken together with all other Designated Noncash Consideration received pursuant
to this clause (b) that is at that time outstanding, not to exceed $3 million at
the time of the receipt of such Designated Noncash Consideration being measured
at the time received and without giving
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effect to subsequent changes in value) shall be deemed to be cash for purposes
of clause (ii) of this provision.
(b) With respect to any Asset Sale Proceeds in the form of
cash or Temporary Cash Investments (including cash collected on any notes),
Insurance Proceeds or Condemnation Proceeds related to Collateral (the
"Collateral Proceeds Amount"), the Company shall make an offer (a "Collateral
Proceeds Offer") for up to a maximum principal amount (expressed as an integral
multiple of $100) of Senior Notes equal to the Collateral Proceeds Amount at a
purchase price equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate amount
of Senior Notes tendered pursuant to such Collateral Proceeds Offer is less than
the amount of Collateral Proceeds, the Company may use such portion of the
Collateral Proceeds that is not used to purchase Senior Notes tendered for
general corporate purposes not inconsistent with the Senior Notes or this
Indenture. If the aggregate principal amount of the Senior Notes tendered
pursuant to such Collateral Proceeds Offer is more than the amount of the
Collateral 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 Collateral Proceeds Offer and the closing of any
repurchase of Senior Notes tendered pursuant to such Collateral Proceeds Offer,
the amount of Collateral Proceeds Amount shall be deemed to be zero.
All Asset Sale Proceeds from Asset Sales of Property constituting
Collateral, Insurance Proceeds and Condemnation Proceeds from Loss Events and
non-cash consideration from Asset Sales of Property constituting Collateral,
including all Collateral Proceeds Amounts, shall be (i) subject to the perfected
first priority Lien in favor of the Trustee subject to Liens permitted under the
Collateral Documents in respect of the relevant item of Collateral, and (ii)
held in trust for the benefit of the holders of the Senior Notes and the
Trustee.
If the Company is required to make a Collateral Proceeds Offer, the
Company shall mail, within 30 days following the date on which the Company
receives any Collateral Proceeds Amounts, 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 Collateral Proceeds Amount 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 Collateral Proceeds Amount 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 permitted under Section 5.1 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,
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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.
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 an independent
committee of its Board of Directors certifying that such Affiliate Transaction
complies with clause (iii) or (iv) above, as the case may be.
(b) The foregoing provisions will not apply to (i) the payment
of reasonable annual compensation to directors or executive officers of the
Company, (ii) the purchase in the ordinary course of business of, supplies,
services and the like from the Company or any Subsidiary; and (iii) the
continued performance of transactions with Affiliates disclosed in the Plan of
Reorganization.
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
obligations are no longer secured by a Lien or
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(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 4.7 hereof.
Section 4.12. Limitation on Creation of Subsidiaries.
The Company shall not create or acquire, nor permit any of its
Subsidiaries, except those Subsidiaries which are parties to the Omega Master
Lease, 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
shareholders' equity in excess of $5,000, executes a Guarantee in the form
included as part of Exhibit A to this Indenture and reasonably satisfactory in
form and substance to the Trustee (and with 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).
Section 4.13. 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 (including any
such Subsidiary formed in connection with a Permitted Mortgage Financing)) to be
an Unrestricted Subsidiary, provided, however, that other than with respect to a
Subsidiary formed in connection with a Permitted Mortgage Financing (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 4.7
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 4.6 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 (for purposes 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
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(iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer.
(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 4.14. 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
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such Permitted Lien (other than a Lien on cash not constituting proceeds of
non-cash property subject 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 (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 and (v) any matter provided for in the Plan of
Reorganization.
Section 4.15. Restriction on Sale and Issuance of Subsidiary Equity Interest.
The Company and its Subsidiaries will not issue or sell, and will not
permit any other 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 4.16. 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 4.6 hereof.
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Section 4.17. 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, 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 4.18. 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 4.19. 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.
Section 4.20. 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 12.2.
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
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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 initially appoints the Trustee as Registrar, Paying Agent
and Agent for service of notices and demands in connection with the Senior Notes
and this Indenture.
Section 4.21. 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 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 other-wise) of the Company and its
Subsidiaries taken as a whole.
Section 4.22. Further Assurances to the Trustee.
The Company shall (and shall cause each of its Subsidiaries to do)
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates,
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financing statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other instruments as may
be required from time to time in order (i) to carry out more effectively the
purposes of the Collateral Documents, (ii) to subject to the Liens created by
any of the Collateral Documents any of the properties, rights or interest
required to be encumbered thereby, (iii) to perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and the Liens
intended to be created thereby, and (iv) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm to the Trustee any of the rights
granted or now or hereafter intended by the parties thereto to be granted to the
Trustee or under any other instrument executed in connection therewith or
granted to the Company under the Collateral Documents or under any other
instrument executed in connection therewith.
Section 4.23. Collateral Documents.
None of the Company or any of its Subsidiaries will amend, waive or
modify, or take or refrain from taking any action that has the effect of
amending, waiving or modifying, any provision of the Collateral Documents or
engaging in any transfer of assets from a company whose capital stock and assets
constitute Collateral or any restructuring of the affairs of such a company and
its subsidiaries to the extent that such amendment, waiver, modification, action
or restructuring could have an adverse effect on the rights of the Trustee or
the Holders, provided, that (i) the Collateral may be released or modified in an
Asset Sale as expressly authorized in this Indenture or in the Collateral
Documents; (ii) any Guarantee and pledges may be released in an Asset Sale as
expressly provided in this Indenture or in the Collateral Documents; and (iii)
this Indenture and any of the Collateral Documents may be otherwise amended,
waived or modified as set forth under Article 9 hereof.
Section 4.24. Conduct of Certain Businesses.
The Company will not and will not permit any of its Subsidiaries to,
engage in any of the pharmacy or therapy businesses of the type conducted as of
the date of this Indenture by Quest or Sunbelt and their respective
Subsidiaries, or to hold any material assets necessary or useful in connection
with the conduct of any such businesses, except through a Subsidiary all the
stock and assets of which shall be subject to a perfected first priority Lien in
favor of the Trustee or the Collateral Agent, for the benefit of the holders of
the Senior Notes, pursuant to security documents substantially similar to the
Collateral Documents and otherwise in form and substance satisfactory to the
Trustee.
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Section 4.25. Condition Subsequent.
No later than 14 days after the Issue Date, (i) Sunbelt shall have
entered into a pledge agreement with the Trustee or the Collateral Agent
pursuant to which Sunbelt grants the Trustee or the Collateral Agent a Lien on
the stock of each of Sunbelt's Subsidiaries, (ii) the Company and Sunbelt shall
have delivered to the Trustee or the Collateral Agent such financing statements,
stock certificates and otherwise taken all acts appropriate to perfect such
Liens, and (iii) documents granting such Liens shall be in form and substance
satisfactory to the Trustee. Any documents or instruments delivered pursuant to
this Section 4.25 shall be deemed Collateral Documents.
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 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, this Indenture and the Collateral Documents, and the
obligations under this Indenture shall remain in full force and effect; and (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 4.6 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 5.1, 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 5.1 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
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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 Subsidiary in accordance
with Section 5.1 above, the successor corporation formed by such consolidation
or into which the Company or any Subsidiary 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 Subsidiary under this Indenture with the same
effect as if such successor corporation had been named as the Company or such
Subsidiary herein, and thereafter the predecessor corporation shall be relieved
of all obligations and covenants under this Indenture and the Senior Notes.
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 45 days in the payment of any
interest on the Senior Notes after such interest becomes due
and payable;
(3) the Company or any Guarantor fails to comply with
any of the terms or provisions of Sections 4.13 or 5.1 hereof;
(4) the Company or any Guarantor defaults in the
observance or performance of any other provision, covenant or
agreement contained in the Senior Notes, this Indenture, or
the Collateral Documents for 45 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 $5 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 $5 million or
more;
(6) a court of competent jurisdiction renders a final
judgment or judgments which can no longer be appealed for the
payment of money in excess of $5 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
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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; other than the Plan
of Reorganization and the proceedings related thereto:
(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,
(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;
(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.
(9) At any time after the execution and delivery thereof,
(i) any Guarantee for any reason, other than the satisfaction
in full of all Obligations, shall cease to be in full force
and effect (other than in accordance with its terms) or shall
be declared to be null and void, or (ii) a material Collateral
Document shall cease to be in full force and effect (other
than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction
in full of the Obligations or any other termination of such
Collateral Document in accordance with their terms hereof or
thereof) or shall be declared null and void, or the Trustee
(or the Collateral Agent) shall not have or shall cease to have
a valid and perfected first priority Lien on
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any Collateral purported to be covered thereby having a fair market
value, individually or in the aggregate, exceeding $500,000, in each
case for any reason other than the failure of the Trustee or the
Collateral Agent to take any action within its control.
(10) A party holding a Lien on the stock or assets of Quest
takes any action, whether judicial or non-judicial, to enforce such
Lien.
Subject to the provisions of Sections 7.1 and 7.2, 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 6.2. Acceleration.
If an Event of Default (other than an Event of Default arising under
Section 6.1(7) or (8) occurs and is continuing, the Trustee by notice to the
Company or the Holders of not less than 51% 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 51% 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.
In case an Event of Default specified in Section 6.1(7) or (8) 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.
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Section 6.4. Waiver of Defaults and Events of Default.
Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of a majority
in principal amount of the Senior Notes then outstanding have the right to waive
any existing or future 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 except as specifically set forth therein.
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 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 6.7 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 51% 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
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(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 on 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 6.1(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 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 (after giving effect to Section 4.1),
and such further amounts as shall be sufficient to cover the costs and expenses
of collection, including the compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, including all sums due and owing to the
Trustee pursuant to the Indenture including Section 7.7.
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 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 compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under the Indenture, including without
limitation Section 7.7 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
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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, its agents and counsel for amounts due under the
Indenture, including without limitation, Section 7.7 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.
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 6.7 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.
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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 known to the
Trustee:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and the Collateral Documents
and no others and no implied covenants or obligations shall be read
into this Indenture against the Trustee.
(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 and the Collateral Documents (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 7.1.
(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 6.2 and 6.5 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.
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(e) Whether or not therein expressly so provided, paragraphs (a), (b),
(c), (d), (f) and (g) of this Section 7.1 shall govern every provision of this
Indenture that in any way relates to the Trustee or any Agent.
(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.
Section 7.2. Rights of Trustee.
Subject to Section 7.1 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) 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.
(3) 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.
(4) 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.
(5) Before the Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel, or both.
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
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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, the Collateral Documents, the Senior Notes or any Guarantee, 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 pursuant to the terms of this
Indenture or the Collateral Documents, 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 or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Noteholder notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of 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 Section 5.1, 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 compensation as shall be agreed in writing
between the Company and the Trustee (or in the absence of such an agreement,
reasonable compensation) 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,
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expenses and advances incurred or made by it in connection with its duties under
this Indenture, including the 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 them
harmless against, any and all loss, damage, claim, liability, expense (including
but not limited to attorneys' fees and expenses) or taxes (other than taxes
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 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 Indenture,
including without limitation, Sections 7.7 and 9.5, the Trustee and any
predecessor 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 7.7 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 6.1(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;
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(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(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
7.7 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 7.8, the Company's obligations under Section
7.7 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.
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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, the Senior Notes or the Collateral
Documents without notice to or consent of any Noteholder:
(1) to comply with Section 5.1 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;
(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;
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(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Senior Notes; or
(6) to enter into additional or supplemental Collateral
Documents consistent with the terms hereof;
(7) to adjust the aggregate principal amount of Senior Notes
permitted to be issued pursuant to this Indenture so that the aggregate
principal amount of Senior Notes permitted to be issued pursuant to
this Indenture are as provided in the Plan of Reorganization;
(8) to otherwise comply with the terms of the Plan of
Reorganization;
(9) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(10) to add any additional Events of Default.
The Trustee is hereby authorized to join with the Company and the
Guarantors, if any, in the execution of any modification, waiver, amendment or
supplement to this Indenture, the Senior Notes, the Guarantees or the Collateral
Documents 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 modification,
waiver, amendment or supplement to this Indenture, the Senior Notes, the
Guarantees or the Collateral Documents 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, the Senior Notes, the Guarantees or
the Collateral Documents with the written consent of the Holders of not less
than a majority in aggregate principal amount of the outstanding Senior Notes.
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 8.4, without the consent of each Noteholder affected, however, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.4, 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;
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(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;
(7) subordinate in right of payment, or otherwise subordinate,
the Senior Notes or the Guarantees to another Indebtedness or
obligation of the Company or the Guarantors;
(8) take any other action otherwise prohibited by this
indenture to be taken without the consent of each Holder affected
thereby;
(9) release all or substantially all of the Collateral from
the Lien of this Indenture and the Collateral Documents (other than
pursuant to an Asset Sale in compliance with Section 4.8 hereto); or
(10) modify this Section 8.2, Section 6.4 or 6.7.
After a modification, amendment, supplement or waiver under this
Section 8.2 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
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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).
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 Holder and every subsequent Holder.
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 7.1
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.
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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 9.1, 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 2.7 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 2.7, 7.7, 9.5, 9.6 and 9.8 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 9.4 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 9.6
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 9.4 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 2.3, 2.4,
2.5, 2.6, 2.7, 2.8 and 4.20 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 7.7 hereof) and (D) this Article 9. Subject
to compliance with this Article 9, the Company may exercise its option under
this Section 9.2 with respect to the Senior Notes notwithstanding the prior
exercise of its option under Section 9.3 below with respect to the Senior Notes.
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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 4.2 through 4.4 hereof, inclusive, Sections 4.6
through 4.17 hereof, inclusive, Section 4.23 and clause (a)(iii) of Section 5.1
hereof with respect to the outstanding Senior Notes on and after the date the
conditions set forth in Section 9.4 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 9.2 or
Section 9.3 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 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
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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 9.2 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 9.3 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 9.2 above or the Covenant Defeasance under
Section 9.3 hereof (as the case may be) have been complied with and (b)
if any other Indebtedness of the Company shall then be 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.
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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 9.4 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 9.4 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.
Subject to Sections 7.1 and 7.2 hereof, 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 9.4 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 9.1, 9.2 or 9.3 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 Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 9.1 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 9.4
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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,
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 2.3 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.
Section 9.9. Senior Note Collateral.
Upon the Company's exercise under Section 9.1 hereof of the option
applicable under either Section 9.2 or 9.3, the Collateral shall be released
pursuant to Section 10.3 hereof.
ARTICLE 10
COLLATERAL AND SECURITY
Section 10.1. Security.
The due and punctual payment of the principal of, premium, if any, and
interest on the Senior Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, and interest on the Senior Notes and performance of all other obligations
of the Company and the Guarantors to the Holders of Senior Notes or the
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Trustee under this Indenture, the Senior Notes and the Guarantees, according to
the terms hereunder or thereunder, shall be secured by the Collateral, as
provided in the Collateral Documents which the Company and the applicable
parties have entered into simultaneously with the execution of this Indenture
for the benefit of the Holders of Senior Notes. Each Holder of Senior Notes, by
its acceptance thereof, consents and agrees to the terms of the Collateral
Documents (including, without limitation, the provisions providing for
foreclosure and release of Collateral) as the same may be in effect or may be
amended from time to time in accordance with its terms and authorizes and
directs the Trustee to enter into the Collateral Documents and to perform its
obligations and exercise its rights thereunder in accordance therewith. The
Company and the Guarantors shall deliver to the Trustee copies of all documents
executed pursuant to this Indenture and the Collateral Documents and shall do or
cause to be done all such acts and things as may be necessary or proper, or as
may be required by the provisions of the Collateral Documents to assure and
confirm to the Trustee the security interest in the Collateral contemplated
hereby, by the Collateral Documents or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Senior Notes and the Guarantees secured hereby,
according to the intent and purposes herein expressed. The Company shall take,
or shall cause its Subsidiaries to take any and all actions reasonably required
to cause the Collateral Documents to create and maintain, as security for the
obligations of the Company hereunder, a valid and enforceable perfected first
priority Lien in and on all the Collateral, in favor of the Trustee for the
ratable benefit of the Holders, superior to and prior to the rights of all third
Persons and subject to no other Liens.
Section 10.2. Recording and Opinions.
The Company and the Guarantors will cause this Indenture, if necessary,
the applicable Collateral Documents, including any financing statements, all
amendments or supplements to each of the foregoing and any other similar
security documents as necessary, to be registered, recorded and filed and/or
re-recorded, re-filed and renewed in such manner and in such place or places, if
any, as may be required by law in order fully to preserve and protect (a) the
Lien securing the obligations under the Senior Notes and the Guarantees of those
Guarantors that are parties to the Collateral Documents pursuant to the
Collateral Documents and (b) the Lien of the Guarantors that are parties to the
Collateral Documents securing (for the ratable benefit of the Holders of Senior
Notes) the Senior Notes and the Guarantees and to effectuate and preserve the
security of the Holders of Senior Notes and all rights of the Trustee.
The Company, the Guarantors and any other obligor shall furnish to the
Trustee:
(a) Promptly after the execution and delivery of this
Indenture, and promptly after the execution and delivery of any other instrument
of further assurance or amendment, an Opinion of Counsel in the United States
(a) stating that this Indenture, the Senior Notes and the Collateral Documents
and such instruments of further assurance or amendment, if any, are valid,
binding and enforceable obligations of the Company and its Subsidiaries which
are signatories to those agreements, subject to customary qualifications and
exceptions reasonably acceptable to the Trustee, and (b) either (i) stating
that, subject to customary assumptions and exclusions, in the opinion of such
counsel, this Indenture and other applicable Collateral Documents and all other
instruments of further assurance or amendment have been properly recorded,
registered and
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filed to the extent necessary to make effective the Lien intended to be created
by such Indenture and Collateral Documents and reciting the details of such
action or referring to prior Opinions of Counsel in which such details are
given, and stating that, subject to customary assumptions and exclusions, as to
such Indenture and Collateral Documents and such other instruments such
recording, registering and filing are the only recordings, registerings and
filings necessary to give notice thereof and that no re-recordings,
re-registerings or re-filings are necessary to maintain such notice, and further
stating that all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the rights
of the Holders of Senior Notes and the Trustee hereunder and under the
Collateral Documents or (ii) stating that, subject to customary assumptions and
exclusions, in the opinion of such counsel, no such action is necessary to make
any Lien created under any of the Collateral Documents effective as intended by
this Indenture and such Collateral Documents; and
(b) Within 30 days after January 1, in each year beginning
with the year 1999, an Opinion of Counsel, dated as of such date, either (i)
stating that, subject to customary assumptions and exclusions, in the opinion of
such counsel, such action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and re-filing of this
Indenture and all supplemental indentures, financing statements, continuation
statements or other instruments of further assurance as is necessary to maintain
the Lien of this Indenture and the Collateral Documents until the next Opinion
of Counsel is required to be rendered pursuant to this paragraph and reciting
the details of such action or referring to prior Opinions of Counsel in which
such details are given, and stating that all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder and
under the Collateral Documents or (ii) stating that, subject to customary
assumptions and exclusions, in the opinion of such counsel, no such action is
necessary to maintain such Lien, until the next Opinion of Counsel is required
to be rendered pursuant to this paragraph.
(c) The Company shall furnish to the Trustee the certificate
or opinions, as the case may be, required by TIA Section 314(d). Such
certificates or opinions will be subject to the terms of TIA Section 314(e).
Section 10.3. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section
10.3, Collateral may be released from the Lien and security interest created by
this Indenture and the Collateral Documents at any time or from time to time
upon the request of the Company pursuant to an Officers' Certificate certifying
that all terms for release and conditions precedent hereunder and under any
applicable Collateral Document have been met and specifying (A) the identity of
the Collateral to be released and (B) the provision of this Indenture which
authorizes such release. The Trustee shall release (at the sole cost and expense
of the Company) (i) all Collateral that is contributed, sold, leased, conveyed,
transferred or otherwise disposed of; provided, such contribution, sale, lease,
conveyance, transfer or other distribution is or will be in accordance with the
provisions of this Indenture, including, without limitation, the requirement
that the net proceeds from such contribution, sale, lease, conveyance, transfer
or other distribution are or will be applied in accordance with this Indenture
to make payment on the Senior Notes ratably and
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that no Default or Event of Default has occurred and is continuing or would
occur immediately following such release; (ii) Collateral which may be released
with the consent of Holders pursuant to Article 8 hereof; (iii) all Collateral
(except as provided in Article 9 hereof) upon discharge or defeasance of this
Indenture in accordance with Article 9 hereof; (iv) all Collateral upon the
payment in full of all obligations of the Company with respect to the Senior
Notes; and (v) Collateral of a Guarantor whose Guarantee is released pursuant to
Section 11.4 hereof. Upon receipt of such Officers' Certificate, an Opinion of
Counsel and any other opinions or certificates required by this Indenture and
the TIA, the Trustee shall execute, deliver or acknowledge any necessary or
proper instruments of termination, satisfaction or release to evidence the
release of any Collateral permitted to be released pursuant to this Indenture or
the Collateral Documents.
(b) No Collateral shall be released from the Lien and security
interest created by the Collateral Documents pursuant to the provisions of the
Collateral Documents unless there shall have been delivered to the Trustee the
certificates required by this Section 10.3.
(c) The Trustee may release Collateral from the Lien and
security interest created by this Indenture and the Collateral Documents upon
the sale or disposition of Collateral pursuant to the Trustee's powers, rights
and duties with respect to remedies provided under any of the Collateral
Documents.
(d) The release of any Collateral from the terms of this
Indenture and the Collateral Documents shall not be deemed to impair the
security under this Indenture in contravention of the provisions hereof if and
to the extent the Collateral is released pursuant to the terms hereof. To the
extent applicable, the Company shall cause TIA Section 313(b), relating to
reports, and TIA Section 314(d), relating to the release of property or
securities from the Lien and security interest of the Collateral Documents and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Collateral Documents to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an Officer of the company except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
Section 10.4. Protection of the Trust Estate.
Upon prior written notice to the Company and the Guarantors, the
Trustee shall have the power (i) to institute and maintain such suits and
proceedings as it may deem expedient, to prevent any impairment of the
Collateral under any of the Collateral Documents; and (ii) to enforce the
obligations of the Company, the Guarantors or any Restricted Subsidiary under
this Indenture or the Collateral Documents, to institute and maintain such suits
and proceedings as may be expedient to prevent any impairment of the Collateral
under the Collateral Documents and in the profits, rents, revenues and other
income arising therefrom; including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would
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impair any Collateral or be prejudicial to the interests of the Holders of
Senior Notes or the Trustee, to the extent permitted thereunder.
Section 10.5. Certificates of the Company.
The Company shall furnish to the Trustee, prior to each proposed
release of Collateral pursuant to the Collateral Documents (i) all documents
required by TIA Section 314(d) and (ii) an Opinion of Counsel in the United
States, which opinion shall be subject to customary assumptions and exclusions,
to the effect that such accompanying documents constitute all documents required
by TIA Section314(d). The Trustee may, to the extent permitted by Sections 7.1
and 7.2 hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
Section 10.6. Certificates of the Trustee.
In the event that the Company wishes to release Collateral in
accordance with the Collateral Documents and has delivered the certificates and
documents required by the Collateral Documents and Sections 10.3 and 10.5
hereof, the Trustee shall determine whether it has received all documents
required by TIA Section 314(d) in connection with such release and, based on
such determination and the Opinion of Counsel delivered pursuant to Section
10.5(ii), shall deliver a certificate to the Collateral Agent setting forth such
determination.
Section 10.7. Authorization of Actions to be Taken by the Trustee Under the
Collateral Documents.
Subject to the provisions of Section 7.1 and 7.2 hereof, the Trustee
may, in its sole discretion and without the consent of the Holders of Senior
Notes, direct, on behalf of the Holders of Senior Notes, the Collateral Agent to
take all actions it deems necessary or appropriate in order to (a) enforce any
of the terms of the Collateral Documents and (b) collect and receive any and all
amounts payable in respect of the Obligations of the Company hereunder. The
Trustee shall have power to institute and maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Collateral Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders of Senior
Notes in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of Senior Notes or of the Trustee).
Section 10.8. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents.
Upon an Event of Default and so long as such Event of Default
continues, the Trustee may exercise in respect of the Collateral, in addition to
the other rights and remedies provided for herein, in the Collateral Documents
or otherwise available to it, all of the rights and remedies
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of a secured party under the Uniform Commercial Code or other applicable law,
and the Trustee may also upon obtaining possession of the Collateral as set
forth herein, without notice to the Company, except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
to the seller than if such a sale were a public sale. The Company agrees that,
to the extent notice of sale shall be required by law, at least 10 days' notice
to the Company 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
Trustee shall not be obligated to make any sale regardless of notice of sale
having been given. The Trustee may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
Any cash that is Collateral held by the Trustee and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied (unless
otherwise provided for in the Collateral Documents) in accordance with Section
6.10, or as the Holders of the Senior Notes shall direct pursuant to Section
6.5. Any surplus of such cash or cash proceeds held by the Trustee and remaining
after payment in full of all the obligations shall be paid over to the Company
or to whomsoever may be lawfully entitled to receive such surplus or as a court
of competent jurisdiction may direct.
Section 10.9. Termination of Security Interest.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Senior Notes, or upon Legal Defeasance or Covenant Defeasance,
the Trustee shall, at the request of the Company, deliver a certificate to the
Collateral Agent stating that such Obligations have been paid in full, and
instruct the Collateral Agent to release the Liens pursuant to this Indenture
and the Collateral Documents.
Section 10.10. Cooperation of Trustee.
In the event the Company or any Guarantor pledges or grants to the
Trustee a security interest in additional Collateral, the Trustee shall
cooperate with the Company or such Guarantor in reasonably and promptly agreeing
to the form of, and executing as required, any instruments or documents
necessary to make effective the security interest in the Collateral to be so
pledged. To the extent practicable, the terms of any security agreement or other
instrument or document necessitated by any such pledge shall be comparable to
the provisions of the existing Collateral Documents. Subject to, and in
accordance with the requirements of this Article 10 and the terms of the
Collateral Documents, in the event that the Company or any Guarantor engages in
any transaction pursuant to Section 10.3, the Trustee, subject to the provisions
of Sections 10.3 and 10.5, shall cooperate with the Company or such Guarantor in
order to facilitate such transaction in accordance with any reasonable time
schedule proposed by the Company, including by delivering and releasing the
Collateral in a prompt and reasonable manner.
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Section 10.11. Collateral Agent.
The Trustee may, from time to time, appoint one or more Collateral
Agents hereunder. Each of such Collateral Agents may be delegated any one or
more of the duties or rights of the Trustee hereunder or under the Collateral
Documents or which are specified in any Collateral Documents, including without
limitation, the right to hold any Collateral in the name of, registered to, or
in the physical possession of, such Collateral Agent, for the ratable benefit of
the Holders of the Senior Notes. Each such Collateral Agent shall have such
rights and duties as may be specified in any agreement between the Trustee and
such Collateral Agent.
Section 10.12. Location of Collateral.
The Company and the Guarantors represent and warrant the
personal property collateral is located in the jurisdictions set forth in
Exhibit A to the Security Agreement and there is no real property, material to
Quest's or Sunbelt's business as presently conducted, owned by Quest, Sunbelt or
their Subsidiaries.
ARTICLE 11
GUARANTEE OF SENIOR NOTES
Section 11.1. Guarantee.
Subject to the provisions of this Article 11, each Guarantor hereby
jointly and severally unconditionally and irrevocably guarantees to each Holder
and to the Trustee, on behalf of the Holders, (i) the due and punctual payment
of the principal of, 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
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payment in full of the principal thereof, premium if any, and interest thereon
and as provided in Section 9.1 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 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 any Guarantee
provided for in this Article 11 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 a
representative of any Holder in enforcing any rights under this section.
Section 11.2. Execution and Delivery of Guarantees.
To further evidence the Guarantee set forth in this Article 11, each
Guarantor shall execute a Guarantee in the form included as part of Exhibit A
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
11.1 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.
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Section 11.3. 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 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 11.4. 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 4.8 and 5.1 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 5.1 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 11.5. Additional Guarantors.
The Company covenants and agrees that it will cause any Person
which becomes obligated to guarantee the Senior 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 Person shall guarantee the obligations of
the Company under the Senior Notes and this Indenture in accordance with this
Article 11 with the same effect and to the same extent as if such Person had
been named herein as a Guarantor.
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ARTICLE 12
MISCELLANEOUS
Section 12.1. 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.
Section 12.2. 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:
RainTree Healthcare Corporation
15300 North 90th Street
Suite 100, Building A
Scottsdale, AZ 85260
Attention: Treasurer
Fax Number: (602) 481-6479
Phone Number: (602) 423-1954
Copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, AZ 85004
Attention: Christopher D. Johnson, Esq.
Fax Number: (602) 253-8129
Phone Number: (602) 528-4000
If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479
Attention: Corporate Trust Services
Fax Number : (612) 667-9825
Phone Number: (612) 667-7323
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<PAGE> 83
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.
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 12.3. 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 12.4. 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:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 12.5 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 12.5 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).
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<PAGE> 84
Section 12.5. 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;
(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 12.6. 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 12.7. 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 12.8. 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.
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Section 12.9. Governing Law.
THIS 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.
Section 12.10. 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 12.11. 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, as such, 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, as such, 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.
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<PAGE> 86
Section 12.12. 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
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind their respective successors.
Section 12.13. 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 12.14. 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 12.15. 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
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 87
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.
RAINTREE HEALTHCARE CORPORATION
By:
----------------------------------
Name:
Title:
79
<PAGE> 88
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
----------------------------------
Name:
Title:
80
<PAGE> 89
SUNQUEST SPC, INC.,
an Arizona corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
MEMPHIS CLINICAL LABORATORY, INC.
a Tennessee corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
AMERICAN PROFESSIONAL HOLDING, INC.
a Utah corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
ARKANSAS, INC.,
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
AMPRO MEDICAL SERVICES, INC.,
a Texas corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
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<PAGE> 90
DOUGLAS MANOR, INC.,
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
GAMMA LABORATORIES, INC.,
a Missouri corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
SAFFORD CARE, INC.,
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
REHABWEST, INC.,
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
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CORNERSTONE CARE CENTER, INC.
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
QUEST PHARMACIES, INC.,
an Arizona corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
DECATUR SPORTS FIT & WELLNESS
CENTER, INC.,
an Alabama corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
THERAPY HEALTH SYSTEMS, INC.,
a Mississippi corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
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<PAGE> 92
HENDERSON & ASSOCIATES
REHABILITATION, INC.,
an Alabama corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
SUNBELT THERAPY MANAGEMENT
SERVICES, INC.,
an Alabama corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
SIGNATURE HEALTH CARE CORPORATION,
a Delaware corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
SIGNATURE MANAGEMENT GROUP, INC.,
a Colorado corporation
By:
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
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<PAGE> 93
BRITWILL FUNDING CORPORATION,
a Delaware corporation
By:/s/ Clayton Kloehr
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
BRITWILL HEALTH CARE COMPANY,
a Delaware corporation
By:/s/ Clayton Kloehr
----------------------------------
Name: Clayton Kloehr
Title: Chief Financial Officer,
Vice President and Treasurer
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<PAGE> 94
EXHIBIT A
[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, premium, if any 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
11 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
11 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
SUNQUEST SPC, INC., an Arizona MEMPHIS CLINICAL LABORATORY,
corporation INC., a Tennessee corporation
CORNERSTONE CARE CENTER, INC., QUEST PHARMACIES, INC., an
a Colorado corporation Arizona corporation
DECATUR SPORTS FIT & WELLNESS THERAPY HEALTH SYSTEMS, INC.,
CENTER, INC., an Alabama corporation a Mississippi corporation
HENDERSON & ASSOCIATES AMERICAN PROFESSIONAL
REHABILITATION, INC., an Alabama HOLDING, INC., a Utah corporation
corporation
ARKANSAS, INC., a Colorado corporation AMPRO MEDICAL SERVICES, INC.,
a Texas corporation
DOUGLAS MANOR, INC., GAMMA LABORATORIES, INC.
a Colorado corporation a Missouri corporation
SAFFORD CARE, INC., a Colorado REHABWEST, INC., a Colorado
corporation corporation
A-1
<PAGE> 95
SUNBELT THERAPY MANAGEMENT SIGNATURE HEALTHCARE
SERVICES, INC., an Alabama corporation CORPORATION, a Delaware corporation
SIGNATURE MANAGEMENT GROUP, BRITWILL FUNDING CORPORATION,
INC., a Colorado corporation a Delaware corporation
SUNBELT THERAPY MANAGEMENT BRITWILL HEALTHCARE COMPANY,
SERVICES, INC., an Arizona corporation a Delaware corporation
By:
--------------------------------
Name:
Title:
A-2
<PAGE> 96
EXHIBIT B
FORM OF NOTE
(FACE OF NOTE)
NUMBER AMOUNT
---------------- -----------------
CUSIP NUMBER
909196 AE7
RAINTREE HEALTHCARE CORPORATION
11% SENIOR SECURED NOTES DUE 2003
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN PART OR IN WHOLE PRIOR TO MATURITY AS
SET FORTH BELOW. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
RainTree Healthcare Corporation, a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, its ratable share of the
principal sum of Two Million Dollars ($2,000,000), on January 1, 2002, its
ratable share of payments made pursuant to that certain Sharing Agreement (which
payments may include payments of principal), and its ratable share of the
remaining outstanding principal balance on January 1, 2003.
Interest Payment Dates: (1) January 1 and July 1, commencing July 1,
1999 through (and including) January 1, 2001, (2) January 1, 2002, and (3)
January 1, 2003.
Record Dates: June 15 and December 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.
RAINTREE HEALTHCARE CORPORATION
By: /s/ Michael A. Jeffries
--------------------------------------
Name: Michael A. Jeffries
Title: President
RAINTREE HEALTHCARE CORPORATION
By: /s/ Nir Margalit
-------------------------------------
Name: Nir Margalit
Title: Secretary
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<PAGE> 97
Certificate of Authentication:
This is one of the 11% Senior Secured Notes due
2003 referred to in the within-mentioned Indenture
Dated:
---------------------
Norwest Bank Minnesota, National Association, as Trustee
By:
------------------------
Authorized Signatory
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<PAGE> 98
(REVERSE SIDE)
RAINTREE HEALTHCARE CORPORATION
11% SENIOR SECURED NOTES DUE 2003
1. INTEREST.
RainTree Healthcare Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Senior Note
(1) semi-annually on July 1 and January 1 of each year, commencing on July 1,
1999 through (and including) January 1, 2001, (2) on January 1, 2002, and (3) on
January 1, 2003 (each an "Interest Payment Date"). Interest on the Senior Notes
will accrue commencing on January 1, 1999 at the rate of 11% 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.
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 .75% per annum.
2. METHOD OF PAYMENT.
The Company will pay interest on this Senior 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 June 15 or
December 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 due on January 1, 2003. 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, Norwest Bank Minnesota, 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 AND COLLATERAL DOCUMENTS.
The Company issued this Senior Note under an Indenture dated as of
January 31, 1999 (as such may be amended, supplemented, waived and modified from
time to time, the
B-3
<PAGE> 99
"Indenture") by and among the Company, the Guarantors party thereto 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
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. The terms of the Indenture
shall govern any inconsistencies between the Indenture and the Senior Notes or
the Guarantee. The Senior Notes are secured by certain collateral pursuant to
the Collateral Documents referred to in the Indenture and may be released
pursuant to the terms thereof. All capitalized terms in this Senior Note, unless
otherwise defined, have the meanings assigned to them by the Indenture.
The Senior Notes are secured senior obligations of the Company of up to
$26,000,000 in aggregate principal amount, subject to adjustment as provided in
the Indenture. The Indenture imposes certain restrictions on, among other
things, 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 at a redemption price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Redemption Date.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 15
days but not more than 30 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 default in making the
redemption payment thereon.
7. GUARANTEE.
Payment of principal of, premium, if any, and interest (including
interest on overdue principal and overdue interest (if lawful)) on the Senior
Notes and all other obligations of the Company to the Holders will be
unconditionally guaranteed by the Guarantors pursuant to, and subject to the
terms of, Article 11 of the Indenture.
8. DENOMINATIONS, TRANSFER, EXCHANGE.
The Senior Notes are in registered form without coupons in
denominations of $100 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
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<PAGE> 100
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.
9. PERSONS DEEMED OWNERS.
The registered Holder of this Senior Note may be treated as the owner
of it for all purposes.
10. 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.
11. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture, the Senior Notes, the
Guarantees or the Collateral Documents 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, the Senior
Notes, the Guarantees or the Collateral Documents 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, or to comply with the requirements of
the SEC in order to effect or maintain the qualification of the Indenture under
the Trust Indenture Act to enter into additional or supplemental Collateral
Documents, to adjust the principal amount of the Senior Notes issued pursuant to
the Indenture and to otherwise comply with the terms of the Plan of
Reorganization.
12. 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.
13. 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 6.1(7) or (8) of the
Indenture) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of not less than 51% in aggregate principal
B-5
<PAGE> 101
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 6.1(7) or (8) of the
Indenture 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.
14. 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.
15. 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 Senior 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.
16. 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.
17. 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).
18. 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
B-6
<PAGE> 102
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.
19. 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:
RAINTREE HEALTHCARE CORPORATION, 15300 NORTH 90TH STREET, SCOTTSDALE, AZ 85260;
ATTENTION: TREASURER.
20. 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.
B-7
<PAGE> 103
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.
Date:
--------------------------------------------------
Your Signature:
-----------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------
B-8
<PAGE> 104
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 4.8 of the Indenture, check the
appropriate box:
[__] Section 4.8
If you want to have only part of the Senior Note purchased by the
Company pursuant to Section 4.8 of the Indenture, state the amount you elect to
have purchased:
$
-------------------
(multiple of $100)
Date:
---------------
Your Signature:
--------------------------------------------
(Sign exactly as your name appears on the face of this Note)
------------------------------------------------------
Signature Guaranteed
B-9
<PAGE> 105
EXHIBIT C
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.
C-1
<PAGE> 1
EXHIBIT 10.1
MASTER LEASE
("OMEGA NEW MASTER LEASE")
AMBERWOOD COURT, INC.
THE ARBORS HEALTH CARE CENTER, INC.
BROOKSHIRE HOUSE, INC.
CHRISTOPHER NURSING CENTER, INC.
LOS ARCOS, INC.
PUEBLO NORTE, INC.
RIO VERDE NURSING CENTER, INC.
LESSEES
AND
OMEGA HEALTHCARE INVESTORS, INC.
LESSOR
<PAGE> 2
MASTER LEASE
THIS MASTER LEASE ("Lease") is dated as of December __, 1998 and is
entered into by OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation, having
its principal office at 900 Victors Way, Suite 350, Ann Arbor, Michigan 48108,
as Lessor, and each of the entities designated a Lessee on the signature page
hereof.
RECITALS
This Lease is made and entered into with reference to the following
recitals:
A. Capitalized terms used and not otherwise defined herein have the
respective meanings given them in Article II, below.
B. Lessor and Lessees other than the Signature Subsidiaries are parties to
the leases described in EXHIBIT A attached hereto ("Existing Leases").
C. Pursuant to the Debtors' First Amended Joint Plan of Reorganization
dated October 15, 1998 entered in the United States Bankruptcy Court
for the District of Arizona in the matters of In Re: Unison HealthCare
Corporation (Case Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN)
and In Re: BritWill Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN
through B-98-1075-PHX-GBN)("Plan"):
1. Lessor has acquired the Signature Facilities from the
Signature Subsidiaries and Lessor, Signature and the Signature
Subsidiaries now wish the Signature Facilities to be leased to
the Lessees on the terms and conditions set forth herein;
2. The Britwill Indiana Facilities, BritWill-II November 1993
Facilities and BritWill-II December 1994 Facilities are to be
added to the Facilities covered by this Lease by amendment
hereto as and when provided by the Plan, and this Lease shall
thereupon act as an assumption (as amended and supplemented)
of the leases described in Exhibit A attached hereto
("Existing Leases");
3. The Additional Texas Facilities are to be added to the
Facilities covered by this Lease by amendment hereto as and
when provided by the Plan; and
4. This Lease shall constitute a single, unseverable lease of all
of the Facilities as and when leased hereunder.
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<PAGE> 3
D. The terms and conditions of the Omega New Master Lease (as defined in
the Plan) are those hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties to this Lease agree as follows:
ARTICLE I
1.1 Assumption and Amendment of Existing Leases; Release of Indiana
Returned Facilities.
Upon the addition of the Britwill Indiana Facilities, BritWill-II
November 1993 Facilities and BritWill-II December 1994 Facilities to this Lease,
which shall be by an amendment or amendments hereof executed by the parties
hereto, the parties hereto agree that this Lease shall constitute an assumption
(as hereby amended and supplemented) of each of the Existing Leases, and as and
on the terms and conditions set forth in the Indiana Returned Facilities
Agreement, BritWill Indiana shall release and relinquish to Lessor any and all
right, title and interest in and to the Indiana Returned Facilities.
1.2 Leased Property
Upon and subject to the terms and conditions hereinafter set forth,
Lessor leases to Lessees the Signature Facilities.
Each Facility is demised subject to all covenants, conditions,
restrictions, easements and other matters affecting such Facility, whether or
not of record, including the Permitted Encumbrances and other matters which
would be disclosed by an inspection of the Facility or by an accurate survey
thereof.
Lessees are jointly and severally liable to Lessor for the payment of
all amounts due Lessor from, and the performance of all obligations of, any one
or more or all of the Lessees under this Lease. This Lease constitutes one
indivisible lease of all of the Facilities, and not separate leases. Except as
expressly provided herein for specific, isolated purposes (and then only to the
extent expressly otherwise stated), all provisions of this Lease apply equally
and uniformly to all the Facilities as a single unit. Neither the fact that
prior to its conveyance to Lessor title to a specific Facility was vested in a
single Lessee, nor the occupancy of a Facility by a single Lessee or the
performance by one
2
<PAGE> 4
Lessee of obligations under the Lease with respect to a specific Facility, shall
relieve a Lessee or any of the other Lessees of joint and several responsibility
for the payment of all amounts due under this Lease and the performance of all
obligations of Lessees required by this Lease. Payment by any Lessee of a
monetary obligation of all Lessees under this Lease, or complete performance by
any one Lessee of a nonmonetary obligation of all Lessees, shall be deemed
performance of such obligation by all Lessees.
References herein to Facilities which have not been added to the
Facilities covered by this Lease by amendment of this Lease shall have no force
or effect until such Facilities are added hereto, at which time such added
Facilities shall be leased upon the terms and conditions set forth herein.
1.3 Term. The initial term of the Lease (the "Initial Term") shall
commence upon the Effective Date and end upon the Expiration Date. Lessees have
a right to extend the Term as set forth in Article XIX of this Lease.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable, (iii) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease, (iv) 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, (v) the terms
"Lessee" and "Lessees" shall mean each and every Lessee unless the context in
which the term is used clearly indicates that the intended reference is to the
Lessee occupying a specific Facility and (vi) the following terms shall be
deemed to pertain only to the Signature Subsidiaries until the addition of the
Britwill Indiana Facilities, Additional Texas Facilities, BritWill-II November
1993 Facilities and BritWill-II December 1994 Facilities have been added to this
Lease, at which time such terms shall be deemed to pertain to all of the
Lessees: Lessees' Consolidated Cash Flow (EBITDARM); Lessees' Consolidated
Current Assets; Lessees' Consolidated Current Liabilities; Lessees' Consolidated
Debt Service; Lessees' Consolidated Fixed Charge Ratio; Lessees' Consolidated
Current Ratio; Lessees' Consolidated Fixed Charges; Lessees' Consolidated Net
Income; Lessees' Consolidated Tangible Net Worth; Lessees' Personal Property.
Additional Charges: As defined in Article III.
3
<PAGE> 5
Additional Contingent Payment. The payment required of Lessor
under Section 7.1.1 of the Plan, if any.
Additional Texas Facilities: The facilities located on the
Additional Texas Facilities Land, commonly known as Colonial Pines Healthcare,
West Place Nursing Center and South Place Nursing Center.
Additional Texas Facilities Effective Date: The date upon
which Lessor acquires fee title to the Colonial Pines Healthcare and West Place
Nursing Center Facilities and either the leasehold interest of UNHC in, or fee
title to, the South Place Nursing Center (whichever of such leasehold interest
or such fee title Lessor shall first acquire), unless a different date is
specified in the amendment hereto pursuant to which the Additional Texas
Facilities are added to this Lease.
Additional Texas Facilities Fixtures: Collectively, all
permanently affixed equipment, machinery, fixtures and other items of real
and/or personal property, including all components thereof, now and hereafter
located in, on or used in connection with, and permanently affixed to or
incorporated into the Additional Texas Facilities Leased 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 (other than individual units), 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 excluding all
items included within the category of Lessor's Personal Property.
Additional Texas Facilities Land: The real property described
in EXHIBIT K-16, EXHIBIT K-17 AND EXHIBIT K-18 attached to this Lease.
Additional Texas Facilities Leased Improvements: Collectively,
all buildings, structures, Additional Texas Facilities Fixtures and other
improvements of every kind presently situated upon the Additional Texas
Facilities Land including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures.
Additional Texas Facilities Minimum Rent. The amount by which
the Minimum Rent is to be increased pursuant to Article 6.1.1(b) of the Plan.
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<PAGE> 6
Additional Texas Facilities Related Rights: Collectively, all
easements, rights and appurtenances relating to the Additional Texas Facilities
Land and the Additional Texas Facilities Leased Improvements.
Adjustment Date: January 1, 2000 and each January 1 thereafter
during the Term.
Affiliate: Any Person which, directly or indirectly, Controls
or is Controlled by or is under common Control with another Person.
Assessments: Any governmental assessment on the Facilities or
any part thereof for public or private improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term.
Award: As defined in Article XV.
BritWill HealthCare: BritWill HealthCare Company, a Delaware
corporation.
BritWill Indiana: BritWill Indiana Partnership, an Arizona
general partnership.
BritWill Indiana Facilities: The Facilities located on, and
inclusive of, the BritWill Indiana Land, commonly known as Wellington Manor
(Cedar Crest Health Center), Cloverleaf of Knightsville (Harty Nursing Home) and
Kendalville Manor (Kendalville Manor Healthcare).
BritWill Indiana Fixtures: Collectively, all permanently
affixed equipment, machinery, fixtures and other items of real and/or personal
property, including all components thereof, now and hereafter located in, on or
used in connection with, and permanently affixed to or incorporated into the
BritWill Indiana Leased 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 (other than
individual units), 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 excluding all items included within the category of
Lessor's Personal Property.
BritWill Indiana Land: The real property described in EXHIBITS
B-1, B-2 AND B-3.
5
<PAGE> 7
BritWill Indiana Leased Improvements: Collectively, all
buildings, structures, BritWill Indiana Fixtures and other improvements of every
kind presently situated upon the BritWill Indiana Land including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits
and lines (on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures.
BritWill Indiana Related Rights: Collectively, all easements,
rights and appurtenances relating to the BritWill Indiana Land and the BritWill
Indiana Leased Improvements.
BritWill-I: BritWill Investments-I, Inc., a Delaware
corporation.
BritWill-II: BritWill Investments-II, Inc., a Delaware
corporation.
BritWill-II Facilities: The BritWill-II November 1993
Facilities and the BritWill-II December 1994 Facilities.
BritWill-II November 1993 Facilities: The Facilities located
on, and inclusive of, the BritWill-II November 1993 Land, commonly known as
Reunion Plaza, Heritage Plaza and Pine Haven.
BritWill-II November 1993 Fixtures: Collectively, all
permanently affixed equipment, machinery, fixtures and other items of real
and/or personal property, including all components thereof, now and hereafter
located in, on or used in connection with, and permanently affixed to or
incorporated into the BritWill-II November 1993 Leased 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 (other than individual units), 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 excluding all items included
within the category of Lessor's BritWill-II November 1993 Personal Property.
BritWill-II November 1993 Land: The real property described in
EXHIBITS B-4, B-5 AND B-6.
BritWill-II November 1993 Leased Improvements: Collectively,
all buildings, structures, BritWill-II November 1993 Fixtures and other
improvements of every kind presently situated upon the BritWill-II November 1993
Land including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures.
6
<PAGE> 8
BritWill-II November 1993 Related Rights: Collectively, all
easements, rights and appurtenances relating to the BritWill-II November 1993
Land and the BritWill-II November 1993 Leased Improvements.
BritWill-II December 1994 Facilities: The Facilities located
on, and inclusive of, the BritWill-II December 1994 Land, commonly known as Pine
Grove and Pleasant Manor.
BritWill-II December 1994 Fixtures: Collectively, all
permanently affixed equipment, machinery, fixtures and other items of real
and/or personal property, including all components thereof, now and hereafter
located in, on or used in connection with, and permanently affixed to or
incorporated into the BritWill-II December 1994 Leased 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 (other than individual units), 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 excluding all items included
within the category of Lessor's Personal Property.
BritWill-II December 1994 Land: The real property described in
EXHIBITS B-7 AND B-8.
BritWill-II December 1994 Leased Improvements: Collectively,
all buildings, structures, BritWill-II December 1994 Fixtures and other
improvements of every kind presently situated upon the BritWill-II December 1994
Land including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures.
BritWill-II December 1994 Related Rights: Collectively, all
easements, rights and appurtenances relating to the BritWill-II December 1994
Land and the BritWill-II December 1994 Leased Improvements.
BritWill HealthCare: BritWill HealthCare Company, a Delaware
corporation.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.
7
<PAGE> 9
Capitalized Lease: A lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
Commencement Date: The date on which Lessor acquired title to
the BritWill Indiana Facilities and the BritWill-II Facilities.
Condemnation, Condemnor: As defined in Article XV.
Consumer Price Index or CPI: The United States Department of
Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban
Consumers (1982-84=100), U.S. City Average, All Items, or if said Index is not
available for the United States, then an available index reasonably selected by
Lessor for the geographical area most similar to the entire United States,
published by said bureau or its successor, or if none, by any other
instrumentality of the United States, in the order mentioned.
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 and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests.
Date of Taking: As defined in Article XV.
Debt: As of any date, all (a) obligations of Lessees, whether
current or long-term, that in accordance with GAAP should be included as
liabilities on Lessees' balance sheets; (b) obligations of others for which any
Lessee is liable directly or indirectly, by way of guaranty (whether by direct
guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to
purchase or advance or keep in funds or other agreement having the effect of a
guaranty), or otherwise; (c) liabilities and obligations secured by liens of any
assets of Lessees, whether or not those liabilities or obligations are recourse
to any Lessee; and (d) liabilities of Lessees, direct or contingent, with
respect to letters of credit issued for the account of any one or more of the
Lessees or others or with respect to bankers acceptances created for any one or
more of the Lessees.
EBITDARM: Synonymous with Lessees' Consolidated Cash Flow.
Effective Date: As to the Signature Facilities, December __,
1998, and as to other Facilities added to this Lease, the Effective Date shall
be defined in the amendments pursuant to which such Facilities are added to this
Lease.
8
<PAGE> 10
Encumbrance: Any mortgage, deed of trust, lien, encumbrance or
title retention agreement upon the Facilities, or any portion thereof or
interest therein, securing any borrowing or other means of financing or
refinancing.
Expiration Date: The fourteenth (14th) anniversary of the last
day of the calendar month in which the Plan Effective Date falls, provided,
however, that if the Plan is not confirmed, the Expiration Date shall be
December 31, 2012.
Event of Default: As defined in Article XVI.
Excluded Facility: A facility listed on EXHIBIT C attached
hereto.
Extended Term: As defined in Article XIX.
Facility: Each of the licensed nursing facilities located on
the Land, together with the Leased Improvements, Lessor's Personal Property,
Fixtures and Related Rights that are part of such facility and the portion of
the Land on which such facility is located.
Facility Mortgage: As defined in Article XIII.
Facility Mortgagee: As defined in Article XIII.
Fair Market Rent: The rent that, at the relevant time, a
Facility would most probably command in the open market, as indicated by the
rent asked and paid at such time for facilities comparable to the Facility in
question, determined in accordance with the appraisal procedure set forth in
Article XXXIV or in such other manner as may be mutually acceptable to Lessor
and Lessees.
Fair Market Value: The fair market value of a Facility,
assuming the same is unencumbered by this Lease, determined in accordance with
the appraisal procedure set forth in Article XXXIV or in such other manner as
shall be mutually acceptable to Lessor and Lessees.
Financial Statement: For a fiscal year or other accounting
period for any Person, an audited statement of earnings and retained earnings
and of changes in financial position and profits and loss 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, and prepared in accordance with GAAP and reported on by
qualified, certified public accountants acceptable to Lessor.
9
<PAGE> 11
Fixtures: The Signature Fixtures, and, when Facilities of
which they are a part are added by amendment hereto, the Additional Texas
Facilities Fixtures, BritWill Indiana Fixtures, BritWill-II November 1993
Fixtures, and BritWill-II December 1994 Fixtures.
GAAP: The generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and Statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
Gross Revenues: As to each Facility, the term "Gross Revenues"
shall mean all revenues received or receivable from or by reason of the
operation of the Facility, or any other use of the Facility, 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
Facility, 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
Facility and all revenues received or receivable by any Lessee and any
Affiliates of Unison from the operation of any healthcare facility located
within a twenty-five (25) mile radius of the Facility (other than an Excluded
Facility); provided, however, that Gross Revenues shall not include:
(i) revenue from professional fees or charges by physicians
when and to the extent such charges are paid over to such physicians or are
accompanied by separate charges for use of the Facility or any portion thereof;
(ii) nonoperating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business;
(iii) contractual allowances for billings not paid by or
received from the appropriate governmental agencies, third party providers or
other payors;
(iv) federal, state or local sales or 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;
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(v) all proper patient billing credits and adjustments
according to GAAP relating to health care accounting;
(vi) gratuities or service charges added to patients' bills or
statements which are paid over to employees of the Facilities;
(vii) amounts received by the Lessees in payment of warranty
or guaranty claims; and
(viii) refunds or credits to patients or guests customarily
deducted in accounting for the revenues of health care facilities.
To the extent that a Facility or any part thereof is subleased, Gross Revenues
from such Facility shall be calculated for all purposes of the Lease by
including the Gross Revenues of such sublessees with respect to the subleased
Facility, i.e., the Gross Revenues generated from the operations conducted on
such subleased portion of the Facility shall be included directly in Gross
Revenues and the Rent received or receivable by Lessees from or under such
subleases shall be excluded from Gross Revenues for such purpose.
Impositions: Collectively, all taxes (including, without
limitation, all capital stock and franchise taxes of Lessor, including but not
limited to the Texas Corporate Franchise Taxes, all ad valorem, sales and use,
single business, gross receipts, transaction privilege, rent or similar taxes),
assessments (including Assessments), ground rents, water, sewer or other rents
and charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and 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 Facilities or the
business conducted thereon and/or the Rent, 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 (i) Lessor or Lessor's interest in the Facilities, (ii) the
Facilities or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Facilities or
the leasing or use of the Leased Property or any part thereof or (iv) the Rent;
PROVIDED, HOWEVER, that Imposition shall not include: (i) any tax based on gross
or net income of Lessor generally and not specifically arising in connection
with the Leased Property, but Lessees shall pay any tax hereafter imposed on any
Rent received by Lessor from Lessees, or (ii) any transfer, or net revenue tax
of Lessor or any other person, or (iii) any tax imposed with respect to the
sale, exchange or other disposition by Lessor of any portion of Leased Property
or the proceeds thereof, PROVIDED FURTHER, HOWEVER, that Imposition shall
include any tax, assessment, tax levy or charge set forth in clause (i) or (ii)
above to the extent the same is levied, assessed or imposed in lieu of any tax,
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assessment, tax levy or charge which Lessees are obligated to pay which has been
totally or partially repealed.
Improvement: One or more new buildings, or one or more
additional structures annexed to any portion of any Facility, or the expansion
of existing improvements, constructed on any parcel or portion of the Leased
Property during the Term, including the construction of a new wing or new story,
to provide beds or services not previously offered which are expected to result
in additional Gross Revenues, or the renovation of existing improvements on the
Leased Property in order to provide a functionally new facility to provide beds
or services not previously offered which are expected to result in additional
Gross Revenues.
Incremental Revenues: As to the BritWill Indiana Facilities:
The amount by which Gross Revenues for the BritWill Indiana Facilities in any
calendar year exceed Gross Revenues for the BritWill Indiana Facilities for the
immediately preceding calendar year. As to the BritWill-II November 1993
Facilities: The amount by which Gross Revenues for the BritWill-II November 1993
Facilities in any calendar year exceed Gross Revenues for the BritWill-II
November 1993 Facilities for the immediately preceding calendar year. As to the
BritWill-II December 1994 Facilities: The amount by which Gross Revenues for the
BritWill-II December 1994 Facilities in any calendar year exceed Gross Revenues
for the BritWill-II December 1994 Facilities for the immediately preceding
calendar year. As to the Additional Texas Facilities: The amount by which Gross
Revenues for the Additional Texas Facilities in any calendar year exceed Gross
Revenues for the Additional Texas Facilities for the immediately preceding
calendar year.
Indiana Returned Facilities: The Facilities designated in
EXHIBITS D-1 THROUGH EXHIBIT D-6, commonly known as English Estates, English
Senior/English Assisted Living, Capital Care Healthcare Center, Sunset Manor,
Lockerbie Healthcare Center and Parkview Manor.
Indiana Returned Facilities Agreement: The Indiana Returned
Facilities Agreement between Lessor and BritWill Indiana of even date herewith.
Initial Term: As defined in Section 1.3.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
Intangible Assets: The amount of (i) all unamortized debt
discounts and expenses, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, organizational and
developmental expenses, unamortized
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operating rights, unamortized licenses, unamortized leasehold rights,
organizational expenses, prepaid pension costs and other intangible assets,
including any write-up resulting from a reversal of a reserve for bad debts or
depreciation and any write-up resulting from a change in methods of accounting
or inventory; and (ii) the amount of any investment in any Affiliate.
Intercreditor Agreement: An Intercreditor Agreement executed
by Lessor and a financial institution providing accounts receivable financing to
Lessees in compliance with Section 8.3.1.7.1 hereof.
Land: The Signature Land, and, when the Facilities of which
they are a part are added by amendment hereto, the BritWill Indiana Land,
Additional Texas Facilities Land, BritWill-II November 1993 Land and BritWill-II
December 1994 Land.
Lease: As defined in the Preamble.
Lease Year: Each period from and including January 1 through
the following December 31, provided, however, that if the Effective Date is any
date other than January 1, the last Lease Year shall be the period from and
including January 1 of the year in which the Term expires or the Lease is
terminated through the date of expiration or termination.
Leased Improvements: The Signature Leased Improvements, and,
when added to this Lease by amendment hereto, the Additional Texas Facilities
Leased Improvements, BritWill Indiana Leased Improvements, BritWill-II November
1993 Leased Improvements and BritWill-II December 1994 Leased Improvements.
Leased Property: The Signature Leased Property, and when the
Facilities of which they are a part are added by amendment hereto, the
Additional Texas Facilities, BritWill Indiana Facilities, BritWill-II November
1993 Facilities and BritWill-II December 1994 Facilities.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Facilities or any portion
thereof, or the construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any which may (i) require repairs,
modifications or alterations in or to any portion or all of the Facilities or
(ii) in any way adversely affect the use and enjoyment thereof, and all permits,
licenses and authorizations and regulations relating thereto including, but not
limited to, those relating to existing healthcare licenses, those authorizing
the current number of licensed beds and the level of services delivered from the
Facilities, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to any
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Lessee (other than encumbrances created by Lessor without the consent of such
Lessee), at any time in force affecting the Facilities.
Lessees: The Signature Subsidiaries, jointly and severally,
and the successors and assigns of each, and, when added to this Lease by
amendment hereto, BritWill Indiana and BritWill II, and the successors and
assigns of each.
Lessees' Consolidated Cash Flow (EBITDARM): For any period,
the sum of (i) Lessees' Consolidated Net Income for the period, plus (ii) the
sum of all amounts deducted in computing Lessees' Consolidated Net Income for
the period for (a) management fees, (b) depreciation and amortization, (c)
income taxes (or, if greater, income taxes actually paid during the period), (d)
interest on Permitted Borrowings, (e) any rent, principal, interest and other
amounts paid by BritWill-II to UNHC, (f) Minimum Rent, (g) any payments made by
BritWill-II under the New Omega Guarantee shall not be taken into account in
determining Lessees' Consolidated Cash Flow (EBITDARM).
Lessees' Consolidated Current Assets: At any date, all amounts
carried as current assets on the balance sheet of the Lessees at such date
determined in accordance with GAAP on a consolidated basis, but shall not
include: (i) any deferred tax asset included therein, and (ii) any expected
proceeds from the sale of the net assets of a discontinued business.
Lessees' Consolidated Current Liabilities: At any date, all
amounts which are or should be carried as current liabilities on the balance
sheet of the Lessees at such date determined in accordance with GAAP on a
consolidated basis, including the current portion of all Debt.
Lessees' Consolidated Debt Service: For any period, the sum of
(i) the aggregate amount of interest, including payments in the nature of
interest under Capitalized Leases, accrued by Lessees for the period in
accordance with GAAP on a consolidated basis, (ii) the aggregate amount of all
mandatory scheduled payments, prepayments and sinking fund payments with respect
to principal paid or accrued by Lessees in respect of Debt, including payments
in the nature of principal under Capitalized Leases, for the period in
accordance with GAAP on a consolidated basis, and (iii) without duplication, all
rent, interest and other amounts payable by BritWill-II to UNHC during the
period under any leases or other agreements.
Lessees' Consolidated Fixed Charge Ratio: For any period,
Lessees' Consolidated Cash Flow (EBITDARM) divided by Lessees' Consolidated
Fixed Charges.
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Lessees' Consolidated Current Ratio: At any time, Lessees'
Consolidated Current Assets divided by Lessees' Consolidated Current
Liabilities.
Lessees' Consolidated Fixed Charges: For any period, the sum
of (i) Lessees' Rent, and (ii) Lessees' Consolidated Debt Service.
Lessees' Consolidated Net Income: For any period, the net
income (or loss) of Lessees for such period in accordance with GAAP on a
consolidated basis, provided, however, that Lessees' Consolidated Net Income
shall not include:
(a) any after-tax gains or losses attributable
to returned surplus assets of any
pension-benefit plan;
(b) any extraordinary gains or nonrecurring
gains;
(c) any gains or losses realized upon the sale
or other disposition of property which is
not sold or otherwise disposed of in the
ordinary course of business;
(d) any gains or losses realized upon the sale
or other disposition of any capital stock of
any Person;
(e) any gains from the disposal of a
discontinued business;
(f) the cumulative effect on prior years of any
change in an accounting principle;
(g) the income or loss of any Person acquired by
a Lessee or an Affiliate in a pooling of
interests transaction for any period prior
to the date of such acquisition;
(h) the income from any sale of assets in which
the book value of such assets had been the
book value of any Person acquired in a
pooling-of-interests transaction prior to
the date such Person became an Affiliate of
a Lessee;
(i) the income (or loss) of any Person (other
than a subsidiary) in which a Lessee has an
ownership interest; provided, however, that
(i) Lessees' Consolidated Net Income shall
include amounts in respect of the income of
such Person when actually received in cash
by a Lessee in the form of dividends
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or similar distributions and (ii) Lessees'
Consolidated Net Income shall be reduced by
the aggregate amount of all investments,
regardless of the form thereof, made by a
Lessee in such Person for the purpose of
funding any deficit or loss of such Person;
(j) the income of any Lessee to the extent the
payment of such income is not permitted by
any law, statute, judgment, decree or
governmental order, rule or regulation
applicable to such Lessee;
(k) all amounts included in computing such net
income (or loss) in respect of the write-up
of any asset or the write-down of any Debt
at less than face value after the Effective
Date;
(l) the reduction in income tax expense
resulting from an increase in a deferred
income tax asset due to the anticipation of
future income tax benefits;
(m) the reduction in income tax expense
resulting from an increase in a deferred
income tax asset or from a decrease in a
deferred income tax liability due to the
change in a statutory tax rate.
Lessees' Consolidated Tangible Net Worth: Lessees' net worth
as determined in conformity with GAAP on a consolidated basis, less Lessees'
Intangible Assets.
Lessees' Personal Property: Personal property owned by Lessees
on the Effective Date or acquired by any Lessee during the Term and used in the
operation of one or more of the Facilities.
Lessor: Omega Healthcare Investors, Inc., a Maryland
corporation, and its successors and assigns.
Lessor's Personal Property: (i) All tangible personal property
other than Lessees' Personal Property necessary for the operation of the
Facilities for their Primary Intended Use in compliance with all licensure and
certification requirements, applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for such use, including all such tangible personal
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property located on the Land on the Effective Date and all such tangible
personal property acquired after the Effective Date in addition to, or to
replace in whole or in part, the tangible personal property located on the Land
on the Effective Date; (ii) all other tangible personal property located at the
Leased Property other than at the Signature Facilities on the Commencement Date
and any tangible personal property acquired thereafter to replace such other
tangible personal property; (iii) all other tangible personal property located
on the Signature Land on the Effective Date, and any tangible personal property
acquired hereafter to replace such other tangible personal property; and (iv)
all tangible personal property that would be included within the foregoing
definitions of Lessor's Personal Property but for the fact that it is
temporarily in a location other than on the Land.
Letter of Credit Agreement: A written agreement between Lessor
and Lessees, if any, pursuant to which Lessees deliver one or more Letters of
Credit to Lessor to satisfy the Security Deposit requirements of this Lease.
Major Alteration: As defined in Section 10.1.
Management Agreement: The Management Agreement entered into
between Lessees and Manager in the form attached hereto as EXHIBIT E, and any
other agreement pursuant to which management of a Facility is delegated by a
Lessee to any related or unrelated Person not an employee of such Lessee.
Manager: Unison, and any other Person to which management of
the operation of a Facility is delegated with the prior written approval of
Lessor pursuant to a Management Agreement.
Minimum Rent: As set forth in EXHIBIT H.
Minimum Repurchase Price: As to each Facility, the price set
forth on EXHIBIT G attached hereto, increased by three percent (3%) on the
Adjustment Date in 1999 with respect to such Facility and thereafter, on a
compounding basis, by three percent (3%) on the Adjustment Date with respect to
such Facility in each succeeding Lease Year after 1999 until the date of
purchase by Lessees.
Net Proceeds: As defined in Section 14.1.
New Omega Guarantee: The New Omega Guarantee, executed by the
New Omega Guarantors and Lessor.
New Omega Guarantors: Unison and BritWill-II.
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Net Income: For any period, net income (or loss) for such
period in accordance with GAAP, excluding items (a) through (m) in the
definition of Lessee's Consolidated Net Income.
Notice: A notice given pursuant to Article XXXIII hereof.
Officer's Certificate: If for a corporation, a certificate
signed by an officer of the corporation authorized to do so by the bylaws of
such corporation or a resolution of the Board of Directors thereof; if for a
partnership, a certificate signed by a general partner; if for any other kind of
entity, a certificate signed by a Person having the authority to so act on
behalf of such entity.
Omega Master Lease Guarantors: Collectively, Unison,
Signature, BritWill HealthCare, BritWill, Cedar Care, Inc. and Sherwood
HealthCare Corporation, jointly and severally.
Omega Master Lease Guarantee: The Omega Master Lease Guarantee
of even date herewith, executed by the Omega Master Lease Guarantors.
Omega's Signature Facilities Investment: The sum of (a)
Thirty-Eight Million Two Hundred Thousand Dollars ($38,200,000.00), increased by
three percent (3%) on each Adjustment Date; plus (b) the Additional Contingent
Payment, if paid by Lessor prior to Lessees' payment of the purchase price for
the Signature Facilities pursuant to Section 18.3 hereof, increased by three
percent (3%) on each anniversary of the date on which Lessor paid the Additional
Contingent Payment.
Overdue Rate: The interest rate that is equal to the Prime
Rate plus five (5) percentage points, but in no event greater than the maximum
rate permitted under applicable law at the applicable time.
Payment Date: Any due date for the payment of the installments
of Minimum Rent, Additional Charges or any other sums payable under this Lease.
Permitted Borrowings: Borrowings permitted under Section
8.3.1.7.
Permitted Encumbrance: An encumbrance described on EXHIBIT F,
attached hereto.
Person: Any natural person, trust, partnership, corporation,
joint venture or other legal entity.
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Plan Effective Date: The Effective Date of the Plan, as set
forth in Section 1.66 of the Plan.
Primary Intended Use: As defined in Section 7.2.2.
Prime Lease: The lease between Athens Associates, L.P. and
UNHC with respect to South Place Nursing Center.
Prime Rate: On any date, an interest rate equal to the prime
rate published by the Wall Street Journal, but in no event greater than the
maximum rate then permitted under applicable law. If the Wall Street Journal
ceases to be in existence, or for any reason no longer publishes such prime
rate, then the Prime Rate shall be the rate of interest announced by Fleet Bank,
and if such bank no longer exists or no longer announces a prime rate of
interest, then the Prime Rate shall be the rate of interest announced by any
other major bank reasonably selected by Lessor.
Prior Leases: The lease between UNHC and BritWill-II with
respect to Colonial Pines Healthcare and West Place Nursing Center and the
sub-lessee between UNHC and BritWill-II with respect to South Place Nursing
Center.
Qualified Capital Expenditures: Expenditures capitalized on
the books of Lessees for any of the following:
Replacement of furniture, fixtures and equipment,
including refrigerators, ranges, major appliances,
bathroom fixtures, doors (exterior and interior),
central air conditioning and heating systems
(including cooling towers, water chilling units,
furnaces, boilers and fuel storage tanks) and major
replacement of siding; major roof replacements,
including major replacements of gutters, downspouts,
eaves and soffits; major repairs and replacements of
plumbing and sanitary systems; overhaul of elevator
systems; major repaving, resurfacing and sealcoating
of sidewalks, parking lots and driveways; repainting
of entire building exterior; but excluding major
alterations, renovations, additions, normal
maintenance and repairs.
Related Rights: The Signature Facilities Related Rights, and,
when the Facilities of which they are a part are added by amendment hereto, the
Additional Texas Facilities Related Rights, BritWill Indiana Related Rights, the
BritWill-II November 1993 Related Rights, and the BritWill-II December 1994
Related Rights.
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Rent: Collectively, the Minimum Rent and Additional Charges.
Rent Payment Date: As defined in Section 3.1.1.
SEC: Securities and Exchange Commission.
Security Deposit: On the Effective Date with respect to the
Signature Facilities, the sum of Nine Hundred Seven Thousand Two Hundred Fifty
Dollars ($907,250.00), which the Signature Subsidiaries shall deposit with the
Lessor at the closing of the Lessor's purchase thereof, and on the Effective
Date with respect to each other Group of Facilities (as defined in EXHIBIT H),
an amount equal to three (3) months Minimum Rent installments for such Group of
Facilities, in all cases in the form of a cash deposit or an irrevocable letter
of credit in a form acceptable to Lessor in its sole discretion, issued by a
commercial bank acceptable to Lessor in its sole discretion.
Signature: Signature HealthCare Corporation, a Delaware
corporation.
Signature Facilities: The Facilities located on the Signature
Land, commonly known as Los Arcos, Rio Verde, The Arbors, Pueblo Norte,
Amberwood, Brookshire and Christopher House.
Signature Fixtures: Collectively, all permanently affixed
equipment, machinery, fixtures and other items of real and/or personal property,
including all components thereof, now and hereafter located in, on or used in
connection with, and permanently affixed to or incorporated into the Signature
Leased 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 (other than individual
units), 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 excluding all items included within the category of Lessor's
Personal Property.
Signature Land: The real property described in EXHIBIT B-9
THROUGH EXHIBIT B-15 attached to this Lease.
Signature Leased Improvements: Collectively, all buildings,
structures, Signature Fixtures and other improvements of every kind presently
situated upon the Signature Land including, but not limited to, alleyways and
connecting tunnels, sidewalks,
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utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures.
Signature Related Rights: Collectively, all easements, rights
and appurtenances relating to the Signature Land and the Signature Leased
Improvements.
Signature Subsidiaries: Amberwood Court, Inc., The Arbors
Health Care Center, Inc., Brookshire House, Inc., Christopher Nursing Center,
Inc., Los Arcos, Inc., Pueblo Norte, Inc. and Rio Verde Nursing Center, Inc.
Stub Period: As to the Signature Facilities, the period from
and including the Effective Date with respect to the Signature Facilities
through December 31, 1998, if any; as to any other Group Of Facilities (as
defined in EXHIBIT H hereto), the period from and including the Effective Date
with respect to such Group of Facilities and December 31, 1999.
Taking: A taking or voluntary conveyance during the Term of
all or part of a Facility, or any interest therein or right accruing thereto or
use thereof, as the result of, or in settlement of any condemnation or other
eminent domain proceeding affecting such Facility, whether or not the same shall
have actually been commenced.
Tangible Net Worth: Net worth as determined in conformity with
GAAP, less Intangible Assets.
Term: Collectively, the Initial Term and the Extended Term, as
the context may require, subject to earlier termination pursuant to the
provisions hereof.
UNHC: UNHC Real Estate Holdings, Ltd., a Texas limited
partnership, formerly known as BritWill Investments - Texas, Ltd., a Texas
limited partnership.
UNHC Facilities: Collectively, the healthcare facilities
commonly known as Colonial Pines Healthcare, West Place Nursing Center, South
Place Nursing Center, Four States Care Center, Heritage Oaks and Texarkana
Nursing Center.
Unavoidable Delays: Delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the Person responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto.
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Unison: Unison HealthCare Corporation, a Delaware corporation
or its derivative entity, Raintree Healthcare Corporation.
Unsuitable for Its Primary Intended Use: A state or condition
of a Facility such that after repair and restoration thereof following (i)
damage or destruction as a result of a fire or other casualty, or (ii) a partial
Taking, such Facility cannot be operated on a commercially practicable basis for
its Primary Intended Use, taking into account, among other relevant factors, the
number of useable beds, the amount of square footage and the estimated revenue
affected by such damage or destruction.
ARTICLE III
3.1 Rent. Lessees shall pay to Lessor in lawful money of the United
States of America which is legal tender for the payment of public and private
debts, by wire transfer of immediately available funds, to Lessor's account
described below or at such other place or to such other Person as Lessor from
time to time may designate in a Notice, Minimum Rent and Additional Charges,
during the Term, as follows:
3.1.1 The Minimum Rent for the Leased Property is set forth in
EXHIBIT H. The Minimum Rent shall be payable in advance in equal, consecutive
monthly installments on the twelfth (12th) day of each calendar month of the
Term ("Rent Payment Date"), except that the first monthly installment of Minimum
Rent shall be payable on or before the Effective Date (Minimum Rent and all
Additional Charges shall be prorated as to any partial month at the beginning or
end of the Term) and shall be deposited with the Lessor on or before the
Effective Date. If Lessor directs a Lessee to pay any Minimum Rent or Additional
Charges to any Person other than Lessor, such Lessee shall send to Lessor,
simultaneously with such payment, a copy of the transmittal letter or invoice
and a check whereby such payment is made or such other evidence of payment as
Lessor shall reasonably require.
3.1.2 Under the procedures set forth in EXHIBIT H, the Minimum
Rent for the Brit Indiana Facilities, BritWill-II November 1993 Facilities and
BritWill-II December 1994 Facilities for any year will not be known until
sometime into that year. Lessees shall continue to pay the Minimum Rent for such
Facilities at the rate previously in effect until Lessor has given Lessees
Notice of its determination of the increased Minimum Rent for such Facilities
(but no Notice of the annual increase in the Minimum Rent for the Signature
Properties shall be required, and the Signature Subsidiaries shall begin paying
such increased Minimum Rent for the Signature Properties effective as of the
Adjustment Date therefor in each Lease Year). Upon such determination, the
Minimum Rent shall be increased effective retroactively as of the Adjustment
Date. On or before the second (2nd)
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Rent Payment Date following receipt by Lessees (other than the Signature
Subsidiaries) of Lessor's Notice of the increase, Lessees shall make such
payment to Lessor as will bring the Minimum Rent current, commencing with the
Adjustment Date for such increase through the date of any installments then due.
Thereafter, Lessees shall pay the new adjusted Minimum Rent in correspondingly
adjusted monthly installments until the next date for increase in the Minimum
Rent. The additional payment required shall bear interest at the Prime Rate from
the Adjustment Date until paid, notwithstanding the fact that the amount of the
increase is not determined as of the Adjustment Date, in order that Lessor shall
receive the economic effect of an increase in the Minimum Rent as of the
Adjustment Date. This Section 3.1.2 shall survive termination of the Lease with
respect to the increases in Minimum Rent for the Brit Indiana Facilities,
BritWill-II November 1993 Facilities and BritWill-II December 1994 Facilities,
which increase in Minimum Rent is not known or fully paid as of the date of
termination of the Lease.
3.2 Additional Charges. In addition to the Minimum Rent, Lessees shall
pay and discharge as and when due and payable all Impositions and all other
amounts, liabilities, obligations which Lessees assume or agree to pay under
this Lease. Lessees shall also pay to Lessor an annual site inspection fee of
Two Hundred and Fifty Dollars ($250.00) for each Facility under this Lease,
which fee shall be due on September 1 of each Lease Year. In the event of any
failure on the part of Lessees to pay any of those items referred to in the
previous sentences, Lessees will also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items referred to in this sentence and the previous sentences.
Collectively, the items referred to in the first three sentences of this Section
3.2 are referred to as the "Additional Charges".
3.3 Late Charge. If any installment of Minimum Rent or Additional
Charges owing by Lessees to Lessor under this Lease shall not be paid by the due
date, Lessees shall pay Lessor on demand, as an additional charge, a late charge
equal to five percent (5%) of the amount of such installment together with all
charges, expenses, fees or penalties imposed on Lessor by any Facility Mortgagee
for late payment.
3.4 Method of Payment of Minimum Rent. All Minimum Rent to be paid to
Lessor under this Lease shall be paid by wire transfer of immediately available
funds to the bank account designated in writing by Lessor. Lessor shall provide
Lessees with appropriate wire transfer information in a Notice from Lessor to
Lessees. Lessees shall inform Lessor of payment by sending a facsimile
transmission of Lessees' wire transfer confirmation not later than noon, Pacific
Standard or Pacific Daylight Savings Time, whichever is applicable at the time
of such payment, on each Rent Payment Date.
3.5 Net Lease.
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3.5.1 The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the installments of Minimum
Rent and Additional Charges throughout the Term, subject only to any provisions
of this Lease which expressly provide for adjustment or abatement of Minimum
Rent or Additional Charges. This Lease is and shall be a "pure-net" or
"triple-net" lease, as such terms are commonly used in the real estate industry,
it being intended that Lessees jointly and severally shall be obligated to pay
all costs, expenses and charges arising out of the use, occupancy and operation
of the Facilities.
3.5.2 Lessor shall not be required to furnish any services or
facilities whatsoever to the Facilities or make any payments with respect to the
Facilities of any kind whatsoever. Although each Facility may be occupied by
only one of Lessees at any given time, Lessees jointly and severally assume the
full and sole responsibility for the condition, operation, repair, alteration,
improvement, replacement, maintenance and management of the Facilities. Absent
its negligence or willful misconduct, Lessor shall not be responsible for any
loss or damage to any property of any Lessees or of any sublessees,
concessionaires or other users or occupants of any part of the Leased Property
except for any loss or damage caused by Lessor's negligence or willful
misconduct.
3.6 Limitation on Counterclaim. If Lessor commences any proceedings for
non-payment of Rent, no Lessee shall interpose any counterclaim or cross
complaint or similar pleading of any nature or description in such proceedings
unless such Lessee would lose or waive such claim by the failure to assert it.
This shall not, however, be construed as a waiver of any Lessee's right to
assert such claims in a separate action brought by such Lessee. The covenants to
pay Rent and other amounts hereunder are independent covenants, and no Lessee
shall have any right to hold back, offset or fail to pay any Rent or other
amount by reason of the default of Lessor or for any other reason whatsoever.
ARTICLE IV
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4.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessees shall pay, or cause to be paid, all Impositions at
least twenty (20) days before any fine, penalty, interest or cost may be added
for non-payment, such payments to be made directly to the taxing authorities
where feasible, and will promptly, upon request, furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. If at
the option of the taxpayer any Imposition may lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Lessees may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and in such event, shall pay
such installments during the Term hereof (subject to Lessees' right of contest
pursuant to the provisions of Article XII) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. If any provision of any Facility Mortgage requires deposits for payment
of real estate taxes or other Impositions to be made with such Facility
Mortgagee, the respective Lessees of the encumbered Facilities shall either pay
to Lessor monthly the amounts required and Lessor shall transfer the amounts to
each Facility Mortgagee, or, pursuant to written direction by Lessor, such
Lessees shall make such deposits directly with such Facility Mortgagee. Lessor,
at its expense, shall, to the extent required or permitted by applicable law,
prepare and file all tax returns and reports as may be required by governmental
authorities in respect of Lessor's net income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise taxes and
taxes on its capital stock, and Lessees, at their expense, shall, to the extent
required or permitted by applicable laws and regulations, prepare and file all
other tax returns and reports in respect of any Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Lessees, the same shall be paid over to or
retained by Lessees if no Event of Default shall have occurred hereunder and be
continuing. Any such funds retained by Lessor due to an Event of Default shall
be applied as provided in Article XVI. Lessor and Lessees shall, upon request of
the other, provide such data as is maintained by the Person 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, Lessees shall file all
personal property tax returns in such jurisdictions where it may legally so
file. Lessor, to the extent it possesses the same, and each Lessee, 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. If Lessor is legally required to file personal
property tax returns, Lessees will be provided with copies of assessment notices
in sufficient time for Lessees to file a protest. Lessees may, upon Notice to
and the prior written consent of Lessor, which consent shall not be unreasonably
withheld, conditioned or delayed, at Lessees' sole cost and expense protest,
appeal, or institute such other proceedings as Lessees may deem appropriate to
effect a reduction of real estate or personal property assessments and Lessor,
at Lessees' expense as aforesaid, shall cooperate with Lessees in such protest,
appeal, or other action. Lessees shall reimburse Lessor for Lessor's direct
costs of cooperating with Lessees for such protest, appeal or
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other action. Billings for reimbursement by Lessees to Lessor of personal
property taxes shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property with respect to which such payments
are made. Notwithstanding the foregoing, upon termination of the Lease (other
than by reason of a Lessee's purchase of a Facility hereunder), all Impositions
applicable to the final Lease Year of the Term shall be prorated between Lessees
and Lessor as set forth in Section 4.3 hereof.
4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessees
of all Impositions payable by Lessees hereunder of which Lessor at any time has
knowledge. Lessor's failure to give any such Notice shall in no way excuse or
affect Lessees' obligations hereunder to pay such Impositions, but if the only
reasonable source of Lessees' knowledge of an Imposition is Notice from Lessor,
and Lessees did not have knowledge of such Imposition in sufficient time to pay
the same as and when required by Section 4.1 hereof, notwithstanding anything to
the contrary elsewhere herein, provided such Imposition is paid within twenty
(20) Business Days after Lessees first have knowledge thereof, Lessees' failure
to pay such Imposition as and when required by Section 4.1 shall not constitute
an Event of Default or cause Lessees to be liable to Lessor for the payment to
Lessor of a Late Charge or interest with respect to the late payment of such
Imposition.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term expires or is terminated shall be
adjusted and prorated between Lessor and Lessees, whether or not such Imposition
is imposed before or after such expiration or termination, and Lessees'
obligation to pay their prorated share thereof shall survive the expiration or
termination of the Lease.
4.4 Utility Charges. Lessees will pay or cause to be paid when due all
charges for electricity, power, gas, oil, water and other utilities used in each
Facility during the Term.
4.5 Insurance Premiums. Lessees will pay or cause to be paid when due
all premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.
ARTICLE V
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5.1 No Termination, Abatement, etc. Except as otherwise specifically
provided in this Lease, Lessees, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the consent of Lessor to modify, surrender or terminate the same,
nor seek nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or setoff against the Rent, nor shall the respective obligations of Lessor
and Lessees be otherwise affected by reason of (i) any damage to, or destruction
of, any of the Facilities or any portion thereof from whatever cause or any
Taking; (ii) the lawful or unlawful prohibition of, or restriction upon,
Lessees' use of any of the Facilities, or any portion thereof, or the
interference with such use by any Person, or by reason of eviction by paramount
title; (iii) any claim which any Lessee or Lessees have or might have against
Lessor by reason of any default or breach of any warranty by Lessor under this
Lease or any other agreement between Lessor and any Lessee or Lessees, or to
which Lessor and any Lessee or Lessees are parties, (iv) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (v) any other cause whether similar or dissimilar to any of the
foregoing other than a discharge of all Lessees from any such obligations as a
matter of law. Lessees hereby specifically waive all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law to
(i) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (ii) entitle Lessees to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessees
hereunder except as otherwise specifically provided in this Lease. The
obligations of Lessor and Lessees hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Lessees
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 a termination by Lessor by
reason of an Event of Default.
ARTICLE VI
6.1 Ownership of the Leased Property. Lessees acknowledge that the
Leased Property is the property of Lessor and that Lessees have only the right
to the exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease. Lessees will not, at any time during the Term: (i)
file any income tax return or other associated documents; (ii) file any other
document with or submit any document to any governmental body or authority;
(iii) enter into any written contractual arrangement; or (iv) release any
financial statements of any Lessee, in each case that takes a position other
than that Lessor is the owner of the Leased Property for federal, state and
local income tax purposes and that the Lease is a "true lease".
6.2 Lessor's Personal Property. Lessees shall, during the entire Term,
maintain all of Lessor's Personal Property in good order, condition and repair
as shall be necessary
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in order to operate each Facility for such Facility's Primary Intended Use in
compliance with all applicable licensure and certification requirements, in
compliance with all applicable Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the Primary
Intended Use. In the event that any Lessor's Personal Property requires
replacement in order to comply with the foregoing, Lessees shall replace the
same with other similar property of the same or better grade at Lessee's sole
cost and expense, and when such replacement property is placed in service with
respect to the Leased Property, it shall become Lessor's Personal Property.
Lessees shall not permit or suffer Lessor's Personal Property to be subject to
any lien, charge, encumbrance, financing statement or contract of sale or the
like. At the expiration or earlier termination of this Lease, Lessor's Personal
Property shall be surrendered to Lessor at or before the time of the surrender
of the Leased Property in as good a condition as: (i) with respect to Lessor's
Personal Property on the Leased Premises (excluding the Signature Land) as of
the Commencement Date, and (ii) with respect to the Lessor's Personal Property
on the Signature Land, on the Effective Date, or (iii) with respect to personal
property acquired to replace Lessor's Personal Property, on the date on which
such replacement personal property became Lessor's Personal Property.
6.3 Lessees' Personal Property. Subject to the provisions of Section
6.4 and Section 8.3.1.7.2, Lessees shall not, except with the prior written
consent of Lessor, permit or suffer Lessees' Personal Property to be subject to
any lien, charge, encumbrance, financing statement or contract of sale or the
like. All of Lessees' Personal Property not purchased by Lessor pursuant to
Section 36.1 hereof, or removed by Lessees within twenty (20) days following the
expiration or earlier termination of this Lease, shall be considered abandoned
by Lessees and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without giving notice thereof to Lessees and without any payment to
Lessees and without any obligation to account therefor. Lessees will, at their
expense, restore each Facility to the condition required by Section 9.1.6,
including repair of all damage to such Facility caused by the removal of
Lessees' Personal Property, whether effected by Lessees or Lessor.
6.4 Grant of Security Interest in Lessees' Personal Property and
Accounts. Each Lessee has concurrently granted to Lessor a security interest in
Lessees' Personal Property, and, subject to the Intercreditor Agreement, in its
intangible property, including its accounts, as more particularly described in
the Security Agreement of even date between Lessor as secured party and such
Lessee as debtor.
ARTICLE VII
7.1 Condition of the Leased Property.. Lessees acknowledge receipt and
delivery of possession of the Leased Property, and that Lessees have examined
and otherwise have knowledge of the condition of the Leased Property prior to
the execution
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and delivery of this Lease and have found the same to be in good order and
repair and satisfactory for their purposes hereunder. Lessees are leasing the
Leased Property "as is" in its present condition. Lessees waive any claim or
action against Lessor in respect of the condition of the Leased Property. LESSOR
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 THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEES. LESSEES ACKNOWLEDGE THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEES AND IS SATISFACTORY. BritWill Indiana and
BritWill-II acknowledge that they have occupied the Leased Property under the
Existing Leases, and the Signature Subsidiaries acknowledge that they have
occupied the Leased Property prior to the Effective Date, and all Lessees
acknowledge that they are satisfied as to the physical condition of the Leased
Property on the Effective Date and that Lessees are solely responsible for the
condition of the Leased Property.
7.2 Use of the Leased Property.
7.2.1 Each Lessee covenants that it will obtain and maintain
all approvals needed to use and operate the Facility it occupies under
applicable local, state and federal law, including, but not limited to,
licensure as a licensed nursing home, or, if applicable, a retirement living
facility, and Medicare or Medicaid certification.
7.2.2 Lessees shall use or cause to be used each Facility as a
licensed nursing facility or retirement living facility as designated on the
applicable EXHIBIT B-1 through B-15, and for such other uses as may be necessary
or incidental to such use (such designated use being herein referred to as the
"Primary Intended Use"). Lessees shall not use the Facilities or any portion
thereof for any other use without the prior written consent of Lessor. No use
shall be made or permitted to be made of any Facility, and no acts shall be
done, which will cause the cancellation of any insurance policy covering any
Facility or any part thereof, nor shall Lessees sell or otherwise provide to
residents or patients therein, or permit to be kept, used or sold in or about
any Facility any article which may be prohibited by law or by the standard form
of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriter's regulations.
7.2.3 Lessees covenant and agree that they will continuously
operate each Facility as a provider of health care services in accordance with
its Primary Intended Use and shall maintain all required accreditation and
certifications for reimbursement and licensure.
7.2.4 Lessees shall not commit or suffer to be committed any
waste on the Leased Property nor shall Lessees cause or permit any nuisance
thereon.
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7.2.5 Lessees shall neither suffer nor permit any Facility or
any portion thereof, or Lessees' Personal Property, to be used in such a manner
as (i) shall impair Lessor's (or a Lessee's, as the case may be) title thereto
or to any portion thereof, or (ii) shall make possible a claim or claims of
adverse usage or adverse possession by the public, as such, or of implied
dedication of the Leased Property or any portion thereof.
7.3 Certain Environmental Matters.
7.3.1 Definitions. The terms defined in this Section have the
meanings assigned to them in this Section and include the plural as
well as the singular:
Clean-Up. The removal and/or remediation and/or
elimination of, or other response to, Contamination (as hereinafter
defined) to the satisfaction of all applicable governmental agencies,
in compliance with Environmental Laws (as hereinafter defined) and in
compliance with good and prudent commercial practice.
Contamination. The presence of any Hazardous
Substance (as hereinafter defined) or the existence of any injury to
health, safety or the environment or any other environmental condition
at, in, or under the Leased Property, or the Release (as hereinafter
defined) at, in, on, from or to the Leased Property, either in
violation of one or more Environmental Laws or at the time of
expiration or earlier termination of the Term of this Lease, which
would be reasonably required to be removed to insure that no
environmental matter restricts the present or future use, operation,
leasing, development, construction, alteration, refinancing or sale of
the Leased Property.
Environmental Documents: Each and every one of the
following: (i) each and every document received by Lessees or any
Affiliate from, and each and every document submitted by Lessees or any
Affiliate to, the United States Environmental Protection Agency and/or
any federal, state, county or municipal environmental health or safety
agency concerning environmental matters with respect to the condition
of the Leased Property or any portion thereof, or Lessees' operations
upon the Leased Property or any portion thereof; and (ii) each and
every review, audit, report, or other analysis concerning environmental
conditions, including, but not limited to, the disclosure of the
presence or absence of Hazardous Substances, at, in, or under or with
respect to the Leased Property or any portion thereof that have been
prepared by or on behalf of or for the benefit of Lessees.
Environmental Laws: Each and every law (including,
without limitation, common law), statute, code, ordinance, regulation,
rule, order permit, consent decree or other requirement (including, but
not limited to, consent decrees and judicial or administrative orders)
of the United States, a state (or any political
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subdivision thereof) in which any of the Leased Property is located,
and any other executive, judicial, regulatory or administrative agency,
authority, board, bureau, commission, court, arbitrator or arbitration
board, relating to health or safety or to the environment, including,
but not limited to, those applicable to the manufacture, processing,
transportation, distribution in commerce, use, generation, storage,
treatment, disposal, handling and Release of any Hazardous Substance
including medical waste, all as amended or modified from time to time,
and those applicable to pollution, contamination, injury, destruction,
loss, protection, cleanup, reclamation or restoration of the soil,
groundwater, surface water, air or other natural resources, to exposure
to pollutants, contaminants, hazardous or toxic substances, petroleum
products, materials or wastes.
Environmental Report: The environmental review, audit
and/or report relating to any portion of the Leased Property heretofore
provided by Lessees to Lessor.
Hazardous Substances: Any dangerous, toxic or
hazardous material, petroleum products, pollutant, contaminant,
chemical, waste including medical waste or substance defined, listed or
described as any of such in or governed by any Environmental Law.
Regulatory Actions: Any claim, demand, action or
proceeding brought or instigated by any governmental authority in
connection with any Environmental Law, including, without limitation,
civil, criminal and/or administrative proceedings, and whether or not
seeking costs, damages, penalties or expenses.
Release: The intentional or unintentional spilling,
leaking, dumping, pouring, emptying, seeping, disposing, discharging,
emitting, depositing, injecting, leaching, escaping, abandoning, or any
other release or threatened release, however defined, of any Hazardous
Substance.
Third Party Claims: Any claims, actions, demands or
proceedings (other than Regulatory Actions) howsoever based (including
without limitation those based on negligence, trespass, strict
liability, nuisance, toxic tort or detriment to health welfare or
property) due to Contamination, and whether or not seeking costs,
damages, penalties or expenses, brought by any Person other than a
governmental agency.
7.3.2 Prohibition Against Use of Hazardous Substances. Lessees
shall not permit, conduct or allow on any portion of the Leased
Property, the generation, introduction, presence, maintenance, use,
receipt, acceptance, treatment, manufacture, production, installation,
management, storage, disposal or release of any Hazardous Substance
except in full compliance with all Environmental Laws.
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7.3.3 Notice of Environmental Claims, Actions or
Contaminations. Lessees shall notify Lessor, in writing, immediately
upon learning of any existing, pending or threatened: (a)
investigation, inquiry, claim or action by any governmental authority
in connection with any Environmental Laws, (b) Third Party Claims, (c)
Regulatory Actions, and/or (d) Contamination of any portion of the
Leased Property.
7.3.4 Costs of Remedial Actions with Respect to Environmental
Matters. In the event that any investigation and/or Clean-Up of any
Hazardous Substance or other environmental condition on, under or with
respect to any portion of the Leased Property is required by any
Environmental Law, Lessees shall complete, at their own expense, such
investigation and/or Clean-Up or cause each such other Person
(including Lessor) as may be responsible therefor to conduct such
investigation and/or Clean-Up.
7.3.5 Delivery of Environmental Documents. Lessees shall
deliver to Lessor complete copies of any and all Environmental
Documents that may now be in or at any time hereafter come into the
possession of Lessees.
7.3.6 Environmental Audit. At Lessor's expense, Lessees shall
within thirty (30) days after the Lessor's written request therefor,
provide to Lessor a written certificate or certificates, in form and
substance satisfactory to Lessor, from an environmental firm or firms
acceptable to Lessor, which states that the Leased Property does not
contain any Hazardous Substances other than those Hazardous Substances
which in the reasonable opinion of Lessor will not materially adversely
affect either the Primary Intended Use of the Facilities or the value
of the Leased Property. All tests and samplings shall be conducted
using generally accepted and scientifically valid technology and
methodologies. Lessees shall give the engineers or environmental
consultants reasonable access to the Leased Property and to all records
in the possession of Lessees that may indicate the presence (whether
current or past) or Release of any Hazardous Substances on, in, under
or about the Leased Property. Lessees shall also provide the engineers
or environmental consultants a reasonable opportunity to interview such
persons employed in connection with the Leased Property as the
engineers or consultants deem appropriate. However, Lessor shall not be
entitled to request such certificate or certificates from Lessees
unless (a) there have been any material changes, modifications or
additions to any Environmental Laws as applied to or affecting any
portion of the Leased Property; (b) a significant change in the
condition of any portion of the Leased Property has occurred; or (c)
Lessor has another good reason for requesting such certificate or
certificates. If an environmental firm discovers any Hazardous
Substances, Lessees shall immediately report such fact to Lessor, and
Lessees shall perform all of Lessees' other obligations hereunder with
respect to such Hazardous Substances.
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7.3.7 Entry onto Leased Property for Environmental Matters. If
Lessees shall fail to provide the Environmental Audit contemplated by
Subparagraph 7.3.6 hereof within sixty (60) days of Lessor's request
therefor, Lessees shall permit Lessor from time to time, by its
employees, agents, contractors or representatives, reasonable access to
the relevant portions of the Leased Property for the purposes of
conducting such soil and chemical tests or any other environmental
investigations, examinations, or analyses (hereafter collectively
referred to as "Investigation") as Lessor may desire, provided Lessor,
and its employees, agents, contractors, consultants and/or
representatives, shall conduct any such investigation in a manner which
does not unreasonably interfere with Lessees' use of and operations on
the Leased Property (however, reasonable temporary interference with
such use and operations is permissible if the investigation cannot
otherwise be reasonably and inexpensively conducted). Other than in an
emergency, Lessor shall provide Lessees with prior notice before
entering on the Leased Property to conduct such Investigation, and
shall provide copies of any reports or results to Lessees, and Lessees
shall cooperate fully in such Investigation.
7.3.8 Environmental Matters Upon Termination of the Lease or
Expiration of the Term. Upon the expiration or earlier termination of
the Term, Lessees shall cause the Leased Property to be delivered to
Lessor free of any and all Regulatory Actions and Third Party Claims,
in compliance with all Environmental Laws with respect thereto, and in
a manner and condition that is reasonably required to ensure that the
then present use, operation, leasing, development, construction,
alteration, refinancing or sale of the Leased Property shall not be
restricted by any environmental condition existing as of the date of
such expiration or earlier termination of the Term.
7.3.9 Compliance with Environmental Laws. Lessees shall comply
with, and cause their agents, servants and employees, to comply with,
and use reasonable efforts to cause each tenant and other occupant and
user of the Leased Property, and the agents, servants and employees of
such tenants, occupants and users, to comply with each and every
Environmental Law applicable to Lessees, the Leased Property and each
such tenant, occupant or user with respect to the Leased Property.
Specifically, but without limitation:
7.3.9.1 Maintenance of Licenses and Permits. Lessees
shall obtain and maintain (and Lessees shall use reasonable
efforts to cause each tenant, occupant and user to obtain and
maintain) all permits, certificates, licenses and other
consents and approvals required by any applicable
Environmental Law from time to time with respect to Lessees,
each and
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every part of the Leased Property and/or the conduct of any
business thereat or related thereto;
7.3.9.2 Contamination. Lessees shall not cause,
suffer or permit any Contamination;
7.3.9.3 Clean-Up. If a Contamination occurs, Lessees
promptly shall Clean-Up and remove any Hazardous Substance or
cause the Clean-Up and the removal of any Hazardous Substance
and in any such case such Clean-Up and removal of the
Hazardous Substance shall be effected in strict compliance
with and in accordance with the provisions of the applicable
Environmental Laws;
7.3.9.4 Discharge of Lien. Within twenty (20) days of
the date any lien is imposed against the Leased Property or
any part thereof under any Environmental Law, Lessees shall
cause such lien to be discharged (by payment, by bond or
otherwise to the Lessor's absolute satisfaction);
7.3.9.5 Notification of Lessor. Promptly upon receipt
by Lessees of notice or discovery by Lessees of any fact or
circumstance which might result in a breach or violation of
any covenant or agreement in this Article VII, Lessees shall
notify Lessor in writing of such fact or circumstance; and
7.3.9.6 Requests, Orders and Notices. Promptly upon
receipt of any request, order or other notice relating to the
Leased Property or any part thereof under any Environmental
Law, Lessees shall forward a copy thereof to the Lessor.
7.3.10 Environmental Related Remedies. In the event of a
breach by Lessees beyond any applicable notice and/or grace period of
its covenants with respect to environmental matters, Lessor may, in its
sole discretion, do any one or more of the following (the exercise of
one right or remedy hereunder not precluding the simultaneous or
subsequent taking of any other right hereunder):
7.3.10.1 Cause a Clean-Up. Cause the Clean-Up of any
Hazardous Substance or other environmental condition on or
under the Leased Property, or both, at Lessees' cost and
expense; or
7.3.10.2 Payment of Regulatory Damages. Pay on behalf
of Lessees any damages, costs, fines or penalties imposed on
Lessees as a result of any Regulatory Actions; or
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7.3.10.3 Payments to Discharge Liens. Make any
payment on behalf of Lessees or perform any other act or cause
any act to be performed which will prevent a lien in favor of
any federal, state or local governmental authority from
attaching to the Leased Property or any part thereof or which
will cause the discharge of any lien then attached to the
Leased Property or any part thereof; or
7.3.10.4 Payment of Third Party Damages. Pay, on
behalf of Lessees, any damages, cost, fines or penalties
imposed on Lessees as a result of any Third Party Claims; or
7.3.10.5 Demand of Payment. Demand that Lessees make
immediate payment of all of the costs of such Clean-Up and/or
exercise of the remedies set forth in this Section 7.3
incurred by Lessor and not theretofore paid by Lessees as of
the date of such demand whether or not any court has ordered
the Clean-Up, and said costs shall become immediately due and
payable, without notice.
7.3.11 Environmental Indemnification. Except as otherwise
provided herein, Lessees shall and do hereby jointly and severally
indemnify, defend and hold harmless Lessor, its principals, officers,
directors, agents and employees (hereinafter, all "Indemnitees") from
each and every claim, cause of action, damage, demand, obligation,
fine, laboratory fee, liability, loss, penalty, imposition settlement,
levy, lien removal, litigation, judgment, proceeding, disbursement,
expense and/or cost (including without limitation the cost of each and
every Clean-Up), however defined and of whatever kind or nature, known
or unknown, foreseeable or unforeseeable, contingent or otherwise
(including, but not limited to, reasonable attorneys' fees,
consultants' fees, experts' fees and related expenses, capital,
operating and maintenance costs, incurred in connection with (i) any
investigation or monitoring of site conditions, and (ii) any Clean Up
required or performed by any federal, state or local governmental
entity or performed by any other Person because of the presence of any
Hazardous Substance, Release, threatened Release or any Contamination
on, in, under or about the Leased Property or any part thereof) which
may be asserted against, imposed on, suffered or incurred by, each and
every Indemnitee arising out of or in any way related to, or allegedly
arising out of or due to any environmental matter caused by Lessees or
occurring during Lessees' operation of the Leased Property, including,
but not limited to, any one or more of the following:
7.3.11.1 Release Damage or Liability. The disposal,
release, threatened release or the presence of or disturbance
of any Hazardous Substance on, in, at, from, under or
affecting the Leased Property or any part thereof, including,
without limitation, the presence of any Hazardous
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Substance which has come to be located in, on, at, under, or
near the Leased Property or any part thereof from another
location;
7.3.11.2 Injuries. All injuries to health or safety
(including wrongful death), or to the environment, by reason
of environmental matters relating to the condition of or
activities past or present on, at, in, or under any of the
Leased Property or any part thereof;
7.3.11.3 Violations of Law. All violations, and
alleged violations, of any Environmental Law relating to the
Leased Property or any part thereof or any activity on, in,
at, under or near any of the Leased Property or any part
thereof;
7.3.11.4 Misrepresentation. All material
misrepresentations relating to environmental matters in any
documents or materials furnished by Lessees or any Affiliate
of Lessees to Lessor and/or its representatives in connection
with the Existing Leases or this Lease;
7.3.11.5 Event of Default. Each and every Event of
Default hereunder relating to environmental matters;
7.3.11.6 Lawsuits. Any and all lawsuits brought or
threatened against any one or more of the Indemnitees,
settlements reached and governmental orders relating to any
Hazardous Substances at, on, in, under or near the Leased
Property or any part thereof, and all demands of governmental
authorities, and all policies and requirements of Lessor
disclosed in writing to Lessees, based upon or in any way
related to any Hazardous Substances at, on, in, or under the
Leased Property or any part thereof; and
7.3.11.7 Presence of Liens. All liens imposed upon
the Leased Property or any part thereof and charges imposed on
any Indemnitee in favor of any governmental entity or any
Person as a result of the presence, disposal, release or
threat of release of Hazardous Substances at, on, in, from,
under the Leased Property or any part thereof.
7.3.12 Rights Cumulative and Survival. The rights granted Lessor under
this Section are in addition to and not in limitation of any other rights or
remedies available to Lessor hereunder or allowed at law or in equity or rights
of indemnification provided to Lessor in any agreement pursuant to which Lessor
purchased a Facility or under the Existing Leases. The indemnification
obligations set forth in this Section 7.3 shall survive the expiration or
earlier termination of the Term of this Lease for a period of six (6) years.
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ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc.
Subject to Article XII relating to permitted contests, Lessees, at their
expense, will promptly (i) comply with all applicable Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property and Lessees' Personal Property, whether or
not compliance therewith shall require structural changes in any of the Leased
Improvements (any such structural changes, nevertheless, being subject to
Lessor's prior written approval) or interfere with the use and enjoyment of the
Leased Property, such compliance to include, without limitation, making such
expenditures as are required to conform the Facilities to such standards as may
from time to time be required by Federal Medicare (Title 1.8) or Medicaid (Title
19) Skilled Care Nursing Programs, if applicable, and any other applicable
programs or legislation, and making such capital improvements as may from time
to time be required by any other governmental agency having jurisdiction over
the Leased Property as a condition to the continued operation of the Facilities,
approval for Medicare, Medicaid or similar programs, pursuant to present or
future laws or governmental regulation, and (ii) procure, maintain and comply
with all licenses, certificates of need, provider agreements and other
authorizations required for the use of the Leased Property and Lessees' Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Facilities.
8.2 Legal Requirement Covenants. Lessees covenant and agree that the
Leased Property and Lessees' Personal Property shall not be used for any
unlawful purpose. Lessees shall acquire and maintain all licenses, certificates,
permits, provider agreements and other authorizations and approvals needed to
operate the Facilities in their customary manner for the Primary Intended Use
and any other use conducted on the Leased Property as may be permitted from time
to time hereunder. Lessees further covenant and agree that Lessees' use of the
Facilities and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times conform to all applicable local, state, and federal
laws, ordinances, rules, and regulations unless the same are held by a court of
competent jurisdiction to be unlawful. Lessees may, however, upon prior written
Notice to Lessor, contest the legality or applicability of any such law,
ordinance, rule or regulation, or any licensure or certification decision as
provided in Article XII. The judgment of any court of competent jurisdiction
which is final and unappealable, or final with the period within which such
judgment may be appealed having expired without appeal, or the admission of
Lessees in any action or proceeding against Lessees, whether Lessor be a party
thereto or not, that Lessees have violated any such Legal Requirements or
Insurance Requirements shall be conclusive of that fact as between Lessor and
Lessees.
8.3 Certain Covenants
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8.3.1 Certain Financial Covenants
8.3.1.1 Consolidated Tangible Net Worth of Unison. At
all times during the Term (including any Extended Term) Unison shall maintain a
Tangible Net Worth, determined on a consolidated basis, at least equal to its
Tangible Net Worth, determined on a consolidated basis, on the Effective Date
increased by fifty percent (50%) of its Net Income, determined on a consolidated
basis, if positive, in each fiscal year between the Effective Date and the date
in question, provided, however, that Unison shall not be required to maintain a
Tangible Net Worth, determined on a consolidated basis, of more than Fifty
Million Dollars ($50,000,000.00).
8.3.1.2 Lessees' Consolidated Tangible Net Worth.. At
all times during the Term (including any Extended Term), Lessees shall maintain
Tangible Net Worth, determined on a consolidated basis, at least equal to its
Tangible Net Worth, determined on a consolidated basis on the Effective Date, to
be increased by 50% of Lessees' Consolidated Net Income, if positive, in each
fiscal year between the Effective Date and the date in question, provided,
however, that Lessees shall not be required to maintain a Consolidated Tangible
Net Worth of more than Five Million Dollars ($5,000,000).
8.3.1.3 Lessees' Consolidated Current Ratio.
Beginning January 1, 2000 and thereafter at all times during the Term (including
any Extended Term), Lessees shall maintain Lessees' Consolidated Current Ratio
of at least 1.2.
8.3.1.4 Lessees' Consolidated Fixed Charge Ratio. At
all times during the Term (including any Extended Term), Lessees shall maintain
a Lessees' Consolidated Fixed Charge Ratio of at least 1.4.
8.3.1.5 Limitation of Distributions. In or with
respect to Lease Year 2000 and any subsequent Lease Year, after the first year
of the Term and excluding the distribution of the proceeds of Omega's Signature
Facilities Investment, Lessees shall not pay or distribute to their shareholders
or any Affiliate in the form of dividends, fees for management in excess of
those Lessees are required by the terms of the Management Agreement to pay, or
for any other services or reimbursements for shareholder expenditures or
overhead on behalf of Lessees unless (A) after any and all such payments and
distributions (i) Lessees' Consolidated Tangible Net Worth equals or exceeds the
amount required by Section 8.3.1.2 above, and (ii) Lessees' Consolidated Current
Ratio is at least 1.2, and (B) Lessees have maintained, for the four (4)
calendar quarters immediately preceding any such payments and distributions, a
Lessees' Consolidated Fixed Charge Ratio of at least 1.4.
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8.3.1.6 Minimum Capital Expenditures. Lessees shall
make Qualified Capital Expenditures of at least Three Hundred ($300.00) Dollars
per-licensed-bed for the improvement of each Facility during the Lease Year
beginning January 1, 1999, and thereafter throughout the Term, in each Lease
Year Lessees shall make Qualified Capital Expenditures for the improvement of
each Facility of at least such amount increased annually in proportion to
increases in the CPI. At least annually, at the request of Lessor, Lessor and
Lessees shall review capital expenditures budgets and mutually agree on
modifications, if any, to such budgets as may be required by changed
circumstances and the changed conditions of the Leased Property. If Lessor and
Lessees are unable to come to agreement on such modifications., the parties
shall resolve any such dispute in accordance with Article XXXVII hereof.
8.3.1.7 Borrowings.
8.3.1.7.1 Accounts Receivable. Lessees (or
any one or more of them) shall not increase their borrowings under a line of
credit secured by any of their accounts receivable unless, at the time of
borrowing under such line of credit, Lessees' Consolidated Fixed Charge Ratio
for the preceding four (4) calendar quarters on a pro forma basis, adding into
the Fixed Charges the estimated payments on the accounts receivable financing,
exceeded 1.55.
8.3.1.7.2 Equipment Financing. The aggregate
amount of principal and interest due from Lessees on any equipment financing,
including equipment leases and chattel financing of any sort, shall not exceed
Fifty Thousand Dollars ($50,000.00) in the first year of the Term, Forty
Thousand Dollars ($40,000.00) in the second Lease Year or Thirty Thousand
Dollars ($30,000) in the third or any succeeding Lease Year.
8.3.1.7.3 Guarantees by Lessees. Lessees
shall not jointly or severally guarantee any Debt of any Affiliate or third
party except (i) the New Omega Guarantee and (ii) such guarantees of payment to
vendors to the Facilities and trade creditors of Lessees as may be required of
Lessees in the ordinary course of business.
8.3.1.7.4 Other Borrowings. Except as
provided in subsections 8.3.1.7.1, 8.3.1.7.2 and 8.3.1.7.3, Lessees shall not
jointly or severally borrow any money or incur any Debt other than Debt to
Lessor, Debt to trade creditors in the ordinary course of business, and Debt
required for the issuance of title or other insurance for the Leased Property.
8.4 Covenants Regarding Kendalville. With respect to the
Leased Property in Kendalville, Lessees agree not to take, or permit to be taken
on their behalf, any action which any Lessee knows or should know would
adversely affect the federal income tax exemption of the interest paid on any
revenue bonds issued to finance the
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Leased Property in Kendallville ("Bonds"); and Lessees will take, or require to
be taken on their behalf, any and all affirmative acts reasonably required to
continue the exemption from taxation of said interest. Lessor shall reasonably
cooperate with Lessees in complying with their obligations under this Section.
Upon the written request of Lessees, Lessor may give its written consent to any
capital expenditure for the Leased Property in Kendallville not otherwise
permitted hereunder, provided that Lessor, in its sole discretion, determines
that such consent and such expenditures will not adversely affect the exemption
from federal income taxation of the interest paid on the Bonds. Lessees further
agree to furnish Lessor upon written request a written statement of the total
amount of such capital expenditures incurred by it or any related person.
8.5 Management Agreement; Amendments. With the approval of
Lessor, Lessees have entered into a Management Agreement with Manager in the
form attached hereto as EXHIBIT E. No material modifications to such Management
Agreement, and no other Management Agreement, shall be entered into without
Lessor's prior written approval, in its sole discretion, of the terms thereof.
The maximum management fee payable to any Manager as to any Facility shall not
exceed six percent (6%) of such Facility's Gross Revenues, without the written
consent of the Lessor. Lessees shall not amend, modify, renew, replace or
otherwise change the terms of any Management Agreement for any Facility without
the prior written consent of the Lessor, which Lessor may arbitrarily withhold,
and without a satisfactory subordination by the Manager thereunder of its right
to receive any management fee to the obligation of Lessees to pay the Minimum
Rent and Additional Charges hereunder.
8.6 Other Healthcare Facilities. Neither Lessees nor any
Affiliate shall own, operate or manage any healthcare facility within a twenty
five (25) mile radius of any Facility, other than an Excluded Facility.
8.7 Continuous Operations. Lessees agree and covenant that
they will continuously operate all of the Facilities as providers of healthcare
and related ancillary services in accordance with the Primary Intended Use of
the Facilities and agree to maintain all necessary certificates for
reimbursement, licensure and accreditation.
8.8 No Other Business. Lessees shall not jointly or severally
engage in any business or businesses other than the leasing and operation of the
Facilities and, in the case of BritWill-II only, the leasing and operation of
the UNHC Facilities.
8.9 Separateness. Each Lessee shall:
a. Establish and maintain one or more offices
through which their business shall be
conducted separate and apart from that of
Unison or any other Affiliates of Unison.
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b. Maintain records and books of account
separate from those of Unison and any other
Affiliates of Unison.
c. Not commingle assets, funds or accounts with
those of Unison or any other Affiliates of
Unison.
d. Conduct its own business in its own names
and not in the name of Unison or the names
of any other Affiliates of Unison.
e. Maintain financial statements separate from
Unison (although the same may be maintained
in compliance with GAAP on a consolidated
basis with Unison and other Affiliates of
Unison).
f. Pay its liabilities out of its own funds,
jointly or severally, including salaries of
its employees, and not from funds of Unison
or any other Affiliates of Unison.
g. Maintain an arm's length relationship with
Unison and any and all of Unison's other
Affiliates.
h. Except as provided in Section 8.3.1.7.3
above, not guarantee or become obligated for
the debts of Unison or any other entity,
including any Affiliate, or hold out its
credit, jointly or severally, as being
available to satisfy the obligations of
others.
i. Use stationery, invoices and checks and
maintain a telephone number and, if
maintaining a telecopier, maintain a
telecopier number, separate from Unison and
any of Unison's other Affiliates.
j. Not pledge its assets, jointly or severally,
for the benefit of Unison or any other
entity, including any Affiliate.
k. Hold itself out as an entity separate from
Unison and any other Unison Affiliates.
l. On and at all times after the ninetieth
(90th) day following the Effective Date have
a Board of Directors which has at least one
"Independent Director".
m. At all times cause its Board of Directors to
hold appropriate meetings (or act by
unanimous consent) to authorize all
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appropriate corporate actions, and in
authorizing such actions, to observe all
formalities.
ARTICLE IX
9.1 Maintenance and Repair.
9.1.1 Lessees, at their expense, will keep the Leased Property
and Lessees' Personal Property in good order and repair (whether or not the need
for such repairs occurs as a result of Lessees' use, any prior use, the elements
or the age of the Leased Property or any portion thereof, or any cause whatever
except the act or negligence of Lessor), and, except as otherwise provided in
Article XIV, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition whether or not existing prior to the
commencement of the Term (concealed or otherwise). Lessees shall make the
capital improvements to the Leased Property agreed to in annual capital budgets
to be prepared by Lessees for each Facility and submitted to Lessor by December
1 of the Lease Year preceding the Lease Year to which such budgets are to apply,
provided, however, that such budgets shall not limit or restrict Lessees'
ability or obligation to make all necessary repairs with respect to
extraordinary or unforeseen conditions.
9.1.2 Lessees shall do or use its best efforts to cause others
to do all shoring of the Leased Property or adjoining property (whether or not
owned by Lessor) or of the foundations and walls of the Leased Improvements, and
every other act necessary or appropriate for the preservation and safety
thereof, by reason of or in connection with any subsidence, settling or
excavation or other building operation upon the Leased Property or any part
thereof or upon adjoining property, whether or not Lessor shall, by any legal
requirements, be required to take such action or be liable for the failure to do
so. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work, and, subject to the provisions of
paragraph 9.1.5, whereby reason of age or condition, such repairs cannot be made
to the quality of the original work, the property to be repaired shall be
replaced. Lessees will paint the exterior of the Leased Improvements not less
than every ten (10) years and will maintain an internal painting program that
results in the interior of each of the Facilities being repainted at least every
three (3) years. Lessees will not take or omit to take any action the taking or
omission of which might materially impair the value or the usefulness of the
Leased Property or any part thereof for the Primary Intended Use.
It is the intention of these provisions that the
level of maintenance of each of the Facilities shall be not less than that which
would be provided by an operator of first class nursing homes or retirement
living facilities making use of the Facilities for the Primary Intended Use. At
all times Lessees shall maintain, operate and otherwise manage
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the Facilities on a quality basis and in a manner consistent with the standards
of the highest quality of other first class nursing homes and retirement living
facilities in the market areas in which the Facilities are located.
9.1.3 Lessor shall not under any circumstances be required to
build or rebuild any improvements on the Leased Property or any part thereof, or
to make any repairs, replacements, alterations, restorations or renewals of any
nature or description to any Leased Property or any part thereof, whether
ordinary or extraordinary, structural or non-structural, foreseen or unforeseen,
or upon any adjoining property, whether to provide lateral or other support for
the Leased Property or abate a nuisance affecting the Leased Property, or
otherwise, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, or to maintain the Leased Property in any way.
Lessees hereby waive, to the extent permitted by law, the right to make repairs
at the expense of Lessor pursuant to any law in effect on the Effective Date or
hereafter enacted.
9.1.4 Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (i) constituting the consent or request
of Lessor, 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 the Leased Property or any part thereof,
or (ii) giving Lessees 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 fashion as would permit the making of any claim against
Lessor in respect thereof or to make any agreement that may create, or in any
way be the basis for any right, title, interest, lien, claim or other
encumbrance upon the estate of Lessor in the Leased Property, or any portion
thereof. Lessor shall have the right to give, record and post, as appropriate,
notices of non-responsibility under any mechanics' lien laws now or hereafter
existing.
9.1.5. Lessees shall, from time to time, replace with other
operational equipment or parts or property (the "Replacement Property") any of
the Fixtures or Lessor's Personal Property (the "Replaced Property") which shall
have (i) become worn out, obsolete or unusable for the purpose for which it is
intended, (ii) been Taken in Condemnation, in which event Lessees shall be
entitled to that portion of any Award made therefor, or (iii) been lost, stolen,
damaged or destroyed; provided, however, that the Replacement Property shall (1)
be in good operating condition, (2) have a value at the time of replacement and
useful life at least equal to the value and estimated useful life of the
Replaced Property as of the Commencement Date on the BritWill Indiana and
BritWill-II Leased Property, or the Effective Date, as to the Signature Leased
Property (as adjusted for inflation) for Replaced Property specified in
Subparagraph 9.1.5(i), or have a value and useful life at the time of
replacement at least equal to the value and estimated useful life of the
Replaced Property immediately prior to the time that the Replaced Property
specified in Subparagraphs 9.1.5 (ii) and 9.1.5 (iii) was so taken, lost,
stolen, damaged or destroyed,
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and (3) be suitable for a use which is the same or similar to that of the
Replaced Property. Lessees shall repair at their sole cost and expense all
damage to the Leased Property caused by the removal of Replaced Property or
other personal property of Lessees or the installation of Replacement Property.
All Replacement Property shall become the property of Lessor and shall become a
part of the Fixtures or Lessor's Personal Property, as the case may be, to the
same extent as the Replaced Property had been. Lessees shall promptly advise
Lessor of all such Replacement Property, and if so requested by Lessor in
writing, Lessees shall promptly cause to be executed and delivered to Lessor an
invoice, bill of sale or other appropriate instrument evidencing the transfer or
assignment to Lessor of all estate, right, title and interest (other than the
leasehold estate created hereby) of Lessees or any other Person in and to the
Replacement Property, free from all liens and other exceptions to title, and
Lessees shall pay all taxes, fees, costs and other expenses that may become
payable as a result thereof. At the expiration of the Term or the sooner
termination of this Lease, all of the Facilities shall be in good operating
condition, ordinary wear and tear excepted.
9.1.6 Except for those Facilities purchased by one or more of
the Lessees pursuant to the provisions of this Lease, Lessees will, upon the
expiration or prior termination of the Term, vacate and surrender each Facility
to Lessor in the condition in which it existed when possession of such Facility
was originally delivered to a Lessee by Lessor under an Existing Lease or this
Lease, except as repaired, rebuilt, restored, altered or added to as permitted
or required by the provisions of this Lease, ordinary wear and tear excepted.
9.2 Encroachments, Restrictions, etc.
9.2.1 If any of the Leased Improvements shall at any time
encroach upon any property, street or right-of-way adjacent to a Facility, or
shall violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting any Facility, or any part thereof, or
shall impair the rights of others under any easement or right-of-way to which
any Facility is subject, then promptly upon the request of Lessor or at the
behest of any Person affected by any such encroachment, violation or impairment,
Lessees shall, at their expense, subject to their right to contest the existence
of any encroachment, violation or impairment as provided in Article XII and in
such case, in the event of an adverse final determination, either (i) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or Lessees or (ii) make such changes in the Leased
Improvements, and take such other actions, as Lessees in the good faith exercise
of their judgment deem reasonably practicable, to remove such encroachment, and
to end such violation or impairment, including, if necessary, the alteration of
any of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent
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the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Lessees shall in no event have any claim
or offset with respect to any such violation, impairment or encroachment. Any
such alteration shall be made in conformity with the applicable requirements of
Article X.
9.2.2 Encroachments described in title insurance commitments
or surveys delivered to Lessor in connection with the Existing Leases or in
connection with the Signature Leased Property at or prior to the Effective Date
of this Lease, and not objected to by Lessor within a reasonable time after such
delivery, shall be excluded from the encroachments described in Section 9.2(1)
above.
ARTICLE X
10.1 Construction of Major Alterations to Leased Property. Without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld, conditioned or delayed by Lessor, and the prior written consent of any
Facility Mortgagee, if required under any Facility Mortgage, Lessees shall make
no alterations or repairs to any Facility costing in excess of One Hundred
Thousand Dollars ($100,000.00), and no alterations or repairs which will
materially increase or decrease the number of beds or enlarge or reduce the size
of any Facility (hereinafter, any such alteration or repair is referred to as a
"Major Alteration"). Lessor agrees that it will not withhold or delay its
consent to any proposed Major Alteration if such Major Alteration is required by
this Lease or by any Legal Requirement. Lessees agree that Lessor's consent to
any Major Alteration will not be deemed unreasonably withheld if such change
will, in Lessor's judgment, reasonably exercised, alter the purpose or character
or detract from the value or operating efficiency of the Facility, or impair the
revenue producing capability of the Facility, or adversely affect the ability of
Lessees to comply with this Lease.
Prior to commencement of any Major Alteration, Lessees shall
submit to Lessor in writing a proposal describing the Major Alteration in detail
and providing Lessor with plans and specifications therefor and such other
information as Lessor may reasonably request. Lessor's consent shall be in
writing. Any consent or withholding of consent by Lessor shall be by Notice
within thirty (30) days after receipt by Lessor of such documents and
information as Lessor may reasonably require, Notice of which requirements shall
be sent to Lessees by Lessor within fifteen (15) days after Lessees' request.
No alteration shall be made which would tie in or connect
any Leased Improvements on the Leased Property with any other improvements on
property adjacent to the Leased Property (and not part of the land covered by
this Lease) including, without limitation, tie-ins of buildings or other
structures or utilities, unless Lessees shall have
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obtained the prior written approval of Lessor, which approval in Lessor's sole
discretion may be granted or withheld.
10.2 Payment for Improvements. In the event that Lessees wish to
request Lessor to consider paying for a proposed alteration or addition that
Lessees consider an Improvement, Lessees shall give Notice of their designation
of such alteration or addition as an Improvement not later than the date on
which Lessees deliver copies of the plans and specifications for such alteration
and addition pursuant to Section 10.3 below. Such Notice shall include
reasonable detail as to the estimated costs of constructing such Improvement and
Lessees' estimate of the projected increases in Gross Revenues of the Facility
attributable to the Improvement. Lessees shall furnish to Lessor such additional
information concerning the proposed Improvement as Lessor shall reasonably
require. Within fifteen (15) business days following Lessor's receipt of Notice
of designation and, if requested, any additional information concerning the
proposed Improvement, without any obligation to pay for such Improvement Lessor
shall notify Lessees of the portion of the actual cost of the proposed
Improvement, if any, for which Lessor is willing to reimburse Lessees, and the
increase to the Minimum Rent that Lessor would require, based upon Lessor's then
current rate of return. In the event that Lessor and Lessees agree on the
reimbursement amount and the increase in Minimum Rent, then Lessor shall
purchase such Improvements from Lessees, free and clear from all liens, for the
amount agreed to by Lessor and Lessees, or, if less, Lessees' actual
out-of-pocket costs in constructing such Improvement, and Lessees shall pay the
increased Minimum Rent to Lessor for the remainder of the Term (including any
Extended Term). The date for such purchase shall be the date agreed upon by
Lessor and Lessees within thirty (30) days following the date of Lessee's Notice
of completion of the Improvement to Lessor. Lessees shall pay all costs,
including but not limited to sales tax, associated with such transfer.
Lessor shall have no obligation whatsoever to reimburse Lessees for
Improvements or for alterations or additions which are not Improvements if the
Lease expires or is terminated prior to the date on which Lessor has committed
in writing to purchase the Improvements. Lessor shall have no obligation to
reimburse Lessees for the cost of any Improvement if Lessor and Lessees cannot
agree on the cost of the Improvement as a result of an Event of Default or on
the increase in the Minimum Rent on account of such Improvement. The increase in
Minimum Rent shall commence on the date on which Lessor reimburses Lessees for
the Improvement pursuant to this Section 10.2.
10.3 Construction of Alterations and Additions to the Leased Property.
Lessees shall not make or permit to be made any alterations or improvements
(whether or not the same constitute Improvements or additions of or to the
Leased Property or any part thereof) unless and until Lessees shall have caused
plans and specifications therefor to have been prepared, at Lessees' expense, by
a licensed architect and shall have obtained Lessor's written approval thereof
and the approval of any Facility Mortgagee. If the estimated cost of the
alteration or addition is more than Twenty Five Thousand Dollars
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($25,000) but less than One Hundred Thousand Dollars ($100,000), Lessees shall
give Lessor at least fifteen (15) Business Days notice of such planned
alteration or addition in advance of the commencement of construction. Such
notice shall be accompanied by a copy of the plans and specifications. If the
estimated cost of the alteration or addition exceeds One Hundred Thousand
Dollars ($100,000), Lessees shall deposit with Lessor an amount equal to the
estimated cost of the alterations or addition. Lessor shall retain and disburse
the amount so deposited in the same manner as is provided for insurance proceeds
in Section 14.8 of this Lease. If such deposit is reasonably determined by
Lessor at any time to be insufficient for the completion of the addition or
alteration, Lessees shall immediately deposit with Lessor any deficiency, to be
held and disbursed by Lessor as provided for in Section 14.8 of this Lease. If
such approvals are granted, Lessees shall cause the work described in such
approved plans and specifications to be performed, at its expense, promptly, and
in a first class, workmanlike manner by a licensed general contractor and in
compliance with all applicable governmental and Insurance Requirements and Legal
Requirements and the standards set forth in this Lease, which improvements shall
in any event constitute a complete architectural unit in keeping with the
character of the affected Facility and the area in which the affected Facility
is located, and which will not diminish the value of the affected Facility or
change the Primary Intended Use of such Facility. Each and every such
improvement, alteration or addition shall immediately become a part of the
Leased Property and shall belong to Lessor subject to the terms and conditions
of this Lease. Lessees shall have no claim against Lessor at any time in respect
of the cost or value of any such improvement, alteration or addition. There
shall be no adjustment in the Minimum Rent by reason of any such improvement,
alteration or addition.
10.4 Salvage. All materials which are scrapped or removed in connection
with the making of either Major Alterations or non-Major Alterations permitted
under this Article X, or repairs required by Article IX, shall be or become the
property of Lessees.
10.5 Abandonment of Demolition or Construction. If, after having
commenced demolition in connection with any Major or non-Major Alteration or
construction of any Major or non-Major Alteration, Lessees shall abandon the
demolition and/or construction or shall fail to complete such demolition and/or
construction within a reasonable time after the commencement thereof (due
consideration being given to Unavoidable Delays) either of such events shall
constitute an Event of Default and Lessor shall thereupon become entitled to
exercise its remedies under Article XVI.
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ARTICLE XI
11. Liens. Subject to the provisions of Article XII relating to
permitted contests, Lessees will not directly or indirectly create or allow to
remain and will promptly discharge at their expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (i) this Lease, (ii) the matters, if any, set forth in EXHIBIT F, (iii)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor and any Facility Mortgagee, (iv) liens for those taxes of Lessor which
Lessees are not required to pay hereunder, (v) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (a) the same are
not yet payable, or (b) such liens are in the process of being contested as
permitted by Article XII, (vi) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due, provided (a) the
payment of such sums shall not be postponed for more than sixty (60) days after
the completion of the work or the occurrence of the act giving rise to such
lien, and (b) if any such liens are in the process of being contested as
permitted by Article XII, such reserve or other appropriate provisions as shall
be required by law or generally accepted accounting principles shall have been
made therefor, and (vii) any liens which are the responsibility of Lessor
pursuant to the provisions of Article XXI of this Lease.
ARTICLE XII
12.1 Permitted Contests. Lessees, on their own or on Lessor's behalf
(or in Lessor's) name, but at Lessees' sole cost and expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity of any Imposition or any Legal Requirement or Insurance
Requirement or any lien, attachment, levy, encumbrance, charge or claim, or any
encroachment or restriction burdening the Leased Property as provided in Section
9.2, ("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way as relieving, modifying or extending Lessees' covenants
to pay or their covenants to cause to be paid any such charges at the time and
in the manner as in this Article provided), on condition, however, that such
legal proceedings shall not operate to relieve Lessees from their obligations
hereunder and shall not cause the sale of the Leased Property, or any part
thereof, to satisfy the same or cause Lessor or Lessees to be in default under
any encumbrance or in violation of any Legal Requirements or Insurance
Requirements upon the Leased Property or any interest therein. Upon request of
Lessor, Lessees shall either (i) provide a bond, letter of credit or other
assurance reasonably satisfactory to Lessor that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon will be paid, or (ii) deposit within the time otherwise required
for payment with a bank or trust company selected by Lessor as trustee, as
security for the payment of such Claims, money in an amount sufficient to pay
the same, together with interest and penalties in connection
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therewith and all Claims which may be assessed against or become a Claim on the
Leased Property, or any part thereof, in said legal proceedings. Lessees shall
furnish Lessor and any lender of Lessor and any other party entitled to assert
or enforce any Legal Requirements or Insurance Requirements with evidence of
such deposit within five (5) days of the same. Lessor agrees to join in any such
proceedings if the same be required to legally prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of any costs or expenses in
connection with any such proceedings; and Lessees covenant to indemnify and save
harmless Lessor from any such costs or expenses, including but not limited to
attorneys' fees incurred in any arbitration proceeding, trial, appeal and
post-judgment enforcement proceedings. Lessees shall be entitled to any refund
of any Claims and such charges and penalties or interest thereon which have been
paid by Lessees or paid by Lessor and for which Lessor has been fully
reimbursed. In the event that Lessees fail to pay or satisfy the requirements or
conditions of any Claims when due or to provide the security therefor as
provided in this paragraph and to diligently prosecute any contest of the same,
Lessor may, upon thirty (30) days advance written Notice to Lessees, pay such
charges or satisfy such claims together with any interest and penalties and the
same (or the cost thereof) shall be repayable by Lessees to Lessor forthwith as
Additional Charges. Should Lessor reasonably determine that the giving of such
Notice would risk loss to the Leased Property or cause damage to Lessor, then
Lessor shall give such written Notice as is practical under the circumstances.
12.2 Lessor's Requirement for Deposits Following Default. Upon and at
any time after an Event of Default under this Lease, Lessor, in its sole
discretion, shall be entitled to require Lessees to pay monthly a prorata
portion of the amounts required to comply with the Insurance Requirements, any
Imposition and any Legal Requirements, and when such obligations become due,
Lessor shall pay them (to the extent of the deposit) upon Notice from Lessees
requesting such payment. In the event that sufficient funds have not been
deposited to cover the amount of the obligations due at least thirty (30) days
in advance of the due date, Lessees shall forthwith deposit the same with Lessor
upon written request from Lessor. Lessor shall not be obligated to pay Lessees
any interest on any deposit so held by Lessor. Upon an Event of Default under
the Lease, any of the funds remaining on deposit may be applied under the Lease,
in any manner and on such priority, as determined by the Lessor and without
Notice to Lessees.
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ARTICLE XIII
13.1 General Insurance Requirements. During the Term of this Lease,
Lessees shall at all times keep the Leased Property, and all property located in
or on the Leased Property, including Lessor's Personal Property and Lessees'
Personal Property, insured with the kinds and amounts of insurance described
below. This insurance shall be written for each Facility by companies authorized
to do insurance business in the state in which such Facility is located. Unless
otherwise agreed by Lessor and Lessees, all such policies provided and
maintained during the Term of this Lease shall be written by companies having a
rating classification of not less than A- and a financial size category of Class
VII or above provided, however, that Lessor consents to the current insurance
policies maintained by Lessees. The policies must name Lessor as an additional
insured. Losses shall be payable to Lessor or Lessees as provided in Article
XIV. In addition, the policies shall name as an additional insured the holder of
any mortgage deed of trust or other security agreement ("Facility Mortgagee")
placed on the Leased Property by Lessor ("Facility Mortgage") by way of a
standard form of mortgagee's loss payable endorsement in use in the State and in
accordance with any such other requirements as may be established by any
Facility Mortgagee. Any loss adjustment shall require the written consent of
Lessor, Lessees and each Facility Mortgagee, which consent shall not be
unreasonably withheld by either Lessor or Lessees. Evidence of insurance shall
be deposited with Lessor and, if requested, with any Facility Mortgagee. If any
provision of any Facility Mortgage requires deposits of premiums for insurance
to be made with such Facility Mortgagee, Lessees of the encumbered Facilities
shall either pay to Lessor monthly the amounts required and Lessor shall
transfer such amounts to each Facility Mortgagee, or, pursuant to written
direction by Lessor, such Lessees shall make such deposits directly with such
Facility Mortgagee. The policies on the Leased Property, including the Leased
Improvements, Fixtures, Lessor's Personal Property and Lessees' Personal
Property shall insure against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as "Special Risk," and all
physical loss perils normally included in such Special Risk insurance, including
but not limited to sprinkler leakage, in an amount not less than one hundred
percent (100%) of the then full replacement cost thereof (as defined below in
Section 13.2);
13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facilities in
such amounts with respect to any one accident as may be requested by Lessor from
time to time;
13.1.3 Loss of rental under a rental value insurance policy
covering risk of loss during reconstruction necessitated by the occurrence of
any of the hazards described in Sections 13.1.1 or 13.1.2 (but in no event for a
period less than twelve (12) months) in an amount sufficient to prevent Lessor
and Lessees from becoming a co-insurer;
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13.1.4 Claims for personal injury or property damage under a
policy of commercial general public liability insurance with a combined single
limit per occurrence in respect of bodily injury and death and property damage
of Five Million Dollars ($5,000,000.00), which insurance shall insure
performance by Lessees of the indemnity provisions of Article XXIII of this
Lease;
13.1.5 Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000.00) for each person and for each
occurrence;
13.1.6. Flood (when any portion of the Leased Property is
located in whole or in part within a designated flood plain area) and such other
hazards and in such amounts as may be customary for comparable properties in the
area;
13.1.7. During such time as any Lessee or Lessees shall be
constructing any improvements, Lessees, at their sole cost and expense, shall
carry, or cause to be carried (i) worker's compensation insurance and employers'
liability insurance covering all persons employed in connection with the
improvements in statutory limits, (ii) a completed operations endorsement to the
commercial general liability and property damage insurance policies referred to
above, (iii) builder's risk insurance, completed value form, covering all
physical loss, in an amount satisfactory to Lessor, and (iv) such other
insurance, in such amounts, as Lessor deems necessary to protect Lessor's
interest in the Leased Property from any act or omission of Lessees contractors
or subcontractors;
13.1.8. Primary automobile liability insurance with limits of
Three Million Dollars ($3,000,000) per occurrence each for owned and non-owned
and hired vehicles; and
13.1.9. If Lessees choose to carry umbrella liability coverage
to obtain the limits of liability required under this Lease, all such policies
shall provide coverage in the same manner as the primary commercial general
liability policy and shall contain no exclusions or limitations other than those
contained in the primary policy.
13.2 Replacement Cost. The term "full replacement cost" as used herein,
shall mean, as to each Facility, actual replacement cost, including an increased
cost of construction endorsement, less exclusions provided in the standard form
of fire insurance policy. In all events full replacement cost shall be an amount
sufficient that neither Lessor nor Lessees are deemed to be co-insurers of the
Facility. In the event Lessor reasonably believes that full replacement cost
(the then replacement cost less such exclusions) of a Facility has increased at
any time during the Lease Term, it shall have the right to have such full
replacement cost redetermined by the fire insurance company which is then
carrying the largest amount of fire insurance carried on the Leased Property,
hereinafter referred to as "impartial appraiser". The determination of the
impartial appraiser shall be final and binding on the parties hereto, and
Lessees shall forthwith increase, but not
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decrease, the amount of the insurance carried pursuant to this Section to the
amount so determined by the impartial appraiser, subject to the approval of any
Facility Mortgagee, as applicable. Each party shall pay one-half (1/2) of the
fee, if any, of the impartial appraiser.
13.3 Additional Insurance. In addition to the insurance described
above, Lessees shall maintain such additional insurance as may be reasonably
required from time to time by any Facility Mortgagee and shall at all times
maintain adequate worker's compensation insurance coverage for all persons
employed by Lessees on the Leased Property. Such worker's compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.4 Waiver of Subrogation. All insurance policies carried by either
party covering the Leased Property, the Fixtures, Lessor's Personal Property or
Lessees' Personal Property including without limitation, contents, fire and
casualty insurance, shall expressly waive any right of subrogation for Lessor
and Lessees on the part of the insurer against the other party. Lessees shall
pay any additional costs or charges for obtaining such waiver.
13.5 Form Satisfactory, etc. All of the policies of insurance referred
to in this Article XIII shall be written in a form satisfactory to Lessor and
any Facility Mortgagee and by insurance companies satisfactory to Lessor and any
Facility Mortgagee. The property loss insurance policies shall contain a
Replacement Cost Endorsement. Lessor agrees that it will not unreasonably
withhold its approval as to the form of the policies of insurance or as to the
insurance companies selected by Lessees. Lessees shall pay when due all of the
premiums therefor, and deliver such policies or certificates thereof to Lessor
prior to their effective date (and, with respect to any renewal policy, not less
than twenty (20) days prior to the expiration of the existing policy, a new
policy or binder shall be furnished to Lessor), and in the event of the failure
of Lessees either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessor
at the times required, Lessor shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor when due, which premiums
shall be repayable to Lessor upon written demand therefor as Rent, and failure
to repay the same shall constitute an Event of Default within the meaning of
Section 16.1.2.
All public liability and property damage insurance shall
contain a provision that Lessor, although named as an insured, shall
nevertheless be entitled to recovery under said policies for any loss, damage,
or injury to Lessor, its servants, agents, and employees by reason of the
negligence of Lessees. Each insurer mentioned in this Article XIII shall agree,
by endorsement on the policy or policies issued by it, or by independent
instrument furnished to Lessor, that it will give to Lessor (and to any Facility
Mortgagee,
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if required by the same) at least thirty (30) days' written notice before the
policy or policies in question shall be altered, allowed to expire or canceled.
13.6 Increase in Limits. In the event that from time to time after the
Effective Date Lessor determines in its reasonable business judgment that the
limits of the personal injury or property damage - public liability insurance
then carried are insufficient, Lessor shall give Lessees Notice of acceptable
limits for such insurance; such insurance shall thereafter be carried with such
limits until further increase pursuant to the provisions of this Section.
13.7 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article XIII, Lessees' 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 Lessees; provided, however, that
the coverage afforded Lessor is not reduced or diminished or otherwise different
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 provided further that the requirements of this Article XIII
(including satisfaction of any Facility Mortgagee's requirements and the
approval of any Facility Mortgagee) are otherwise satisfied and provided further
that Lessees maintains specific allocations acceptable to Lessor.
13.8 No Separate Insurance.
13.8.1 Lessees shall not on their own initiative or pursuant
to the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, to be furnished by, or which may reasonably be required to be
furnished by, Lessees, or 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 Lessor and all Facility Mortgagees, are included therein as additional
insureds and the loss is payable under said insurance in the same manner as
losses are payable under this Lease.
13.8.2 Nothing herein shall prohibit Lessees from (i) securing
insurance required to be carried hereby with higher limits of liability than
required in this Lease, (ii) securing insurance to cover risks in excess of the
liability limits of policies required to be carried in this Lease ("umbrella
policies") or (iii) insuring against risks not required to be insured pursuant
to this lease, and as to such insurance, Lessor and all Facility Mortgagees need
not be included therein as additional insureds, nor must the loss thereunder be
payable in the same manner as losses are payable under this lease except to the
extent required to avoid a default under any Facility Mortgage or any other
encumbrance. Lessees shall immediately notify Lessor of the taking out of any
such
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separate insurance or of the increasing of any of the amounts of the then
existing insurance.
ARTICLE XIV
14.1 Insurance Proceeds. All insurance proceeds, net of any costs
incurred by Lessor in obtaining such proceeds, payable by reason of any loss or
damage to the Leased Property, or any portion thereof, or to any of Lessees'
Personal Property that is integral to the operation of any Facility at the time
of the loss or damage insured under any policy of insurance required by Article
XIII of this Lease shall be paid to Lessor and held by Lessor as provided in
this Lease. If such proceeds, net of collection costs (the "Net Proceeds"), are
less than Two Hundred Fifty Thousand Dollars ($250,000.00), and, if no Event of
Default has occurred and is continuing, Lessor shall pay such Net Proceeds to
Lessees promptly upon the completion of any restoration or repair, as the case
may be, of any damage to or destruction of the Leased Property. If such Net
Proceeds equal or exceed Two Hundred Fifty Thousand Dollars ($250,000.00), and
if no Event of Default has occurred and is continuing, the Net Proceeds shall be
made available for restoration or repair, as the case may be, of any damage to
or destruction of the Leased Property, or any portion thereof, as provided in
Section 14.9; provided, however, that within fifteen (15) days of the receipt of
the Net Proceeds, Lessor and Lessees shall agree as to the portion thereof
attributable to Lessees' Personal Property (and failing such shall submit the
matter to arbitration pursuant to the provisions of this Lease) and those Net
Proceeds which the parties agree are payable by reason of any loss or damage to
Lessees' Personal Property shall be disbursed in the manner specified in Section
14.5.2.
14.2 Restoration in the Event of Damage or Destruction Covered by
Insurance.
14.2.1 If during the Lease Term a Facility is totally or
partially damaged or destroyed from a risk covered by the insurance described in
Article XIII and thereby is rendered Unsuitable for its Primary Intended Use,
Lessees shall give Lessor Notice of such damage or destruction within five (5)
Business Days of the occurrence thereof. Lessees shall, within sixty (60) days
of the occurrence, either (i) commence the restoration of the damaged Facility
to substantially the same (or better) condition it was in immediately prior to
such damage or destruction, and complete such restoration within two hundred
seventy (270) days of the occurrence, or (ii) within thirty (30) days of the
occurrence offer to purchase the damaged Facility from Lessor for a purchase
price equal to the greater of Fair Market Value thereof and the Net Proceeds,
but not less than the Minimum Repurchase Price. In the event Lessor does not
accept Lessees' offer to so purchase the damaged Facility, Lessees may either
withdraw their offer to purchase the damaged Facility and within the two hundred
seventy (270) day time limit restore the damaged Facility to substantially the
same condition (or better) as existed immediately before the damage or
destruction, or terminate the Lease as to such Facility and in the latter event
Lessor shall
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be entitled to retain the Net Proceeds, the Additional Charges attributable to
such Facility shall cease and Minimum Rent shall be reduced in accordance with
Section 14.2.3.
14.2.2 If during the Lease Term, a damaged Facility is totally
or partially destroyed from a risk covered by the insurance described in Article
XIII, but the damaged Facility is not thereby rendered Unsuitable for its
Primary Intended Use, within ninety (90) days of the occurrence Lessees shall
restore the damaged Facility to substantially the same (or better) condition as
existed immediately before the damage or destruction. Such damage or destruction
shall not terminate this Lease; provided, however, if Lessees cannot within a
reasonable time obtain all necessary government approvals, including building
permits, licenses, conditional use permits and any certificates of need, after
diligent efforts to do so, in order to be able to perform all required repair
and restoration work and to operate the damaged Facility for its Primary
Intended Use in substantially the same manner as that existing immediately prior
to such damage or destruction, Lessees shall purchase the damaged Facility for a
purchase price equal to the greater of the Net Proceeds or the Fair Market
Value, but not less than the Minimum Repurchase Price.
14.2.3 If Lessees purchase the damaged Facility, this Lease
shall terminate as to such Facility when such purchase is closed (and Rent shall
be prorated as of such date), the Additional Charges attributable to such
Facility shall cease and the Minimum Rent payable under this Lease thereafter
shall be reduced by an amount equal to the Fair Market Rent for the purchased
Facility at the time of Lessees' purchase thereof, and, provided there is no
Event of Default under this Lease and then only to the extent not previously
applied by Lessor, Lessor shall remit to Lessees all Net Proceeds being held by
Lessor pertaining to the purchased Facility.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. Except as provided in Section 14.7 below, if a Facility is totally
or partially destroyed from a risk not covered by the insurance described in
Article XIII (and Lessor is not responsible for such destruction), Lessees shall
give Lessor Notice of such damage or destruction within five (5) Business Days
of the occurrence thereof. Whether or not such damage or destruction renders the
Facility Unsuitable for Its Primary Intended Use, Lessees at their option shall
restore the Facility to substantially the same condition it was in immediately
before such damage or destruction and such damage or destruction shall not
terminate this Lease. If Lessees fail to commence the restoration within thirty
(30) days of the occurrence or if Lessees fail to complete the restoration
within two hundred seventy (270) days of the occurrence, Lessees shall be deemed
to have elected to purchase the damaged Facility for the Minimum Repurchase
Price. Lessees shall complete the purchase within two hundred seventy (270) days
of the occurrence. In any such purchase, Lessees shall receive a credit for the
portion of any Net Proceeds retained by Lessor and, upon Lessees completion of
such purchase, the Lease shall terminate as to the damaged Facility and the
Minimum Rent shall be reduced as set forth in Section 14.2.3, above.
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14.4 Restoration of Lessees' Personal Property. If Lessees are required
or elect to restore a damaged Facility, they shall also concurrently remove or
restore any of Lessees' Personal Property.
14.5 Restoration of Lessee's Property Other than Lessees' Personal
Property.
14.5.1 If Lessees are required or elect to restore any
Facility as provided in Sections 14.2 or 14.3, Lessees shall either (i) restore
all alterations and improvements made by Lessees voluntarily without having been
required by this Lease to do so, and all Lessees' Personal Property used by
Lessees in the conduct of the Primary Intended Use of the Facility to be
restored, or (ii) replace such alterations and improvements and Lessees'
Personal Property with improvements and personal property of the same or better
quality and utility in the operation of such Facility; provided, however, if no
Event of Default shall have occurred and be continuing, Lessees shall not be
required to restore or replace any such voluntary alterations or improvements or
Lessees' Personal Property to any extent beyond the book value of Lessees'
Personal Property needed to re-equip such Leased Property in accordance with the
terms of this Lease if failure to do so will not adversely affect the amount of
Gross Revenues of the Facility; and provided further that in all events Lessees
shall make such restoration and repairs as may be necessary to keep in full
force and effect all licenses and certifications relating to such Facility.
14.5.2 In the event Lessees elect under Section 14.5.1 not to
restore or replace any such voluntary alterations or improvements and/or any
Lessee's Personal Property beyond that needed to re-equip such Leased Property
in accordance with the terms of this Lease, Lessees shall so advise Lessor in
writing, and Lessor shall within five (5) days of Lessor's receipt of said
notice, remit to Lessees the portion of the Net Proceeds, plus any accrued
interest thereon, attributable to the items which Lessees have elected not to
restore or replace. In the event Lessees elect to restore or replace any such
voluntary alterations or improvements and/or Lessees' Personal Property beyond
that needed to re-equip the damaged Facility in accordance with the terms of
this Lease, Lessees shall so advise Lessor in writing and Lessor shall disburse
said proceeds in the manner specified in Section 14.1 or 14.8, as appropriate,
in light of the amount of Net Proceeds at issue.
14.6 No Abatement of Rent. This Lease shall remain in full force and
effect and Lessees' obligation to pay the Rent shall remain unabated during any
period required for repair and restoration, unless and until this Lease shall
terminate pursuant to this Article XIV.
14.7 Damage Near End of Term. Notwithstanding any provisions of Section
14.2 or 14.3 to the contrary, if damage to or destruction of a Facility occurs
during the last twelve (12) months of the Term, including any Extended Term as
to which Lessees have exercised their option prior to the occurrence of such
damage or destruction, and if such damage or destruction cannot be fully
repaired and restored within six (6) months following
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the date of loss, Lessees shall either (i) promptly commence and thereafter
proceed diligently to restore the damaged facility to substantially the same (or
better) condition as existed immediately before the damage or destruction or
(ii) by written notice to Lessor within thirty (30) days of the occurrence of
such damage or destruction, elect to purchase the facility from Lessor for a
purchase price which shall be the greater of the Minimum Repurchase Price or the
Net Proceeds. If Lessees fail to promptly commence and diligently proceed to
complete the restoration within the time limits specified in this Section 14.7,
Lessees shall be deemed to have elected to purchase the damaged facility for the
greater of the Net Proceeds or the Minimum Repurchase Price. Lessees shall
complete the purchase within one hundred and eighty (180) days of the date of
loss. In any such purchase, Lessees shall receive a credit for any portion of
the Net Proceeds retained by Lessor, the Additional Charges attributable to such
Facility shall cease and Minimum Rent shall be reduced in accordance with
Section 14.2.3.
14.8 Waiver. Except as provided elsewhere in this Lease, Lessees hereby
waive any statutory or common law rights of termination which may arise by
reason of any damage to or destruction of any Facility.
14.9 Procedure for Disbursement of Insurance Proceeds Equal to or
Greater Than Two Hundred Fifty Thousand Dollars ($250,000). In the event Lessees
restore or repair the Facility pursuant to any Subsection of this Article XIV
and if the Net Proceeds equal or exceed Two Hundred Fifty Thousand Dollars
($250,000), the restoration or repair shall be performed in accordance with the
following procedures:
(i) The restoration or repair work shall be done pursuant to
plans and specifications approved by Lessor (which approval shall not be
unreasonably withheld, conditioned or delayed), and Lessees shall cause to be
prepared and presented to Lessor a certified construction statement, acceptable
to Lessor, showing the total cost of the restoration or repair; to the extent
such cost exceeds the Net Proceeds, the amount of such excess cost shall be
paid, in cash, by Lessees, to Lessor, before any disbursement is made by Lessor
pursuant hereto (which insurance proceeds and such funds paid to Lessor are
hereinafter called the "Construction Funds").
(ii) The Construction Funds shall be made available to Lessees
upon request, no more frequently than monthly, as the restoration and repair
work progresses pursuant to certificates of an architect acceptable to Lessor,
which certificates shall be in form and substance reasonably acceptable to
Lessor and subject to a ten (10%) percent holdback until the architect certifies
that the work is fifty percent (50%) complete after which, so long as there is
no Event of Default under this Lease and so long as the architect certifies work
is proceeding in accordance with schedule and budget, there shall be no further
retainage; any funds paid by Lessees to Lessor to pay all excess costs shall be
disbursed prior to disbursement of any insurance proceeds; the architect shall
be selected by Lessees, but shall be in the judgment of Lessor, reasonably
exercised, highly qualified
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in the design and construction of nursing homes, or of the type of property for
which the retainage or repair work is being done.
(iii) There shall be delivered to Lessor, with such
certificates, sworn statements and conditional lien waivers in an amount at
least equal to the amount of the previous disbursement of Construction Funds
paid out to Lessees pursuant to each architect's certificate and dated as of the
date of the current disbursement.
(iv) There shall be delivered to Lessor such other evidence as
Lessor may reasonably request, from time to time, during the restoration and
repair, as to the progress of the work, compliance with the approved plans and
specifications, the cost of restoration and repair and the total amount needed
to complete the restoration and repair.
(v) There shall be delivered to Lessor such other evidence as
Lessor may reasonably request, from time to time, showing that there are no
liens against the Leased Property arising in connection with the restoration and
repair and that the cost of such restoration and repair at least equals the
total amount of Construction Funds then disbursed to Lessees hereunder.
(vi) If such Construction Funds are at any time determined by
Lessor not to be adequate for completion of the restoration and repair, Lessees
shall immediately pay any deficiency to Lessor to be held and disbursed as
Construction Funds and prior to any other funds then held by Lessor for
disbursement pursuant hereto.
(vii) Construction Funds may be disbursed by Lessor to Lessees
or to the persons entitled to receive payment thereof from Lessees, and such
disbursement in either case may be made directly or through a third party escrow
agent, such as, but not limited to, a title insurance company, or its agent, all
as Lessor may determine in its sole discretion. Any excess Construction Funds
shall be paid to Lessees upon completion of the restoration or repair.
(viii) In the event Lessees at any time shall fail to promptly
and fully perform the conditions and covenants set out in subparagraphs (i)
through (vi) above, and such failure is not corrected within ten (10) Business
Days of Notice thereof, or in the event during the restoration or repair an
Event of Default occurs hereunder, Lessor may, at its option, immediately cease
making any further payments to Lessees for such restoration and repair.
14.10 Insurance Proceeds Paid to Facility Mortgagee. Notwithstanding
anything herein to the contrary, in the event that any Facility Mortgagee is
entitled to any Net Proceeds, or any portion thereof, under the terms of any
Facility Mortgage, such Net Proceeds shall be applied, held and/or disbursed in
accordance with the terms of the Facility Mortgage. In the event that the
Facility Mortgagee elects to apply the Net
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Proceeds to the indebtedness secured by the Facility Mortgage, Lessees shall
either (i) restore the Facility to substantially the same (or better) condition
as existed immediately before the damage or destruction, in which event Lessor
shall make available to Lessees for such purpose, as and when the Net Proceeds
would have been made available hereunder, an amount equal to the Net Proceeds,
or (ii) offer to acquire the Leased Property from Lessor for a purchase price
equal to the Minimum Repurchase Price, in each case within the time periods
provided for in this Lease, in which event Lessees shall receive a credit
against the Minimum Purchase Price equal to the amount of Net Proceeds applied
to pay such Facility Mortgage. If Lessees fail to make such election, or if
Lessees elect not to restore, or if Lessees fail to commence or complete the
restoration within the time limits specified in this Article XIV, then Lessees
shall be deemed to have elected to purchase the Leased Property for the Minimum
Repurchase Price.
ARTICLE XV
15.1 Condemnation Article Definitions
15.1.1 "Award" means all compensation, sums or anything of
value awarded, paid or received on a total or partial condemnation.
15.1.2 ."Condemnation" means (i) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor,
and (ii) a voluntary sale or transfer by Lessor to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.
15.1.3 "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
condemnation.
15.1.4 "Date of Taking" means the date the Condemnor has the
right to possession of the Leased Property being condemned.
15.2 Parties Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease
by Condemnation, the rights and obligations of the parties shall be determined
by this Article XV.
15.3 Total Taking. If title to the fee of the whole of a Facility shall
be taken or condemned by any Condemnor, this Lease shall cease and terminate as
to such Facility as of the Date of Taking by said Condemnor. If title to the fee
of less than the whole of a Facility shall be so taken or condemned, which
nevertheless renders such Facility Unsuitable for Its Primary Intended Use,
Lessees and Lessor shall each have the option by written 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
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to such Facility as of the date so determined. Upon such date so determined, if
such Notice has been given, this Lease shall thereupon cease and terminate as to
such Facility. In either of such events, Minimum Rent shall be reduced by an
amount equal to the Fair Market Rent for such Facility as of the date the Lease
shall have been so terminated as aforesaid. In the event of any such
termination, the provisions of Section 15.7 shall apply and the Additional
Charges attributable to such Facility shall cease.
15.4 Allocation of Portion of Award. The total Condemnation Award made
with respect to all or any portion of a Facility or for loss of Rent, or for
loss of business, shall be solely the property of and payable to Lessor.
Nothing contained in this lease shall be deemed to create any
additional interest in Lessees, or any right in Lessees to an award for the
value of the unexpired Term, for any so-called "bonus value" to Lessees of this
lease or for any loss of goodwill. Any Award made for the Taking of Lessees'
Personal Property, or for removal and relocation expenses of Lessees in any such
proceedings shall be the sole property of, and be payable to Lessees. In any
Condemnation proceedings, Lessor and Lessees shall seek their own Awards in
conformity herewith, at their own expense.
15.5 Partial Taking. If title to the fee of less than the whole of a
Facility shall be so taken or condemned, Lessees shall give Lessor Notice of
such partial Taking or Condemnation within five (5) Business Days of the
occurrence thereof. If such Facility is still suitable for its Primary Intended
Use, or if Lessees or Lessor shall be entitled, but shall not elect, to
terminate this Lease as provided in Section 15.3 hereof, Lessees, at their own
cost and expense, shall with all reasonable dispatch restore the untaken portion
of any Leased Improvements so that such Leased 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 Leased Improvements
existing immediately prior to such Condemnation or Taking. Lessees shall
commence the restoration of the Facility within sixty (60) days of the partial
Taking, and shall complete the restoration within one hundred eighty (180) days
of such partial Taking. Lessor shall contribute to the cost of restoration such
portion of the Award as is made therefor, if any, together with severance and
other damages awarded for taken Leased Improvements; provided, however, the
amount of such contribution shall not exceed such cost. As long as no Event of
Default has occurred hereunder, if the Award is in an amount less than Two
Hundred Fifty Thousand Dollars ($250,000.00), Lessor shall pay the same to
Lessees upon completion of such restoration. As long as no Event of Default has
occurred hereunder, if the Award is in an amount more than Two Hundred Fifty
Thousand Dollars ($250,000.00), Lessor shall make the Award available to Lessees
in the same manner as is provided in Section 14.9 for Net Proceeds in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00). The Minimum Rent shall not be
reduced by reason of such partial Taking. If Lessees fail to make the election
or if Lessees elect not to restore, or if Lessees fail to commence or complete
the restoration within the time limits specified in this Section 15.5, then
Lessees
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shall be deemed to have elected to purchase the Leased Property for the Minimum
Repurchase Price. Lessees shall complete the purchase within one hundred eighty
(180) days of the such partial Taking. In any such purchase, Lessees shall
receive a credit for the portion of any Award retained by Lessor and Minimum
Rent shall be reduced as set forth in Section 15.3 hereof and the Additional
Charges attributable to such Facility shall cease..
15.6 Temporary Taking. The Taking of a Facility, or any part thereof,
by military or other public authority shall constitute a Taking by Condemnation
only when the use and occupancy by the Condemnor has continued for longer than
six (6) months. During any such six (6) month period all the provisions of this
Lease shall remain in full force and effect. In the event of any temporary
Taking as in this Section 15.6 described, the entire amount of any Award made
for such Taking allocable to the Term of this Lease, whether paid by way of
damages, rent or otherwise, shall be paid to Lessees provided Lessees are not
then in default. Lessees covenant that upon the termination of any such period
of temporary use or occupancy as set forth in this Section 15.6, they will, at
their sole cost and expense restore the affected Facility as nearly as may be
reasonably possible to the condition existing immediately prior to such Taking.
If any temporary Taking continues for longer than six (6) months, such Taking
shall be considered a Total Taking governed by Section 15.3.
15.7 Condemnation Awards Paid to Facility Mortgagee. Notwithstanding
anything herein to the contrary, in the event that any Facility Mortgagee is
entitled to any Award, or any portion thereof, under the terms of any Facility
Mortgage such Award shall be applied, held and/or disbursed in accordance with
the terms of the Facility Mortgage. In the event that the Facility Mortgagee
elects to apply the Award to the indebtedness secured by the Facility Mortgage,
(i) if the Award represents an Award for Partial Condemnation as described in
Section 15.5 above, Lessees shall restore the Leased Property (as nearly as
possible under the circumstances) to a complete architectural unit of the same
general character and condition as the Leased Property existing immediately
prior to such Taking, or (ii) if the Award represents an Award for a Total
Taking as described in Section 15.3 above, Lessees shall pay to Lessor an amount
equal to the Minimum Repurchase Price and Lessor shall transfer its portion of
the Award and its interest in the Leased Property to Lessees. In any such
restoration or purchase Lessees shall receive a credit for any portion of any
Award applied to the indebtedness secured by the Facility Mortgage.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") shall occur:
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16.1.1 If Lessees shall fail to pay any Rent when the same
becomes due and payable and such failure is not cured within
a period of ten (10) Business Days after Notice thereof from
Lessor, provided that Lessees shall be entitled to such
Notice and may avail themselves of such cure period no more
than two (2) times in any calendar year; or
16.1.2 If any Lessee or Omega Master Lease Guarantor shall:
(i) admit in writing its inability to pay its debts
generally as they become due,
(ii) file a petition in bankruptcy or a petition to
take advantage of any insolvency law,
(iii) make a general assignment for the benefit of
its creditors,
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property, or
(v) file a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws or
any other applicable law or statute of the United
States of America or any State thereof, or
16.1.3 If any Lessee or Omega Master Lease Guarantor shall,
on a petition in bankruptcy filed against it, be adjudicated
a bankrupt or have an order for relief thereunder entered
against it or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of such
Lessee or Omega Master Lease Guarantor, a receiver of any
Lessee or any Omega Master Lease Guarantor or of the whole
or substantially all of the property of any Lessee, or
approving a petition filed against any Lessee or Omega
Master Lease Guarantor seeking reorganization or arrangement
of such Lessee or Omega Master Lease Guarantor under the
federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state
thereof, 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
16.1.4 If any Lessee or Omega Master Lease Guarantor shall
be finally liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or shall
have filed against it a petition or other proceeding to
cause it to be liquidated or dissolved and such proceeding
be not dismissed within thirty (30) days thereafter or
shall, in any manner, permit the sale or divestiture of
substantially all of its assets, or
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16.1.5 If the estate or interest of any Lessee in the Leased
Property or any part thereof shall be levied upon or
attached on any proceeding and the same shall not be vacated
or discharged within thirty (30) days after commencement
thereof (unless such Lessee shall be contesting such lien or
attachment in good faith in accordance with Article XII
hereof), or
16.1.6 If, except as a result of damage, destruction or a
partial or complete Condemnation, Lessees voluntarily cease
operations in any Facility for a period in excess of ten
(10) Business Days, or
16.1.7 If any representation or warranty made in writing to
Lessor by any Lessee proves to be untrue when made in any
material respect which materially and adversely affects
Lessor, and is not cured within twenty (20) days after
Notice from Lessor thereof, detailing with specificity the
nature of the untrue representation or warranty, or, if not
susceptible of being cured within the twenty (20) days, if
Lessees have not commenced to cure the same within twenty
(20) days after notice thereof and thereafter diligently
proceeded to cure such default and completed such cure prior
to the time that the same causes a default in any Facility
Mortgage and prior to the time that the same results in
civil or criminal penalties to Lessor, any Lessee, any
Affiliates of either or to the Facility, or
16.1.8 If any Lessee shall have its license to operate a
Facility as a provider of health care services in accordance
with its Primary Intended Use suspended or revoked, or an
order is imposed suspending such Lessee's right to operate
or accept patients, which order is not immediately stayed
and promptly cured, or any governmental agency having
jurisdiction takes any action of which Lessor or any officer
of any Lessee has knowledge, or notifies any Lessee in
writing of its intent to take any action to de-license or
de-certify any Facility, or terminate or suspend any
Lessee's Medicare provider agreements or Medicaid
participation agreements relating to any Facility, or
16.1.9 If any Lessee or Omega Master Lease Guarantor shall
default, or permit a default, of any material obligations of
such Lessee or Omega Master Lease Guarantor under any
material agreement between Lessor and any Lessee or Omega
Master Lease Guarantor, which default is not waived or cured
within the applicable cure period, provided, however, that
notwithstanding anything to the contrary elsewhere in this
Lease, a default by the New Omega Guarantors under the New
Omega Guarantee shall not constitute an Event of Default
under this Lease, or
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16.1.10 If a Guarantee Default should occur under the Omega
Master Lease Guarantee or any other guaranty of this Lease
given to Lessor to secure performance of any term or
provision of this Lease, or
16.1.11 If Lessees shall transfer, by means not expressly
provided for in this Lease, the operational control or
management of any Facility without the written consent of
the Lessor first had and obtained, or a Transfer shall occur
with the meaning of Section 24.2 of this Lease with respect
to any Lessee or to the voting stock of BritWill HealthCare,
which Transfer is not a Permitted Transfer, or
16.1.12 A default shall occur under any other material
contract (which, in the case of a payment default, involves
a sum in controversy of at least One Hundred Thousand
Dollars ($100,000.00) affecting any Lessee or any Affiliate
of any Lessee (provided, however, for such purpose the
Persons which Control Unison shall not be considered
Affiliates of Lessee), including without limitation the
lease between BritWill-II and UNHC, which default (a) is not
waived or cured within the shorter of (i) the cure or grace
period provided in such material contract and (ii) the
thirty (30) day period following the Notice described in
Section 16.1.17 below, and (b) Lessor elects to treat as an
Event of Default hereunder, or
16.1.13 A default shall occur under any Letter of Credit
Agreement (if applicable), or the Security Deposit
provisions of this Lease, or a default shall occur under the
terms of the Security Agreement, and such default is not
waived or cured within any applicable cure period and Lessor
elects to treat such default as an Event of Default
hereunder, or
16.1.14 Lessees fail to purchase a Facility if and as
required pursuant to Articles 14 and 15 of this Lease, or
16.1.15 Lessees fail to comply with the financial covenants
required by Sections 8.3.1.2 through 8.3.1.7 of this Lease,
or Unison fails to maintain the Consolidated Tangible Net
Worth required by Section 8.3.1.1 of this Lease, and such
failure is not cured within a period of the lesser of (i)
thirty (30) days after Notice thereof from Lessor or (ii)
fifteen (15) days following the date of delivery to Lessor
of a financial statement of Lessees or of Unison, or an
Officer's Certificate of Lessees or of Unison, showing or
stating that there is a default with respect to such
financial covenants with respect to Lessees or Consolidated
Tangible Net Worth requirements with respect to Unison, or
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16.1.16 A default shall occur pursuant to any other
agreement hereafter entered into between any Lessee and
Lessor or any agreement entered into between any Affiliate
of a Lessee and any Affiliate of Lessor and such default is
not waived or cured within any applicable cure period
(provided, however, that for such purpose, the Persons which
Control Unison shall not be considered Affiliates of Lessee
and the Persons which Control Lessor shall not be considered
Affiliates of Lessor )including without limitation the
Indiana Returned Facilities Note (as defined in the Plan),
but excluding the New Omega Guarantee, if Lessor elects to
treat such default as an Event of Default hereunder, or
16.1.17 If any Lessee shall fail to observe or perform any
other term, covenant or condition of this Lease and such
failure is not cured by Lessees within a period of thirty
(30) days after Notice thereof from Lessor detailing with
specificity the nature of the default, unless such failure
cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to
continue if Lessees proceed promptly and with due diligence
to cure the failure and diligently complete the curing
thereof and complete such cure prior to the time that the
same shall cause a default in any Facility Mortgage and
prior to the time that the same shall result in civil or
criminal penalties to Lessor, Lessees, any Affiliates of
either or any Facility, or
16.1.18 If Lessees or any Omega Master Lease Guarantor shall
fail to deliver to Lessor a Financial Statement, financial
report or Officer's Certificate as and when required by
Article XXV hereof within a period of ten (10) Business Days
after Notice from Lessor to Lessees or such Omega Master
Lease Guarantor, as the case may be, that such Financial
Statement, financial report or Officer's Certificate has not
been received as and when so required,
Lessor may terminate this Lease by giving Lessees not less than ten (10) days'
Notice (referred to in this Section as a "Notice of Termination") and, as
provided herein, the Term shall terminate and all rights of Lessees under this
Lease shall cease. The Notice of Termination shall be in lieu of and not in
addition to any notice required by the laws of the State as a condition to
bringing an action for possession of the Leased Premises or to recover damages
under this Lease. In addition to Lessor's right to terminate this Lease, Lessor
shall have all rights set forth in this Lease and available to Lessor at law and
in equity as a result of Lessees' breach of this Lease.
Notwithstanding anything herein into the contrary, upon the
occurrence of an Event of Default as set forth in Section 16.1.11, Lessor may
terminate this Lease immediately without prior Notice of any kind.
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Lessees will, to the extent permitted by law, pay as
Additional Charges all costs and expenses incurred by or on behalf of Lessor,
including, without limitation, reasonable attorneys' fees and expenses (whether
or not litigation is commenced, and if litigation is commenced, including fees
and expenses incurred in appeals and post-judgment proceedings) as a result of
any default of Lessees hereunder.
No Event of Default (other than a failure to make payment of
money) shall be deemed to exist under Section 16.1 during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Lessees shall remedy such default without further
delay.
An Event of Default with respect to any Facility is an Event
of Default as to all of the Facilities. An Event of Default occurring with
respect to any Lessee is an Event of Default as to all Lessees.
16.2 Certain Remedies. If an Event of Default shall have occurred,
whether or not this Lease has been terminated pursuant to Section 16.1, Lessees
shall, to the extent permitted by law, if required by Lessor so to do,
immediately surrender to Lessor the Leased Property pursuant to the provisions
of Sections 9.1.6 and 16.1 and quit the same and Lessor may enter upon and
repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Lessees and all other persons and any and
all personal property from the Leased Property subject to rights of any
residents or patients and to any requirement of law. In addition to all other
remedies set forth or referred to in this Article XVI, Lessor shall have the
right, upon the occurrence of any circumstances described in Sections 16.1.8
above, to suspend the Management Agreement as to the affected Facility or all
Facilities and to retain a manager of the affected Facility or all Facilities at
the expense of Lessees, such manager to serve for such term as Lessor reasonably
determines is necessary under the circumstances. The expense of the new manager
to be paid by Lessees shall not exceed the greater of the management fee paid
under the Management Agreement or 5% of such Facility's Gross Revenues.
16.3 Damages. Neither (i) the termination of this Lease pursuant to
Section 16.1, (ii) the repossession of the Leased Property, (iii) the failure of
Lessor to relet the Leased Property, (iv) the reletting of all or any portion
thereof, nor (v) the failure of Lessor to collect or receive any rentals due
upon such any reletting, shall relieve Lessees of their liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting.
(A) In the event of any such termination, Lessees shall forthwith pay
to Lessor all Rent due and payable with respect to the Leased Property
to and including the date of such termination and, thereafter Lessees
shall forthwith pay to Lessor, at
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Lessor's option as and for liquidated and agreed current damages for
Lessee's default the sum of:
(i) the worth at the time of award of any unpaid Rent which
had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned from the date
of termination until the date of the award, if the Lease had
not been terminated, exceeds the amount of such rental loss
that Lessees prove could have been reasonably avoided,
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time
of award, if the Lease had not been terminated, exceeds the
amount of such rental loss that Lessee proves could be
reasonably avoided, and
(iv) any other amount necessary to compensate Lessor for all
damages proximately caused by Lessee's failure to perform
its obligations under this Lease and which in the ordinary
course of things would be likely to result therefrom.
In making the above determinations, (i) the "worth
at the time of award" shall be determined by adding
to the applicable amounts interest, at the rate
that is the lesser of five (5) percent over the
Prime Rate or the maximum interest rate permitted
by the law of the State of Michigan, from the date
or dates on which such amount or amounts were due,
if such amounts were due before the time of the
award, and, as to amounts which would have been
payable after the time of the award, by determining
the present value of such amounts at the time of
the award by applying a discount rate equal to the
yield at the time of the award on one (1) year U.S.
Treasury Bonds, and (ii) Gross Revenues shall be
deemed to have increased four percent (4%) per year
and the CPI shall be deemed to have increased four
(4) percentage points per year during the remaining
Term of the Lease, assuming, for such purpose, that
the Lease had not been terminated.
or
(B) In the event the Lease is not terminated, Lessee's right to
possession of the Leased Property shall continue, each installment of
Rent and other sums payable by Lessees to Lessor under the Lease as the
same becomes due and payable, which Rent and other sums shall bear
interest at the rate that is the lesser of five (5)
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percent over the Prime Rate or the maximum interest rate permitted by
the law of the State of Michigan from the date when due until paid, and
Lessor may enforce, by action or otherwise, any other term or covenant
of this Lease.
16.4 Lessee's Obligation to Purchase. If an Event of Default shall have
occurred, Lessor may require Lessees to purchase all of the Leased Property by
including such requirement in the Notice of Termination (as defined in Section
16.1, above) or by separate Notice given by Lessor to Lessees at any time after
the occurrence and continuance of an Event of Default during the Term. Such
purchase by Lessees shall take place on the first Rent Payment Date occurring
not less than thirty (30) days after the date of receipt of, or such later date
that may be specified in, the Notice of Termination or separate Notice requiring
such purchase. The purchase price for the Leased Property shall be an amount
equal to the higher of the then current Fair Market Value thereof or the Minimum
Repurchase Price of the Leased Property plus all Rent then due and payable
(excluding the installment of Minimum Rent and Additional Charges due on the
purchase date) as of the date of purchase. If Lessor exercises such right, upon
payment of the purchase price Lessor shall convey the Leased Property to Lessees
or their nominee, subject to the Permitted Encumbrances and any other easements,
restrictions, liens or other matters of any kind except such encumbrances, if
any, as may have been created by the act or negligence of Lessor, on the date
specified in this Section 16.4 and this Lease shall thereupon terminate. The
purchase price paid by Lessees for the Leased Property pursuant to this Section
shall be credited against, but shall not relieve Lessees of liability for, the
damages specified in Section 16.3(A), excluding, however, all prepaid Rent or
Rent accruing after the date of the purchase of the Leased Property.
16.5 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessees waive, to the extent permitted by applicable law, (i) any right of
reentry, repossession or redesignation, (ii) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
XVI, and (iii) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
16.6 Application of Funds. Any payments received by Lessor under any of
the provisions of this Lease during the existence or continuance of any Event of
Default (and any such payments made to Lessor rather than Lessees due to the
existence of an Event of Default) shall be applied to Lessees' obligations in
the order which Lessor may determine or as may be prescribed by applicable laws
of the states in which the Facilities are located.
16.7 General Provisions Affecting Remedies. Upon an Event of Default,
Lessor may exercise the remedies provided for herein and by law with respect to
one or more or all of Lessees and with respect to one or more or all of the
Facilities. Notwithstanding the provisions of Section 16.1 of this Lease
permitting the Lessor to terminate this Lease as to all of the Leased Property
upon the occurrence of an Event of Default pursuant to that
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Section 16.1 or otherwise proceed against Lessees, Lessor may, in its sole
discretion, elect to seek the remedies provided for in this Lease only as to the
Facility or Facilities affected by the Event of Default. Lessor's election to
seek remedies only as fewer than all Facilities on one occasion shall not
preclude Lessor from exercising any or all of its remedies under this Lease in
the event of a subsequent Event of Default affecting one or more of the
Facilities.
ARTICLE XVII
17. Lessor's Right to Cure Lessee's Default. If Lessees shall fail to
make any payment or to perform any act required to be made or performed under
this Lease, and to cure the same within the relevant time periods provided in
Section 16.1, Lessor, without further Notice to or demand upon Lessees, and
without waiving or releasing any obligation of Lessees or default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Lessees, and may, to the
extent permitted by law, enter upon any portion of the Leased Property for such
purpose and take all such action thereon as, in Lessor's sole opinion, may be
necessary or appropriate therefor. Should Lessor reasonably determine that the
giving of such Notice as is provided for in Section 16.1 would risk loss to the
Leased Property or cause damage to the Lessor, Lessor shall give such Notice as
is practical under the circumstances. No such entry shall be deemed an eviction
of Lessees. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case, to
the extent permitted by law) so incurred, together with the Late Charge thereon
(to the extent permitted by law) and interest, which shall accrue at the Overdue
Rate from the date on which such sums or expenses are paid or incurred by
Lessor, shall be paid by Lessees to Lessor on demand. The obligations of Lessees
and rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.
ARTICLE XVIII
18. Provisions Relating to Purchase of the Leased Property; Sale by
Lessor.
18.1 General. In the event Lessees purchase any Facility from
Lessor pursuant to any of the terms of this Lease, Lessor shall, upon receipt
from Lessees of the applicable purchase price for such Facility, together with
full payment of any unpaid Rent for such Facility due and payable with respect
to any period (prorated on a per diem basis, if appropriate) ending on or before
the date of the purchase, deliver to Lessees an appropriate deed or other
conveyance conveying the entire interest of Lessor in and to such Facility to
Lessees unencumbered by any liens or encumbrances created by Lessor. All
expenses of such conveyance, including, without limitation, the cost of title
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examination, title insurance, attorneys' fees incurred by Lessor in connection
with such conveyance and release, recording fees and transfer taxes, shall be
paid by Lessees. From and after the date of purchase, the Minimum Rent shall be
reduced in accordance with the provisions of this Lease pursuant to which such
Facility was purchased, and the Additional Charges attributable to such Facility
shall cease.
18.2 Lessor's Right to Sell. Lessor shall have the right, at
any time, to sell each Facility, to any Person provided such sale is made
expressly subject to this Lease and the rights of Lessees under this Lease.
18.3 Option to Purchase. Provided no Event of Default shall
have occurred and be continuing, and no facts exist which, if not cured, with
the passage of time would constitute an Event of Default, upon the expiration of
the Initial Term, Lessees shall have the option to purchase all (but not less
than all) of the Signature Facilities subject to this Lease at the time of
purchase, upon the following terms and conditions: (a) the option to purchase
shall be exercisable only by Notice to Lessor at least one hundred and twenty
(120) days prior to the date upon which Lessees wish to close such purchase,
which date shall be specified in such Notice; (b) the purchase price shall be
the greater of (i) the Fair Market Value on the closing date of the Signature
Facilities which are to be purchased and (ii) Omega's Signature Facilities
Investment; (c) title to the Signature Facilities shall be conveyed to Lessees
or their nominee by Special Warranty Deed or Deeds in the same form as title to
the Signature Facilities was conveyed to Lessor, and Lessor shall make no other
warranties or representations concerning title to or the condition of the
Signature Facilities; (d) with the exception of prorations to account for
Effective Dates which do not occur on the first day of the calendar month,
prepaid Rent or Additional Charges allocable to the purchased Facilities there
shall be no prorations of any costs or expenses, all of which, except for the
fees and expenses of Lessor's counsel, shall be borne by Lessor; (e) the
purchase price shall be paid to Lessor by wire transfer of immediately available
funds to the account to which Rent is payable hereunder or such other account as
Lessor may specify by Notice to Lessees; (f) upon their exercise of this option
to purchase, Lessees shall be obligated to close the purchase of the Signature
Facilities on the date specified in the Notice, and their failure to do so shall
without further Notice constitute an Event of Default hereunder; and (g) upon
payment of the purchase price and delivery of the Deed or Deeds as provided
herein, this Lease shall terminate as to the Signature Facilities, the Minimum
Rent due hereunder thereafter shall be reduced by the amount of the Minimum Rent
for the Signature Facilities, and Additional Charges attributable to the
Signature Facilities shall cease.
ARTICLE XIX
19.1 Renewal. If no Event of Default shall have occurred and be
continuing, Lessees, jointly and not severally, are hereby granted the option to
renew this Lease at the
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expiration of the Initial Term with respect to all, but not less than all, of
the Facilities then subject to this Lease, for one (1) fourteen year optional
renewal term ("Extended Term"), upon giving Notice to Lessor of renewal at least
three hundred sixty-five (365) days prior to the end of the Initial Term. During
the Extended Term, all of the terms and conditions of this Lease shall continue
in full force and effect, except that the Minimum Rent during the Extended Term
shall be determined as set forth in EXHIBIT H.
19.2 Savings Provisions. If Lessees fail to exercise the foregoing
renewal option within the required time, Lessee's option to renew shall
nevertheless remain in full force and effect for a period of fifteen (15)
Business Days after Notice from Lessor subsequent to the required time setting
forth the expiration date of this Lease and advising Lessees that Notice of
renewal has not been received. The option to renew as thereby extended shall
expire on the close of business on the fifteenth (15th) Business Day after
Notice, and thereafter may not be exercised by Lessees. Lessor shall provide
such Notice to Lessees during the last Lease Year of the Initial Term.
ARTICLE XX
20.1 Holding Over. If Lessees shall for any reason remain in possession
of any portion of the Leased Property after the expiration of the Term or
earlier termination of the Term hereof, such possession shall be as a
month-to-month tenant during which time Lessees shall pay as Rent each month,
1.75 times the aggregate of (i) one-twelfth of the aggregate Minimum Rent
payable with respect to the last Lease Year of the preceding Term, (ii) all
Additional Charges accruing during the month and (iii) all other sums, if any,
payable by Lessees pursuant to the provisions of this Lease with respect to the
Leased Property. During such period of month-to-month tenancy, Lessees 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 their occupancy and
use of the Leased Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessees after the
expiration or earlier termination of this Lease.
20.2 Indemnity. If Lessees fail to surrender the Facility in a timely
manner and in accordance with the provisions of Section 9.1.6 upon the
expiration or termination of this Lease, in addition to any other liabilities to
the Lessor accruing therefrom, Lessees shall jointly and severally indemnify and
hold Lessor, its principals, officers, directors, agents and employees harmless
from loss or liability resulting from such failure, including, without limiting
the generality of the foregoing, loss of rental with respect to any new lease in
which the rental payable thereunder exceeds any rental paid by Lessees pursuant
to this Lease and any claims by any proposed new tenant founded on such failure.
The provisions of this Section 20.2 shall survive the expiration or termination
of this Lease.
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ARTICLE XXI
21.1 Subordination. Upon written request of Lessor, a Facility
Mortgagee or the beneficiary of a deed of trust of Lessor, Lessees will
subordinate their rights pursuant to this Lease in writing (i) to the lien of
any mortgage, deed of trust or the interest of any lease in which Lessor is
lessee and to all modifications, extensions, substitutions thereof (or, at
Lessor's option, cause the lien of said mortgage, deed of trust or the interest
of any lease in which Lessor is the lessee to be subordinated to this Lease),
and (ii) to all advances made or hereafter to be made thereunder. In connection
with any such request, Lessor shall provide Lessees with a Non-Disturbance
Agreement reasonably acceptable to such mortgagee, beneficiary or lessor
providing that should such mortgagee, beneficiary or lessor acquire the Leased
Property by way of foreclosure or deed in lieu, such mortgagee, beneficiary or
lessor will not disturb Lessees' possession under this Lease and will recognize
Lessees' rights hereunder provided no Event of Default has occurred under this
Lease. Lessees agree to consent to amend this Lease as reasonably required by
any Facility Mortgagee; Lessees shall be deemed to have unreasonably withheld or
delayed their consent to changes or amendments to this Lease requested by the
holder of a mortgage or deed of trust or such similar financing instrument
encumbering Lessor's fee interest in the Leased Property if such changes do not
materially (i) alter the economic terms of this Lease, (ii) diminish the rights
of Lessees, or (iii) increase the obligations of Lessees, provided that Lessees
shall also have received the non-disturbance agreement provided for in this
Article.
21.2 Attornment. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed of trust made by Lessor encumbering the Leased Property, or
should a lease in which Lessor is the lessee be terminated, Lessees shall attorn
to the purchaser or lessor under such lease upon any foreclosure or deed in lieu
thereof, sale or lease termination and recognize the purchaser or lessor as
Lessor under this Lease, provided that the purchaser or lessor shall acquire and
accept the Leased Property subject to this Lease.
21.3 Lessee's Certificate. Lessees agree, upon not less than ten (10)
Business Days prior Notice by Lessor to execute, acknowledge and deliver to
Lessor, a statement in writing in substantially the same form of EXHIBIT I
hereto (with such changes thereto as shall reasonably be requested by the person
relying on such certificate) ("Lessee's Certificate"). It is intended that any
Lessees' Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Premises, any mortgagee or prospective
mortgagee, or by any other party who may reasonably rely on such statement.
Lessee's failure to deliver such Lessees' Certificate within such time shall
constitute an Event of Default. In addition, upon such failure, it shall be
conclusively presumed, and shall constitute a representation and warranty by
Lessees, that (i) this
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Lease is in full force and effect without modification, and (ii) Lessor is not
in breach or default of any of its obligations under the Lease.
ARTICLE XXII
22. Risk of Loss. During the Term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
attachments, levies or executions (other than those caused by Lessor and those
claiming from, through or under Lessor) is assumed by Lessees, and, in the
absence of gross negligence, willful misconduct or material breach of this Lease
by Lessor pursuant to Section 35.1, Lessor shall in no event be answerable or
accountable therefor nor shall any of the events mentioned in this Section
entitle Lessees to any abatement of Rent except as specifically provided in this
Lease.
ARTICLE XXIII
23. Indemnification.
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23.1 General. Notwithstanding the existence of any insurance provided
for in Article XIII, and without regard to the policy limits of any such
insurance, Lessees shall jointly and severally protect, indemnify, save harmless
and defend Lessor, its principals, officers, directors and agents and employees
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent permitted by law, imposed upon or
incurred by or asserted against Lessor by reason of: (i) any accident, injury to
or death of persons or loss of or damage to property occurring on or about the
Leased Property or adjoining sidewalks, including without limitation any claims
of malpractice, (ii) any use, misuse, non-use, condition, maintenance or repair
of the Leased Property by Lessees, (iii) the failure to pay any Impositions
which are the obligations of Lessees to pay pursuant to the applicable
provisions of this Lease, (iv) any failure on the part of Lessees to perform or
comply with any of the terms of this Lease and (v) the nonperformance of any
contractual obligation, express or implied, assumed or undertaken by Lessees or
any party in privity with Lessees with respect to the Leased Property or any
business or other activity carried on with respect to the Leased Property during
the Term or thereafter during any time in which Lessees or any such other party
is in possession of the Leased Property or thereafter to the extent that any
conduct by Lessees or any such Person (or failure of such conduct thereby if the
same should have been undertaken during such time of possession and leads to
such damage or loss) causes such loss or claim. Any amounts which become payable
by Lessees under this Section shall be paid within ten (10) days after liability
therefor on the part of Lessees is determined by litigation or otherwise, and if
not timely paid, shall bear a late charge (to the extent permitted by law) at
the Overdue Rate from the date of such determination to the date of payment.
Nothing herein shall be construed as indemnifying Lessor against its own grossly
negligent acts or omissions or willful misconduct.
23.2 Indemnification With Respect to Signature Facilities. In addition
to their obligations under Section 23.1, Lessees shall indemnify and hold Lessor
harmless from and against any and all damages, losses, liabilities, costs,
actions, suits, proceedings, demands, assessments, and judgements, including,
but not limited to, reasonable and documented attorneys' fees and reasonable
costs and expenses of litigation, arising out of or in any manner related to any
of the following:
(a) Any and all obligations relating to the ownership and
operation of the Signature Facilities that exist immediately prior to
the Effective Date;
(b) Any misrepresentation of a material fact, breach of warranty
or material breach of any agreement on the part of any of the Signature
Subsidiaries under this Agreement or in any certificate furnished or to
be furnished to Lessor hereunder;
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(c) Any failure by the seller or sellers of the Signature
Facilities in connection with the sale to Lessor to comply with the
requirements of any laws or regulations relating to bulk sales or
transfers; and
(d) Any sums that are now or hereafter claimed to be due for
Medicare and Medicaid adjustments arising from the operation of any of
the Signature Facilities prior to the date of this Lease; and
(e) Any action or proceeding by any state or federal agency
seeking to revoke, withdraw or suspend any of the licenses or permits
applicable to a Signature Facility, or to terminate the participation
of any Signature Facility in either the Medicare or Medicaid Programs,
as a result of or caused by the sale of the Signature Facilities to
Lessor or the execution and delivery of this Lease by the Signature
Facilities.
For purposes of this Section 23.2, an obligation shall be deemed to
"exist" prior to the date of this Lease if it relates to events that
occurred prior to the date of this Lease even if it is not asserted
until after the date of this lease.
23.3 Lessor's Indemnification. Lessor shall indemnify, save harmless
and defend Lessees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by
or asserted against Lessees as a result of the gross negligence or willful
misconduct of Lessor.
23.4 Survival. Lessees' and Lessor's liability for a breach of the
provisions of this Article arising during the Term hereof shall survive any
termination of this Lease.
ARTICLE XXIV
24.1 General Prohibition against Assignment. No Lessee or Lessees shall
voluntarily, involuntarily or by operation of law, assign, mortgage or otherwise
encumber, all or any part of such Lessee's or Lessees' interest in this Lease or
in the Leased Property or sublet the whole or any part of the Leased Property or
enter into any agreement or arrangement under which any Facility is operated by
or licensed to be operated by an entity other than one or more of the Lessees or
Manager (any and all of which are herein referred to as a "Transfer"), except as
specifically permitted by this Lease or consented to in advance by Lessor in
writing. Unless otherwise provided herein, Lessor may arbitrarily and
unreasonably withhold its consent to any such request (or any other request
provided for in this Lease for which Lessor's consent is required) and no court
shall imply any agreement by Lessor to act in a reasonable fashion. Any such
attempted Transfer which is not specifically permitted by this Lease or
otherwise approved shall be null and void and
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of no force and effect whatsoever. In the event of any such Transfer, Lessor may
collect Rent and Additional Charges from the assignee, subtenant or other
occupant (any and all of which are herein referred to as a "Transferee") and
apply the amounts collected to the Rent and Additional Charges herein reserved,
but no Transfer or collection of Rent and Additional Charges shall be deemed to
be a waiver of Lessor's rights to enforce Lessees' covenants or the acceptance
of the Transferee as lessee, or a release of Lessees from the performance of any
covenants on the part of Lessees to be performed. Notwithstanding any Transfer,
Lessees, Omega Master Lease Guarantors and any other guarantor of this Lease
shall remain fully liable for the performance of all terms, covenants and
provisions of this Lease. Any violation of this Lease by any Transferee shall be
deemed to be a violation of this Lease by Lessees.
24.2 Corporate or Partnership Transactions. Except as provided in the
last sentence of this Section 24.2, if any Lessee, Omega Master Lease Guarantor
or Manager, if any, is a corporation, then the merger, consolidation or
reorganization of such corporation and/or the sale, issuance, or transfer,
cumulatively or in one transaction, of any voting stock, by such Lessee or Omega
Master Lease Guarantor or Manager or the stockholders of record of any of them
as of the date of this Lease, which results in a change in the Control of any
Lessee or Omega Master Lease Guarantor or Manager such that Unison does not have
direct or indirect Control of such Lessee, Omega Master Lease Guarantor or
Manager, or as a result of which any Lessee or Omega Master Lease Guarantor
which on the Effective Date is a wholly owned subsidiary of Unison, BritWill
HealthCare or Signature ceases to be such a wholly owned subsidiary, shall
constitute a Transfer of this Lease. If any Lessee, Omega Master Lease Guarantor
or Manager is a joint venture, partnership or other association, the sale,
issuance or transfer, cumulatively or in one transaction, within any five-year
period of either voting control or of a twenty percent (20%) or greater
interest, or the termination of any such joint venture, partnership or other
association, shall constitute a Transfer. Notwithstanding anything elsewhere
herein to the contrary, however, the merger, consolidation or reorganization of
Unison and/or the sale, issuance or transfer, cumulatively or in one
transaction, of any stock in Unison shall not constitute a Transfer of this
Lease.
24.3 Subordination and Attornment. Lessees shall insert in any sublease
permitted by Lessor provisions to the effect that (i) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (ii) in the event this Lease shall terminate before
the expiration of such sublease, the sublessees thereunder will, at Lessor's
option, attorn to Lessor and waive any right the sublessees may have to
terminate the sublease or to surrender possession thereunder, as a result of the
termination of this Lease, and (iii) in the event the sublessee receives a
written Notice from Lessor or Lessor's assignee, if any, stating that Lessees
are 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 direct. All rentals received from the sublessee by
Lessor or Lessor's assignees, if any, as
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the case may be, shall be credited against the amounts owing by Lessees under
this Lease.
24.4 Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, even if a sublease of the Facility is permitted,
Lessees shall not sublet the Leased 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 (i) the income or profits derived by the business activities of the
sublessee, or (ii) any other formula such that any portion of the sublease
rental received by Lessor 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. The parties agree that this paragraph shall not be deemed
waived or modified by implication, but may be waived or modified only by an
instrument in writing explicitly referring to this paragraph by number.
ARTICLE XXV
25.1 Officer's Certificates and Financial Statements. Lessees will
deliver, and as to Omega Master Lease Guarantors' Financial Statements and
reports will cause each Omega Master Lease Guarantor to deliver to Lessor:
(i) within seventy five (75) days after the end of
each Lessee's Fiscal Years, a Financial Statement for such Lessee and
separate financial statements for each Facility occupied by or under
the authority of such Lessee, in each case accompanied by an Officer's
Certificate certifying the accuracy of such Financial Statement and
Facility financial statements. The financial statements for each
Facility shall meet the reporting standards for Financial Statements,
except for principals of consolidation;
(ii) within seventy five (75) days after the end of
each Lessee's Fiscal Years, together with the Financial Statement
required by subsection (i), above, (a) an Officer's Certificate of such
Lessee stating that such Lessee is not in default in the performance or
observance of any of the terms of this Lease, or if such Lessee is in
default, specifying all such defaults, the nature thereof and the steps
being taken to remedy the same, and (b) a certificate from the
certified public accountants that prepared the Financial Statement that
nothing came to their attention during the course of their audit of
such Lessee's Financial Statement that would cause them to believe that
there was any default under the Lease;
(iii) within seventy-five (75) days after the end of
each Omega Master Lease Guarantor's Fiscal Year, a Financial Statement
for such Omega Master Lease Guarantor;
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(iv) within forty (40) days after the end of each
Lessee's fiscal quarters, quarterly financial reports for such Lessee,
together with an Officer's Certificate of such Lessee that such Lessee
is not in default of any covenant set forth in Section 8 of this Lease,
or if such Lessee shall be in default, specifying all such defaults,
the nature thereof, and the steps being taken to remedy the same;
(v) within forty (40) days after the end of each
Omega Master Lease Guarantor's fiscal quarters, quarterly financial
reports for such Omega Master Lease Guarantor;
(vi) within twenty (20) days after the end of each
month, a monthly financial report for each Facility, including a
detailed statement of income and detailed operational statistics
regarding occupancy rates, patient mix and patient rates by type for
such Facility;
(vii) within one hundred twenty (120) days after the
end of each Lessee's fiscal years or, if earlier, within fifteen (15)
days of filing, a copy of each cost report filed with the appropriate
governmental agency for each Facility;
(viii) within fifteen (15) days after they are
required to be filed with the SEC, copies of any annual or quarterly
report and of 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 a Lessee and any Omega Master Lease
Guarantor is required to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934;
(ix) within thirty (30) days of receipt thereof by
any Lessee, copies of surveys performed by the appropriate governmental
agencies for licensing or certification purposes, and any plan of
correction thereto for any Facility;
(x) immediately, Notice of any action, proposal or
investigation by any agency or entity, or complaint to such agency or
entity, (any of which is called a "Proceeding"), known to any Lessee,
the result of which Proceeding could be to (i) revoke, suspend,
terminate, modify in a way adverse to a Lessee or fail to renew or
fully continue in effect any license or certificate or operating
authority pursuant to which a Lessee carries on any use of such
Facility, or (ii) suspend, terminate, adversely modify, or fail to
renew or fully continue in effect any cost reimbursement or cost
sharing program by any state or federal governmental agency, including
but not limited to Medicaid or Medicare or any successor or substitute
therefor, or seek return of or reimbursement for any funds previously
advanced or paid pursuant to any such program, or (iii) impose any bed
hold, limitation on patient admission or similar restriction on any
Facility, or (iv) prosecute any party with respect to the operation of
any activity on any part of the Leased Property or enjoin any party or
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seek any civil penalty in excess of One Thousand Dollars ($1,000.00) in
respect thereof;
(xi) within thirty (30) days following the end of
each calendar quarter, an Officer's Certificate setting forth the Gross
Revenues of each Facility for the calendar quarter then ended and the
Lease Year to date;
(xii) as soon as it is prepared in each Lease Year, a
capital and operating budget for each Facility for that and the
following Lease Year, which budget shall be subject to Lessor's
reasonable approval, and Lessees shall promptly notify Lessor of any
material deviation from an approved budget;
(xiii) with reasonable promptness, such other
information respecting the financial condition and affairs of Lessees
and each Facility as Lessor may reasonably request from time to time
including, without limitation, any such other information as may be
available to the administration of a Facility; and
(xiv) upon Lessor's reasonable request, such audited
year-end information and unaudited quarterly financial information
concerning the Leased Property and Lessees as Lessor shall require for
its on-going filings with the Securities and Exchange Commission, under
both the Securities Act of 1933, as amended and the Securities Exchange
Act of 1934, as amended, including, but not limited to 10-Q Quarterly
Reports, 10-K Annual Reports and registration statements to be filed by
Lessor during the Term of this Lease.
Lessor's right to the information referred to in subparagraph (xiii) shall be
subject to any prohibitions or limitations on disclosure of any such data under
applicable laws or regulations, including, without limitation, any duly enacted
"Patients' Bill of Rights" or any similar legislation, including such
limitations as may be necessary to preserve the confidentiality of the
Facility-patient relationship and the physician-patient privilege. Further,
except for information which is already public, Lessor shall not disclose the
information that is subject to such prohibitions or limitations, except to its
attorneys, accountants or a Facility Mortgagee, proposed Facility Mortgagee, or
prospective purchaser or as required by judicial or administrative order and
except as permitted in Section 25.2.
25.2 Public Offering Information. Lessees specifically agree that
Lessor may include financial information and such information concerning the
operation of each Facility which does not violate the confidentiality of the
Facility-patient relationship and the physician-patient privilege under
applicable laws, in offering memoranda, prospectus or similar publications in
connection with syndications or public offerings of the Lessor's securities or
interests, and any other reporting requirements under applicable Federal and
State Laws, including those of any successor to Lessor. Lessees agrees to
provide such
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other reasonable information necessary with respect to Lessees and the Leased
Property to facilitate a public offering or to satisfy SEC or regulatory
disclosure requirements. Lessor shall provide to Lessees a copy of any such
information prepared by Lessor for publication published and Lessees shall have
a reasonable period of time (not to exceed five (5) days) after receipt of such
information to notify Lessor of any corrections.
ARTICLE XXVI
26. Lessor's Right to Inspect. Lessees shall permit Lessor and its
authorized representatives to inspect the Leased Property during usual business
hours subject to any security, health, safety or confidentiality requirements of
any governmental agency or insurance requirement relating to the Leased
Property, or imposed by law or applicable regulations.
ARTICLE XXVII
27. No Waiver. No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, 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 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.
ARTICLE XXVIII
28. Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessees now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessees of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessees of any or all of such
other rights, powers and remedies.
ARTICLE XXIX
29. Acceptance of Surrender. No surrender to Lessor of this Lease or of
any Facility or any part thereof, or of any interest therein, shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative
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or agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of any such surrender.
ARTICLE XXX
30.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (i) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (ii) the fee estate in the
Leased Property.
30.2 No Partnership. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture between Lessor and Lessees or
to cause either party to be responsible in any way for the debts or obligations
of the other or any other party, it being the intention of the parties that the
only relationship hereunder is that of Lessor and Lessees.
ARTICLE XXXI
31. Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property shall convey the Leased Property in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of the
Leased Property shall expressly assume all obligations of Lessor hereunder
arising or accruing from and after the date of such conveyance or transfer,
Lessor or such successor owner, as the case may be, shall thereupon be released
from all future liabilities and obligations of Lessor under this Lease arising
or accruing from and after the date of such conveyance or other transfer as to
the Leased Property and all such future liabilities and obligations shall
thereupon be binding upon the new owner.
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ARTICLE XXXII
32. Quiet Enjoyment. So long as Lessees shall pay all Rent as the same
becomes due and shall comply with all of the terms of this Lease and
substantially perform its obligations hereunder, Lessees shall peaceably and
quietly have, hold and enjoy the Leased Property for the Term hereof, free of
any claim or other action by Lessor or anyone claiming by, through or under
Lessor, but subject to all liens and encumbrances of record as of the date
hereof or hereafter provided for in this Lease or consented to by Lessees.
Except as otherwise provided in this Lease, no failure by Lessor to comply with
the foregoing covenant shall give Lessees 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 to perform any other
obligation of Lessees hereunder. Notwithstanding the foregoing, Lessees shall
have the right, by separate and independent action to pursue any claim it may
have against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Section.
ARTICLE XXXIII
33. Notices. All notices, demands, requests, consents, approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served upon an Executive Officer (as defined below) of the party
being served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), or delivered by national overnight delivery
service such as Federal Express or D.H.L., or sent by facsimile transmission
addressed to the respective parties, as follows:
(i) if to Lessees:
Unison HealthCare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
ATTN: Michael A. Jeffries
Tel: (602) 607-4000
Fax: (602) 607-4014
with a copy to:
ATTN: Nir E. Margalit
Tel: (602) 607-4000
Fax: (602) 607-4114
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(ii) if to Lessor:
Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, MI 48108
ATTN: Essel W. Bailey, Jr.
Tel: (734) 747-9890
Fax: (734) 996-0020
with a copy to:
Dykema Gossett
ATTN: Fred J. Fechheimer
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
Tel: (248) 203-0743
Fax: (248) 203-0763
or to such other address as a party may by Notice hereafter designate, provided,
however, that Lessees may not at any given time designate more than one entity's
name and address to which Lessor's Notices are to be sent. A Notice sent by
Lessor to the name and address set forth above for Lessees, or to such other
name and address as Lessees may hereafter designate by Notice, shall be deemed
to be a Notice to all Lessees. A Notice sent by any Lessees to Lessor shall be
deemed to be a Notice from, and binding upon, all Lessees. Notice shall be
deemed to have been given on the date of delivery if such delivery is made on a
Business Day, or if not, on the first Business Day after delivery, or if
delivery is refused, on the date delivery was first attempted, provided however
that a Notice sent by facsimile transmission shall be deemed given upon
confirmation to the sender by the recipient that such Notice was received.
"Executive Officer" shall mean the Chairman of the Board of Directors, the
President, any Vice President and the Secretary of any corporation upon which
service is to be made.
ARTICLE XXXIV
34. Appraisers. In the event that it becomes necessary to determine the
Fair Market Value of, or the Fair Market Rent for, a Facility for any purpose of
this Lease, 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 (10) days after Notice, Lessor or
Lessees, as the case may be, shall by Notice to Lessees (or Lessor, as the case
may be) appoint a second Person as appraiser on its or their behalf. The
appraisers thus appointed, each of whom must be a member of the American
Institute
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of Real Estate Appraisers (or any successor organization thereto) and
experienced in appraising nursing home properties, shall, within forty-five (45)
days after the date of the Notice appointing the first appraiser, proceed to
appraise the Facility to determine Fair Market Value or Fair Market Rent as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall have been
so appointed but only one such appraiser shall have made such determination
within fifty (50) days after the making of Lessees' or Lessor's request, then
the determination of such appraiser shall be final and binding upon the parties.
To the extent consistent with sound appraisal practice as then existing at the
time of any such appraisal, such appraisal shall be made on a basis consistent
with the basis on which the Facility was appraised for purposes of determining
its Fair Market Value at the time the Facility was acquired by Lessor. If two
appraisers shall have been appointed and shall have made their determinations
within the respective requisite periods set forth above and if the difference
between the amounts so determined shall not exceed ten per cent (10%) of the
lesser of such amounts, then the Fair Market Value or Fair Market Rent shall be
an amount equal to fifty percent (50%) of the sum of the amounts so determined.
If the difference between the amounts so determined shall exceed ten percent
(10%) of the lesser of such amounts, then such two appraisers shall have twenty
(20) days to appoint a third appraiser. If no such appraiser shall have been
appointed within such twenty (20) days or within ninety (90) days of the
original request for a determination of Fair Market Value or Fair Market Rent,
whichever is earlier, either Lessor or Lessees 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 or Fair Market Rent within forty-five (45) days
after appointment of such appraiser. The determination of the appraiser which
differs most in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be final and binding upon Lessor and Lessees
as the Fair Market Value of, or the Fair Market Rent for, the Facility, as the
case may be. If Fair Market Rent is being determined for more than one year,
Fair Market Rent may include such annual increases, if any, as the appraisers
determine to be appropriate and shall make the assumptions as to the CPI and
Gross Revenues provided for in Section 16.3 above. This provision for
determining by appraisal 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. Lessor shall pay the fees and expenses of the appraiser appointed by it,
Lessees shall pay the fees and expenses of the appraiser appointed by them and
Lessor and Lessees shall 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 XXXV
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35.1 Breach by Lessor. Lessor shall not be in breach of this Lease
unless Lessor 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 thirty (30) days after Notice thereof from Lessees, unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to continue if Lessor, within
said thirty (30) day period, proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof. The time within which
Lessor shall be obligated to cure any such failure shall also be subject to
extension of time due to the occurrence of any Unavoidable Delays.
35.2 Compliance With Facility Mortgage. Lessees covenant and agree that
they will duly and punctually observe, perform and comply with all of the terms,
covenants and conditions (including, without limitation, covenants requiring the
keeping of books and records and delivery of financial statements) of all
Facility Mortgages and that they will not directly or indirectly, do any act or
suffer or permit any condition or thing to occur, which would or might
constitute a default under any Facility Mortgage. Anything in this Lease to the
contrary notwithstanding, if the time given to Lessor by the terms of any
Facility Mortgage to perform any act or do any thing is shorter than the time
given to Lessees by this Lease to perform or do the same act or thing, then
Lessees shall perform said act or do said thing by the time specified in any
such Facility Mortgage, provided however, that Lessees shall not be deemed to be
in default under this Lease solely by reason of the shortening of any applicable
cure period permitted Lessees under Article XVI of this Lease by reason of the
requirements with respect to Facility Mortgages of Sections 16.1.7, 16.1.17, or
this Section 35.2.
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ARTICLE XXXVI
36.1. Lessor's Option to Purchase Lessees' Personal Property. Effective
on not less than ninety (90) days prior written Notice given at any time within
one hundred eighty (180) days prior to the expiration of the Initial Term or any
Extended Term of this Lease, but not later than ninety (90) days prior to such
expiration, or such shorter Notice as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have the option to
purchase all (but not less than all) of Lessees' Personal Property, if any, at
the expiration or termination of this Lease, for an amount equal to the then
book value thereof (acquisition cost less accumulated depreciation on the books
of Lessees pertaining thereto), subject to, and with appropriate price
adjustments for, any obligations owing from Lessees to Lessor, all equipment
leases, conditional sale contracts, UCC-1 financing statements and other
encumbrances to which such Lessees' Personal Property is subject. Upon Lessee's
purchase of a Facility, this option shall terminate with respect to Lessees'
Personal Property in or used in connection with the purchased Facility. If
Lessor fails to notify Lessees of the exercise of such option to purchase
Lessees' Personal Property within the required time, such option shall
nevertheless remain full force and effect for a period of thirty (30) days after
Notice from Lessees subsequent to the required time advising Lessor that Notice
of purchase has not been received.
36.2 Facility Trade Names. If this Lease is terminated because of an
Event of Default, or Lessor exercises its option to purchase Lessees' Personal
Property pursuant to Section 36.1, Lessor shall be permitted to use the name
under which each Facility has done business during the Term (the "Facility Trade
Names"). Lessees shall not after any termination use any Facility Trade Name in
the same market in which the Facility is located in connection with any business
that competes with such Facility.
36.3 Transfer of Operational Control of the Facilities. If this Lease
expires without extension, or is terminated for any reason other than Lessees'
purchase as to any of the Facilities, pending a transfer of the operational
control of the Facilities to Lessor or its nominee, Lessees covenant as follows:
(i) Lessees will not effect any changes in salaries (other than
normal merit raises and the pre-announced wage increases of which Lessor has
knowledge) or employment agreements, if any, without the advance written consent
of Lessor other than customary raises to non-officers at regular review dates;
and will not hire any additional employees except in good faith in the ordinary
course of business.
(ii) Lessees will provide all necessary information requested by
Lessor or its nominee for the preparation and filing of any and all necessary
applications or notifications for any federal or state governmental authority
having jurisdiction over a change in the operational control of the Facilities,
and Lessees will use their best efforts to cause the operating healthcare
licenses to be transferred to Lessor or to nominee.
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(iii) Lessees shall use their best efforts to keep the business
and organization of the Facilities intact and to preserve for Lessor or its
nominee the good will of the suppliers, distributors, residents and others
having business relations with Lessees with respect to the Facilities.
(iv) Lessees shall engage only in transactions or other activities
with respect to the Facilities which are in the ordinary course of its business
and shall perform all maintenance and repairs reasonably necessary to keep the
Facilities in satisfactory operating condition and repair, and shall maintain
the supplies and foodstuffs at levels which are consistent and in compliance
with all health care regulations, and shall not sell or remove any personal
property except in the ordinary course of business.
(v) Lessees shall fully cooperate with Lessor or its nominee in
supplying any and all information that may be reasonably required to effect an
orderly transfer of the Facilities.
(vi) Lessees shall provide Lessor or its nominee with full and
complete information regarding the employees of the Facilities and shall
reimburse Lessor or its nominee for all outstanding accrued employee benefits,
including accrued vacation, sick and holiday pay calculated on a true accrual
basis, including all earned and a prorated portion of all unearned benefits.
(vii) Lessees shall use their best efforts to obtain the
acknowledgment and the consent of any creditor, lessor or sublessor, mortgagee,
beneficiary of a deed of trust or security agreement affecting the real and
personal properties of Lessees or any other party whose acknowledgment and/or
consent would be required because of a change in the operational control of the
Facilities and transfer of personal property, such consent to be in form, scope
and substance satisfactory to Lessor or its nominee, including, without
limitation, an acknowledgment in respect to all such contracts, leases, deeds of
trust, mortgages, security agreements, or other agreements that Lessees and all
predecessors or successors-in-interest thereto are not in default in respect
thereto, that no condition known to the consenting party exists which with the
giving of notice or lapse of time would result in such a default, and, if
requested, affirmatively consenting to the change in the operational control of
Facilities.
(viii) To more fully preserve and protect the Lessor's rights
under this Section 36.3, Lessees do hereby jointly and severally make,
constitute and appoint Lessor their true and lawful attorney-in-fact, for them
and each of them and in their names, place and stead to execute and deliver all
such instruments and documents, and to do all such other acts and things, as
Lessor may deem to be necessary or desirable to protect and preserve its rights
under this Section 36.3, including, without limitation, the preparation,
execution and filing with the Board of Health of the State or other appropriate
agency of the State or department any and all required "Letters of
Responsibility" or similar documents. Lessees further hereby grant to Lessor the
full power and authority to appoint
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one or more substitutes to perform any of the acts that Lessor is authorized to
perform hereunder, with a right to revoke such appointment of substitution at
pleasure. The power of attorney granted pursuant to this Section is coupled with
an interest and therefore is irrevocable. Any Person dealing with Lessor may
rely upon the representation of Lessor relating to any authority granted by this
power of attorney, including the intended scope of the authority, and may accept
the written certificate of Lessor that this power of attorney is in full force
and effect. Photographic or other facsimile reproductions of this executed
Agreement may be made and delivered by Lessor, and may be relied upon by any
Person to the same extent as though the copy were an original. Anyone who acts
in reliance upon any representation or certificate of Lessor, or upon a
reproduction of this Lease, shall not be liable for permitting Lessor to perform
any act pursuant to this power of attorney.
ARTICLE XXXVII
37. Arbitration. Except with respect to the payment of Rent under this
Lease, in case any controversy shall arise between the parties hereto as to any
of the requirements of this Lease or the performance thereof, which the parties
shall be unable to settle by agreement or as otherwise provided herein, such
controversy shall be determined by arbitration. Such arbitration shall be
conducted by three arbitrators selected in accordance with the procedures of the
American Arbitration Association and in accordance with its rules and
procedures. The decision of the arbitrators shall be final and binding, and
enforceable in any court of competent jurisdiction. Such decision shall set
forth in writing the basis for the decision, and in rendering such decision and
award, the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease. The expense of the arbitration shall be divided
between Lessor and Lessees unless otherwise specified in the award. Each party
in interest shall pay the fees and expenses of its own counsel. Such arbitration
shall be conducted in Ann Arbor, Michigan. In any such arbitration, the parties
shall be entitled to conduct discovery in the same manner as permitted under
Federal Rules of Civil Procedure 26 through 37. No provision in this Article
shall limit the right of any party to this Agreement to obtain provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration. The exercise of such a remedy does not
waive the right of either party to arbitration.
ARTICLE XXXVIII
38.1 Miscellaneous.
38.1.1 Survival, Choice of Law. Anything contained in this
Lease to the contrary notwithstanding, all claims against, and liabilities of,
Lessees or Lessor arising prior to any date of termination of this Lease shall
survive such termination. If any term or provision of this Lease or any
application thereof shall be invalid or unenforceable, the
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remainder of this Lease and any other application of such term or provisions
shall not be affected thereby. If any late charges provided for in any provision
of this Lease are based upon a rate in excess of the maximum rate permitted by
applicable law, the parties agree that such charges shall be fixed at the
maximum permissible rate. Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing and
in recordable form signed by Lessor and Lessees. 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 Michigan without regard to Michigan's conflict of
interest rules as to all matters other than those matters relating to the
enforcement or exercise of any remedies of Lessor under this Lease, which shall
be governed as to each Facility by the laws of the state in which such Facility
is located.
38.1.2 Limitation on Recovery. Lessees shall look solely to
Lessor's interest in the Leased Property for recovery of any judgment from
Lessor. No shareholder or officer of Lessor shall ever be personally liable for
any such judgment or for the payment of any monetary obligation to Lessees. The
foregoing provisions are not intended to, and shall not, limit any right that
Lessees might otherwise have to obtain injunctive relief against Lessor or
Lessor's successors in interest, or to bring any action not asserting any
personal liability of Lessor (original or successor), its shareholders, officers
or directors. In no event shall Lessor (original or successor) ever be liable to
Lessees for any indirect or consequential damages suffered by Lessees from
whatever cause.
38.1.3 Waivers. Lessees waive any defense by reason of any
disability of any Lessee, and waive any other defense based on the termination
of any Lessee's (including any Lessee's successor's) liability from any cause.
Lessees waive all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance, and waive all notices of the existence, creation, or incurring of
new or additional obligations.
38.1.4 Consents. Whenever the consent or approval of Lessor or
Lessees is required hereunder, Lessor or Lessees may in their sole discretion
and without reason withhold that consent or approval unless otherwise
specifically provided.
38.1.5 Counterparts. This Lease may be executed in separate
counterparts, each of which shall be considered as original when each party has
executed and delivered to the other one or more copies of this Lease.
38.1.6 Options Personal. The renewal option granted to Lessees in
this Lease is granted solely to Lessees and is not assignable or transferrable
except in
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connection with a transfer or assignment of this Lease as permitted in Article
XXIV. Any attempt to assign or transfer such option shall be void and of no
force and effect.
38.1.7 Rights Cumulative. Except as provided herein to the
contrary, the respective rights and remedies of the parties specified in this
Lease shall be cumulative and in addition to any rights and remedies not
specified in this Lease.
38.1.8 Entire Agreement. It is understood that there are no oral
or written agreements or representations between the parties hereto affecting
this Lease and this Lease supersedes and cancels any and all previous
negotiations, arrangements, representations, brochures, agreements and
understandings, if any, between Lessor and Lessees.
38.1.9 Amendments in Writing. No provision of this Lease may be
amended except by an agreement in writing signed by Lessor and Lessees.
38.1.10 Severability. If any provision of this Lease or the
application of such provision to any person, entity or circumstance is found
invalid or unenforceable by a court of competent jurisdiction, such
determination shall not affect the other provisions of this Lease and all other
provisions of this Lease shall be deemed valid and enforceable.
38.1.11 Successors. The term "Lessor" shall mean only the owner or
owners at the time in question of fee title in the Leased Property. All rights
and obligations of Lessor and Lessees under this Lease shall extend to and bind
the respective heirs, executors, administrators and the permitted
concessionaires, successors, subtenants and assignees of the parties. Lessees
shall be bound jointly and severally by the terms, covenants and agreements
contained in this Lease.
38.1.12 Time of the Essence. Except for the delivery of possession
of the Premises to Lessees, time is of the essence of all provisions of this
lease of which time is an element.
ARTICLE XXXIX
39. Commissions. Lessor and Lessees each represent and warrant to the
other that no real estate commission, finder's fee or the like is due and owing
to any Person in connection with this lease. Lessor and Lessees each agree to
save, indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations for brokerage, finder's fees or the like in
connection with this Lease or the transactions contemplated hereby, asserted by
any Person on the basis of any statement or act alleged to have been made or
taken by that party.
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ARTICLE XL
40. Memorandum of Lease. Lessor and Lessees shall, promptly upon the
request of either, enter into a short form or memorandum of this Lease, in form
suitable for recording under the laws of the state in which the Facilities are
located, in which reference to this lease, and all options contained herein,
shall be made. Lessees shall pay all costs and expenses of recording such short
form or memorandum. The form of the memorandum shall be as set forth in EXHIBIT
J.
ARTICLE XLI
41.1 Security Deposit. Concurrently with Lessees' execution of this
Lease, Lessor shall withhold a sum equal to the Security Deposit from Omega's
Signature Facilities Investment, which Lessor shall hold as security for the
full and faithful performance by Lessees of each and every term, provision,
covenant and condition of this Lease. The Security Deposit (if not a letter of
credit) shall be deposited by Lessor into an account which shall earn interest,
which interest shall remain on deposit as security hereunder and be available to
Lessor as provided in this Article. At least quarterly during each Lease Year
after the first Lease Year, provided Lessees have not caused an Event of
Default, unless otherwise agreed by Lessor and Lessees Lessor shall pay to
Lessees an amount equal to the interest earned on the Security Deposit. The
Security Deposit shall not be considered an advance payment of Rent (or of any
other sum payable to Lessor under this Lease) or a measure of Lessor's damages
in case of a default by Lessees. The Security Deposit shall not be considered as
a trust fund, and Lessees expressly acknowledge and agree that Lessor is not
acting as a trustee or in any fiduciary capacity in controlling or using the
Security Deposit. Lessor shall have no obligation to maintain the Security
Deposit separate and apart from Lessor's general and/or other funds.
41.2 Application of Security Deposit. If Lessees have caused an Event
of Default in respect of any of the terms, provisions, covenants and conditions
of the Lease, including, but not limited to, payment of any Rent and other sums
of money payable by Lessees, Lessor may, but shall not be required to, in
addition to and not in lieu of any other rights and remedies available to Lessor
use, apply or retain the whole or any part of the Security Deposit to the
payment of any sum in the Event of Default, or any other sum, including but not
limited to, any damages or deficiency in reletting the Leased Property, which
Lessor may expend or be required to expend by reason of an Event of Default.
Whenever, and as often as, Lessor has used the Security Deposit to cure an Event
of Default hereunder, Lessees shall, within ten (10) days after Notice from
Lessor, deposit additional money with Lessor sufficient to restore the Security
Deposit to the full amount originally paid. The failure of Lessees to restore
any such deficiency shall constitute a default hereunder.
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41.3 Transfer of Security Deposit. If Lessor transfers its interest
under this Lease, Lessor shall assign the Security Deposit to the new Lessor and
thereafter the transferor shall have no further liability for the return of the
Security Deposit, and Lessees agree to look solely to the new lessor for the
return of the Security Deposit. The provisions of the preceding sentence shall
apply to every transfer or assignment of Lessor's interest under this Lease.
Lessees agree that they will not assign or encumber or attempt to assign or
encumber the monies deposited as security and that Lessor, its successors and
assigns, may return the Security Deposit to the last Lessees in possession at
the last address for notice given by such Lessees and that Lessor shall
thereafter be relieved of any liability therefor, regardless of one or more
assignments of the Lease or any such actual or attempted assignment or
encumbrances of the monies held as the security deposit.
ARTICLE XLII
42.1 Continuing Liability of BritWill Indiana and Brit Will-II.
Notwithstanding the execution of this Lease, BritWill Indiana and BritWill-II
shall remain liable for the payment of any and all outstanding and unpaid
amounts payable by them, and for the performance of any and all outstanding and
unperformed obligations required of them under the Existing Leases prior to the
Effective Date, except for their obligations thereunder for the payment of
Minimum Rent prior to the Effective Date hereof, which obligations shall be
deemed satisfied as of the Effective Date.
42.2 Events of Default Under Existing Leases. Lessees warrant and
represent that except for Events of Default under the Existing Leases with
respect to the nonpayment of Minimum Rent and violations of financial covenants,
which Lessor shall not assert are Events of Default hereunder, Lessees know of
no Events of Default under the Existing Leases or of any facts existing on the
Effective Date hereof which, upon the expiration of the cure or grace period
provided under an Existing Lease, would, if continuing, have constituted an
Event of Default under an Existing Lease.
42.3 Conflict Between Existing Lease and Omega New Master Lease. In the
event of any conflict between an Existing Lease and this Lease, this Lease shall
prevail. The omission in this Lease of provisions contained in one or more of
the Existing Leases, and the addition in this Lease of provisions not contained
in the Existing Leases, is intentional.
ARTICLE XLIII
43. Additional Texas Facilities. If Lessor obtains, through foreclosure
or otherwise, fee title to the Additional Texas Facilities which are commonly
known as Colonial Pines Healthcare and West Place Nursing Center, and the
leasehold interest of UNHC in, or fee title to, the Additional Texas Facility
that is commonly known as the South
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Place Nursing Center, Lessor and Lessees agree that this Lease shall be amended
to add the Additional Texas Facilities on the terms and conditions set forth in
this Lease except for the following terms and conditions:
i. The Minimum Rent shall be increased as of the
Additional Texas Facilities Effective Date by the
addition thereto of the Additional Texas Facilities
Minimum Rent, and thereafter the Minimum Rent shall
increase effective each Adjustment Date as the
Additional Texas Facilities Minimum Rent increases as
provided in Exhibit H.
ii. Upon the Additional Texas Facilities Effective Date,
Lessees jointly and severally shall be deemed to have
assumed and agreed to pay and perform, as the case
may be, any payment or other obligations of
BritWill-II as Lessee of Colonial Pines Healthcare
and West Place Nursing Center and as sublessee of
South Place Nursing Center under the Prior Leases
which obligations were unpaid or unperformed as of
the Additional Texas Facilities Effective Date,
provided, however, that the period which Lessees
shall have hereunder to cure any failure to pay or
perform any such obligation which was unpaid or
unperformed on the Additional Texas Facilities
Effective Date before such failure becomes an Event
of Default hereunder shall begin on the date of a
Notice from Lessor specifying the nature of such
failure and such period shall be of the same duration
as the cure period which would have been granted to
Lessees by Section 16 hereof if the same failure were
to have occurred after the Additional Texas
Facilities Effective Date; and
iii. From and after the Additional Texas Facilities
Effective Date, if at any time Lessor has a leasehold
interest in, and not fee title to, South Place
Nursing Center, with respect to such Facility this
Omega New Master Lease shall constitute a sublease of
such Facility subject to the terms and conditions of
the Prime Lease, and Lessees jointly and severally
shall be deemed to have assumed and agreed to pay and
perform as and when required under the Prime Lease
all of the liabilities and obligations of Lessor as
lessee under the Prime Lease, whether or not any such
liabilities or obligations accrued prior to the
Additional Texas Facilities Date.
SIGNATURE PAGES FOLLOW
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
Omega Healthcare Investors, Inc.,
a Maryland corporation
By: ______________________________
Name: ____________________
Title: ____________________
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LESSEES:
Amberwood Court, Inc., a Colorado corporation
By: _________________________________
Name: __________________________
Title: __________________________
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The Arbors Health Care Center, Inc.,
an Arizona corporation
By: __________________________________
Name: __________________________
Title: __________________________
Brookshire House, Inc., a Colorado
Corporation
By: __________________________________
Name: __________________________
Title: __________________________
Christopher Nursing Center, Inc.,
a Colorado corporation
By: __________________________________
Name: __________________________
Title: __________________________
Los Arcos, Inc., a Colorado corporation
By:___________________________________
Name: __________________________
Title: __________________________
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Pueblo Norte, Inc., a Colorado corporation
By: __________________________________________________
Name: __________________________________________
Title: __________________________________________
Rio Verde Nursing Center, Inc., a Colorado corporation
By: __________________________________________________
Name: __________________________________________
Title: __________________________________________
<PAGE> 99
List of Exhibits
Exhibit A - Existing Leases
Exhibits B-1 through B-15 - Leased Property
Exhibit C - List of Excluded Facilities
Exhibit D-1 through D-6 - Indiana Returned Facilities
Exhibit E - Management Agreement
Exhibit F - Permitted Encumbrances
Exhibit G - Purchase Price
Exhibit H - Minimum Rent
Exhibit I - Lessee's Certificate
Exhibit J - Form of Memorandum of Lease
Exhibit K - Additional Texas Facilities
<PAGE> 100
EXHIBIT A
EXISTING LEASES
1. Lease between BritWill Investments - I, Inc., Lessee, and Omega
Healthcare Investors, Inc., Lessor, dated November 1, 1992, as amended
by Agreement regarding Financial Covenants Compliance and Amendment
Agreement (signatures dated December 12, 1994) and by Amendment
Agreement-Sunquest (signatures dated August 10, 1995).
2. BritWill Investments - II, Inc., Lessee and Omega Healthcare Investors,
Inc., Lessor, dated November 30, 1993 as amended by Amendment
Agreement-Sunquest (signatures dated August 10, 1995).
3. BritWill Investments - II, Inc., Lessee and Omega Healthcare Investors,
Inc., Lessor, dated December 31, 1994 as amended by Amendment
Agreement-Sunquest (signatures dated August 10, 1995).
<PAGE> 101
EXHIBIT B-1
WELLINGTON MANOR
<PAGE> 102
EXHIBIT B-2
CLOVERLEAF OF KNIGHTSVILLE
<PAGE> 103
EXHIBIT B-3
KENDALVILLE MANOR
<PAGE> 104
EXHIBIT B-4
REUNION PLAZA
Name of Facility: Reunion Plaza
Facility Address: 1401 Hampton Drive
Texarkana, Texas 75503
Purchase Price:
Legal Description:
<PAGE> 105
EXHIBIT B-5
HERITAGE PLAZA
Name of Facility: Heritage Plaza
Facility Address: 600 West 52nd
Texarkana, Texas 75501
Purchase Price: $3,850,000
Legal Description:
<PAGE> 106
EXHIBIT B-6
PINE HAVEN
Name of Facility: Pine Haven
Facility Address: 4808 Elizabeth
Texarkana, Texas 75501
Purchase Price: $2,500,000
Legal Description:
<PAGE> 107
EXHIBIT B-7
PINE GROVE
<PAGE> 108
EXHIBIT B-8
PLEASANT MANOR
<PAGE> 109
EXHIBIT B-9
LOS ARCOS
A portion of the East half of Section 20, and a portion of the West half of
Section 21, both Sections being in Township 21 North, Range 7 East of the Gila
and Salt River Base and Meridian, Coconino County, Arizona, described as
follows:
COMMENCING at the Southwest comer of the Abandonment Plat for Frisco Hills
Subdivision as recorded in Case 1, Map 181, records of Coconino County, Arizona;
THENCE North 01(Degree)32'17" East along the West line of the said Abandonment
Plat, a distance of 60.00 feet to the POINT OF BEGINNING, being a found 1/2 inch
rebar with plastic cap marked "LS 11369"; THENCE South 87(Degree)37'05" West
(measured (M) and record (R1) per Warranty Deed Docket 904, page 470, records of
Coconino County, Arizona (Basis of Bearings) along the Westerly extension of the
Northerly right of way of University Avenue as shown on the said Abandonment
Plat and as described in that document recorded in Docket 984, page 939, records
of Coconino County, Arizona, (R3),416. 10 feet (M), 416.05 feet (R1 and R.3), to
a 1/2 inch rebar with plastic cap marked "LS 11369", being a point on the
boundary of Woodlands Village Unit One as shown on the plat thereof recorded in
Case 4, Map 62, records of Coconino County, Arizona (R2); THENCE North
01(Degree)31'16" West (M), North 01(Degree)3 2'17" West (R1), North
01(Degree)39'32" West (R2), along said boundary 416.11 feet (M), 416.05 feet
(R1), 416.01 feet (R.2), to a 1/2 inch rebar with plastic cap marked "LS 11369",
being the Southwest comer of Lot 10 of said Woodlands Village Unit One; THENCE
North 87(Degree)39'24" East (M), North 87(Degree)37'05" East (R1), North
87(Degree)29'22" East (R2), along the South boundary of said Lot 10, 416.00 feet
(M), 416.05 feet (R1), 416.10 feet (R2), to an aluminum cap marked "ARENCO
13010", being the Southeast comer of said Lot 10, being a point on the West line
of the said Abandonment Plat; THENCE South 01(Degree)32'03" East (M), South
01(Degree)32'17" East (R1), along the said West line of the Abandonment Plat
415.82 feet (M), 416.05 feet (R1), to the POINT OF BEGINNING; EXCEPT that
portion of the above described parcel described as follows:
A portion of the East half of Section 20, and a portion of the West half of
Section 21, both Sections being in Township 21 North, Range 7 East of the Gila
and Salt River Base and Meridian, Coconino County, Arizona, described as
follows:
COMMENCING at the Southwest comer of the Abandonment Plat for Frisco Hills
Subdivision as recorded in Case 1, Map 181, records of Coconino County,
<PAGE> 110
Arizona; THENCE North 01(Degree)32'17" East along the West line of the said
Abandonment Plat 60.00 feet to a found 1/2 inch rebar with plastic cap marked
"LS 11369"; THENCE South 87(Degree)37'05" West (Measured (M) and Record (R1) per
Warranty Deed Docket 904, page 870, records of Coconino County, Arizona) [Basis
of Bearings] along the Westerly extension of the Northerly right of way of
University Avenue as shown on the said Abandonment Plant and as described in
that document recorded in Docket 984, page 939, records of Coconino County,
Arizona (R3), 416.10 feet (M), 416.05 feet (R1 and R3), to a 1/2 inch rebar with
plastic cap marked "LS 11369", being a point on the boundary of Woodlands
Village Unit One as shown on the plat thereof recorded in Case 4, Map 62,
records of Coconino County, Arizona (R2), being the TRUE POINT OF BEGINNING;
THENCE North 01(Degree)31'16" West (M), North 01(Degree)32'17" West (R1), North
01(Degree)39'32" West (R2), along said boundary 416.11 feet (M), 416.05 feet
(R1), 416.01 feet (R2), to a 1/2 inch rebar with plastic cap marked "LS 11369",
being the Southwest corner of Lot 10 of said Woodlands Village One; THENCE North
87(Degree)39'24" East (M), North 87(Degree)37'05" East (R1), North
87(Degree)29'22" East (R2), along the South boundary of said Lot 10, a distance
of 111.90 feet; THENCE South 01(Degree)31'16" East, a distance of 416.03 feet to
the said Westerly extension of the Northerly right of way of University Avenue;
THENCE South 87(Degree)37'05" West (M and R1), a distance of 111.90 feet along
said Westerly extension of the Northerly right of way to the POINT OF BEGINNING.
<PAGE> 111
EXHIBIT B-10
RIO VERDE
PARCEL 1
All that portion of the Northwest Quarter of the Southwest Quarter of Section
34, Township 16 North, Range 3 East of the Gila and Salt River Base and
Meridian, Yavapai County, Arizona, described as follows:
COMMENCING for reference at the West Quarter corner of said Section 34 from
which the center Quarter corner of said Section bears North 89(Degree)13'11"
East; THENCE North 89(Degree)13'11" East along the East-West midsection line of
said Section 34, a distance of 87.60 feet (record) 87.85 feet (calculated) to a
point; THENCE South 00(Degree)15'00" East (record) South 00(Degree)13'41" East
(calculated), a distance of 48.00 feet to a point on the Southerly right of way
line of East Mingus Avenue, said point also being on the Easterly right of, way
line of South Willard Street; THENCE continuing South 00(Degree)15'00" East
along said Easterly right of way line, a distance of 354.64 feet (record) 354.61
feet (calculated) to the, TRUE POINT OF BEGINNING; THENCE continuing South
00(Degree)15'00" East along said Easterly right of way line, a distance of
340.00 feet (record) South 00(Degree)13'41" East 340.02 feet (measured) and
340.05 feet (measured) to a point from which the Northwest corner of Palatka
Acres, a subdivision as recorded in Book 10 of Maps and Plats, Page 40, records
of Yavapai County, Arizona bears South 00(Degree)15'00" East, a distance of
259.15 feet therefrom; THENCE North 89(Degree)42'40" East parallel to and 259.15
feet Northerly of the Northerly line of the said Palatka Acres, a distance of
344.04 feet (record) North 89(Degree)42'30" East 344.14 feet (measured) and
North 89(Degree)42'00" East, 344.16 feet (measured) to a point; THENCE North
00(Degree)15'00" West, a distance of 340.00 feet (record) North 00(Degree)14'28"
West, 340.06 feet (measured) and North 00(Degree)15'31" West, 340.05 feet
(measured) to a point; THENCE South 89(Degree)42'40" West parallel to and 599.15
feet Northerly of the said Northerly line of Palatka Acres, a distance of 344.04
feet (record) South 89(Degree)42'05" West, 344.06 feet (measured) and South
89(Degree)42'01"West, 344.11 feet (measured) to the TRUE POINT OF BEGINNING.
EXCEPT all oil, minerals, ores and metals of every kind, as reserved in Deed
recorded in Book 187 of Deeds, page 331, records of Yavapai County, Arizona.
<PAGE> 112
PARCEL 2
An easement for ingress, egress and public utilities as created in Book 1536 of
Official Records, Page 685, records of Yavapai County, Arizona, lying 25 feet
North of, adjacent to and parallel with the following described centerline;
COMMENCING for reference at the West Quarter corner of Said Section 34; THENCE
89(Degree)13'11" East, along the East-West midsection line of said Section 34, a
distance of 87.60 feet to a point, said point being on the centerline of East
Mingus Avenue; THENCE South 00(Degree)15'00" East, a distance of 48.00 feet to
the Southerly right of way line of said East Mingus Avenue, said point also
being on the Easterly right of way line of South Willard Street; THENCE
continuing South 00(Degree)15'00" East, along said Easterly right of way line a
distance of 354.64 feet to the TRUE POINT OF BEGINNING; THENCE North
89(Degree)42'40" East, along the North line of the afore described parcel, a
distance of 690.14 feet to the POINT OF TERMINATION of this easement.
<PAGE> 113
EXHIBIT B-11
THE ARBORS
Following is a description of a parcel of land in Section 31, Township 14 North,
Range 5 East of the Gila and Salt River Base and Meridian, Yavapai County,
Arizona. The parcel described is the same parcel as the parcel described in Book
2310 of Official Records, Page 990 (all Book and Page references refer to the
official records of the Yavapai County Recorder). The parcel is more
particularly described as follows:
FROM the Southeast corner of Section 31; thence North 90(Degree)00'00" West,
along the South line of the Southeast Quarter of Section 31, and along the South
line of the parcel of land described in Book 150, Page 67, 219.00 feet to the
TRUE POINT OF BEGINNING of this description; thence North 90(Degree)00'00" West,
along the South line of the Southeast Quarter of Section 31, and along the South
line of the parcel of land described in Book 150, Page 67, 329.00 feet to the
Southwest corner thereof, and to the Southeast corner of the parcel of land
described in Book 2871, Page 566; thence North 01(Degree)03'06" West, along the
West line of the parcel of land described in Book 150, Page 67, and along the
East line of the parcel of land described in Book 2871, Page 566, 275.76 feet to
the Northeast corner thereof; thence continuing North 01(Degree)03'06" West,
along the West line of the parcel of land described in Book 150, Page 67, 20.24
feet to the Northwest corner thereof; thence North 01(Degree)03'21" East, along
the West line of the parcel of land described in Book 2046, Page 746, 163.14
feet to the Northeast corner thereof, monumented with a 1/2 inch rebar; thence
South 86(Degree)30'46" East, along the Southerly line of Wood Ditch which is
described in Book 56, Page 320, 23.92 feet; thence North 69(Degree)11'00" East,
along the Southerly line of Woods Ditch which is described in Book 56, Page 320,
266.58 feet to the Northwest corner of parcel of land described in Book 3026,
Page 499; thence South 00(Degree)03'00" East, along the West line of the parcel
of land described in Book 3026, Page 499, 106.85 feet to the Southwest corner
thereof; thence North 75(Degree)10'35" East, along the Southerly line of the
parcel of land described in Book 3026, Page 499, 260.73 feet, to the Westerly
right of way line of State Route 260; thence Southerly, along the Westerly right
of way line of State Route 260, along a curve to the left, having a radius of
987.93 feet and a central angle of 08(Degree)52'20", an arc distance of 152.98
feet (chord bearing South 09(Degree)21'19" East, chord length 152.83 feet) to
the East line of the Southeast Quarter of Section 31; thence South
00(Degree)03'40" East, along the east line of the Southeast Quarter of Section
31, and along the East line of the parcel of land described in Book 150, Page
67, 148.42 feet to a point which lies 213.00 feet from the Southeast corner of
Section 31; thence North 90(Degree)00'00" West, parallel with the South line of
the Southeast Quarter of Section 31, 219.00 feet; thence South 00(Degree)03'40"
East, parallel with the East line of the Southeast of Section 31, 213.00 feet,
to the South line of the Southeast Quarter of Section 31, the TRUE POINT OF
BEGINNING of this description.
<PAGE> 114
EXHIBIT B-12
PUEBLO NORTE
That part of the Southeast quarter of Section 4, Township 9 North, Range 22
East, Gila and Salt River Meridian, Show Low, Navajo County, Arizona, described
as follows:
COMMENCING at the South quarter corner (a found 1" O.I.P.) of said Section 4;
THENCE North 00(Degree)25'02" North along the mid-section line, a distance of
1690.42 feet; THENCE East, a distance of 198.28 feet; THENCE South
88(Degree)05'15" East (record South 88(Degree)03'06" East, 400.00 feet), a
distance of 400.09 feet to the Southeast corner of the parcel of land described
in Docket 843, page 637 being a found 1/2" I.R. w/cap - L.S. #15402 and being
the TRUE POINT OF BEGINNING; THENCE North 00(Degree)27'22" West (record North
00(Degree)24'39" West, 300.91 feet), a distance of 300.87 feet; THENCE North
87(Degree)58'08" West (record North 87(Degree)54'26" West, 373.92 feet), a
distance of 373.91 feet; THENCE along a curve to the left, concave to the
Southeast having a central angle of 92(Degree)28'06" (record central angle
92(Degree)30'13", length 40.36 feet) and a radius of 25.00 feet, a distance of
40.36 feet; THENCE South 00(Degree)26'14" East (record South 00(Degree)24'39"
East, 275.73 feet), a distance of 275.59 feet; THENCE South 88(Degree)05'15"
East (record South 88(Degree)03'06" East, 400.00 feet), a distance of 400.09
feet to the TRUE POINT OF BEGINNING.
<PAGE> 115
EXHIBIT B-13
AMBERWOOD
Lots 13 through 16 inclusive, Douthit-Ordelheide Subdivision,
City and County of Denver,
State of Colorado
<PAGE> 116
EXHIBIT B-14
BROOKSHIRE
Lots 9, 10, 11 and 12, Douthit-Ordelheide Subdivision, City and County of
Denver, State of Colorado
<PAGE> 117
EXHIBIT B-15
CHRISTOPHER HOUSE
The West one-half of the East one-half of the West one-half of the Northeast
one-quarter of the Northwest one-quarter of Section 25, Township 3 South, Range
69 West of the 6th Principal meridian, excepting therefrom the South 792 feet
thereof and the West 100.65 feet of the North 190 feet thereof, and the North 30
feet of the East 65 feet thereof.
County of Jefferson
State of Colorado
<PAGE> 118
EXHIBIT C
LIST OF EXCLUDED FACILITIES
<TABLE>
<CAPTION>
NUMBER
NAME OF FACILITY FACILITY ADDRESS OF BEDS
---------------- ---------------- -------
<S> <C> <C>
South Place Nursing Center 150 Gibson Road 150
Athens, Texas
West Place Nursing Center Highway 31 West 120
Athens, Texas
Colonial Pines Healthcare
(f/k/a Hines
Health Care Center 1203 FM 1277 107
San Augustine, Texas
Four States Care Center #8 E. Midway 180
Texarkana, Texas 75501
Heritage Oaks Nursing Center 210 N. Kenwood 120
Texarkana, Texas 75501
Texarkana Nursing Center 4920 N. Elizabeth Street 120
Texarkana, Texas 75501
Arkansas Manor Nursing Home 3185 W. Arkansas Avenue
Denver, Colorado 80129
Cornerstone Care Nursing Center 1432 Depew Street
Lakewood, Colorado 80214
</TABLE>
<PAGE> 119
EXHIBIT D-1
"INDIANA RETURNED FACILITY"
ENGLISH ESTATES
<PAGE> 120
EXHIBIT D-2
"INDIANA RETURNED FACILITY"
ENGLISH SENIOR LIVING/ENGLISH ASSISTED LIVING
<PAGE> 121
EXHIBIT D-3
"INDIANA RETURNED FACILITY"
CAPITAL CARE HEALTHCARE CENTER
<PAGE> 122
EXHIBIT D-4
"INDIANA RETURNED FACILITY"
SUNSET MANOR
<PAGE> 123
EXHIBIT D-5
"INDIANA RETURNED FACILITY"
LOCKERBIE HEALTHCARE CENTER
<PAGE> 124
EXHIBIT D-6
"INDIANA RETURNED FACILITY"
PARKVIEW MANOR
<PAGE> 125
EXHIBIT E
MANAGEMENT AGREEMENT
<PAGE> 126
EXHIBIT F
PERMITTED ENCUMBRANCES
<PAGE> 127
EXHIBIT G
PURCHASE PRICE
<TABLE>
<CAPTION>
DATE OF COMMENCEMENT
FACILITY OF LEASE
- -------- --------------------
<S> <C>
Los Arcos Health Care Center ($5,134,409.00) December 31, 1998
Rio Verde Nursing Center ($5,031,720.00) December 31, 1998
Pueblo Norte Nursing Center ($5,647,849.00) December 31, 1998
Amberwood Court Care Center ($2,977,957.00) December 31, 1998
Brookshire House ($5,237,097.00) December 31, 1998
Christopher House ($5,955,914.00) December 31, 1998
Arbors Health Care Center ($8,215,054.00) December 31, 1998
</TABLE>
<PAGE> 128
EXHIBIT H
MINIMUM RENT
1. Exhibit H Definitions. For purposes of this Exhibit H:
a. "Group of Facilities" shall mean each of the
Additional Texas Facilities, BritWill Indiana
Facilities, BritWill-II November 1993 Facilities,
BritWill-II December 1994 Facilities and the
Signature Facilities.
b. "Market Rate Adjustment Year" shall mean each of
2006, 2011, 2016, 2021 and 2026.
c. "Annualized Stub Period Minimum Rent" shall mean,
with respect to each Group of Facilities, the product
of the Minimum Rent for the Stub Period allocated to
such Group of Facilities as set forth below divided
by the number of days in the Stub Period multiplied
by 365.
d. "Revenue Adjustment" shall mean for any Group of
Facilities an amount equal to five percent (5%) of
the Incremental Revenues for that Group of
Facilities; provided, however, that after the Minimum
Rent for the BritWill Indiana Group of Facilities has
increased to $_________, until the calendar year
2006, the Incremental Revenues for the BritWill
Indiana Group of Facilities shall be an amount equal
to three percent (3%) of the Incremental Revenues for
that Group of Facilities.
e. "CPI Adjustment" shall mean for any Group of
Facilities the Minimum Rent for such Group of
Facilities for the year then ended multiplied by a
fraction, the numerator of which is the CPI in effect
for December of that year and the denominator of
which is the CPI in effect for December of the
immediately preceding year.
2. Minimum Rent. The Minimum Rent for the BritWill Indiana Group of
Facilities, the BritWill-II November 1993 Group of Facilities and the
BritWill-II December 1994 Group of Facilities for the Stub Period shall be set
forth in the amendment or amendments pursuant to which such Groups of Facilities
are added to this Lease. Beginning January 1, 2000, the Minimum Rent for the
Facilities for each calendar year shall be the sum of (a) the Minimum Rent for
each such Group of Facilities for such year, determined as set forth below, plus
(b) the Minimum Rent for the Signature Group of Facilities for such year plus
(c) the Minimum Rent for the Additional Texas Facilities, if any.
<PAGE> 129
Monthly installments of Minimum Rent shall increase in proportion to increases
in Minimum Rent.
3. Allocation of Minimum Rent for Computational Purposes Only. The
Minimum Rent is being allocated among the Groups of Facilities solely for the
purpose of calculating the Minimum Rent from time to time. The allocation of the
Minimum Rent does not affect the intent of the parties that this Lease
constitutes one indivisible lease of all of the Facilities, and not separate
leases. For computational purposes only, the Minimum Rent for the Stub Period
and the Annualized Stub Period Minimum Rent shall be set forth in the amendment
or amendments pursuant to which the applicable Groups of Facilities are added to
this Lease.
4. Increases in Minimum Rent for the BritWill Indiana Group of
Facilities.
(a) For the calendar year 2000, and for each calendar year
thereafter during the Term, including the Extended Term, but excluding each
Market Rate Adjustment Year, the Minimum Rent for the BritWill-Indiana Group of
Facilities shall be the sum of (i) (y) for 2000, the Annualized Stub Period
Minimum Rent for the BritWill Indiana Group of Facilities, and (z) after 2000,
the Minimum Rent for the BritWill Indiana Group of Facilities for the prior
calendar year, and (ii) the BritWill Indiana Rent Increase. The BritWill Indiana
Rent Increase for each such calendar year shall be the greater of:
(i) for 2000, three percent (3%) of the Annualized Stub Period
Minimum Rent and, in the case of all such years
thereafter, three percent (3%) of the Minimum Rent for the
prior calendar year; and
(ii) the lesser of the CPI Adjustment and the Revenue
Adjustment for the BritWill Indiana Group of Facilities.
(b) Section 3.1.2.6 of the Existing Lease with respect to the
BritWill Indiana Facilities sets forth examples which illustrate the operation
of the procedures for increases in the Minimum Rent for the BritWill Indiana
Group of Facilities pursuant to subsection (a) as of January 1 of each year
other than January 1 of a Market Rate Adjustment Year .
(c) Notwithstanding the foregoing, no adjustment pursuant to this
Paragraph 4 shall reduce the Minimum Rent for the BritWill Indiana Group of
Facilities below the Minimum Rent for the BritWill Indiana Group of Facilities
for the prior calendar year.
(d) The Minimum Rent for the BritWill Indiana Group of Facilities
for each Market Rate Adjustment Year shall be the greater of:
<PAGE> 130
(i) the Fair Market Rent for the BritWill Indiana Group of
Facilities in such calendar year, determined by an appraisal
pursuant to Article XXXIV of this Lease, and
(ii) one hundred three percent (103%) of the Minimum Rent for
the BritWill Indiana Group of Facilities for the prior calendar
year,
provided, however, that in no event shall the Minimum Rent for the BritWill
Indiana Group of Facilities in any Market Rate Adjustment Year be more than one
hundred and ten percent (110%) of the Minimum Rent for the BritWill Indiana
Group of Facilities for the prior calendar year.
5. Increases in Minimum Rent for the BritWill-II November 1993 Group of
Facilities.
(a) For the calendar year 2000, and for each calendar year
thereafter during the Term, including the Extended Term, but excluding each
Market Rate Adjustment Year, and subject to the limitations set forth in
subsections (b) and (d) below, the Minimum Rent for the BritWill-II November
1993 Group of Facilities shall be the sum of (i) (y) for 2000, the Annualized
Stub Period Minimum Rent for the BritWill-II November 1993 Group of Facilities
and (z) after 2000, the Minimum Rent for the BritWill-II November 1993 Group of
Facilities for the prior calendar year, and (ii) the BritWill-II November 1993
Rent Increase. The BritWill-II November 1993 Rent Increase for each such
calendar year shall be the greater of (i) the CPI Adjustment and (ii) the
Revenue Adjustment for the BritWill-II November 1993 Group of Facilities.
(b) Notwithstanding subsection 5(a), the Minimum Rent for the
BritWill-II November 1993 Group of Facilities for any calendar year between 2000
and 2006 shall not exceed ____________ Dollars ($______), increased by three and
one-half percent (3-1/2%) on a cumulative, compounded basis on January 1 of each
year commencing January 1, 2001. The Minimum Rent for the BritWill-II November
1993 Group of Facilities for any calendar year following any Market Rate
Adjustment Year shall not exceed the Minimum Rent for the Market Rate Adjustment
Year increased by three and one-half percent (3-1/2%) on a cumulative,
compounded basis on January 1 of each calendar year thereafter until the next
Market Rate Adjustment Year.
(c) Section 3.1.2.5 of the Existing Lease with respect to the
BritWill-II November 1993 Facilities sets forth examples which illustrate the
operation of the procedures for increases to the Minimum Rent allocable to the
BritWill-II November 1993 Facilities, but the second example erroneously states
that on the basis of the facts therein stated, the increase in monthly
installments of Minimum Rent would be equal to the CPI Adjustment whereas such
example should state that on the basis of such facts the increase in monthly
installments of Minimum Rent would be equal to the Revenue Adjustment.
<PAGE> 131
(d) Notwithstanding the foregoing, no adjustment pursuant to this
Paragraph 5 shall reduce the Minimum Rent for the BritWill-II November 1993
Group of Facilities below the Minimum Rent for the BritWill-II November 1993
Group of Facilities for the prior calendar year.
(e) The Minimum Rent allocable to the BritWill-II November 1993
Group of Facilities for each Market Rate Adjustment Year shall be the greater
of:
(i) the Fair Market Rent allocated to the BritWill-II November
1993 Group of Facilities in such calendar year, determined by an
appraisal pursuant to Article XXXIV of this Lease, and
(ii) one hundred three percent (103%) of the Minimum Rent
allocated to the BritWill-II November 1993 Group of Facilities for
the prior calendar year,
provided, however, that in no event shall the Minimum Rent allocated to the
BritWill-II November 1993 Group of Facilities in any Market Rate Adjustment Year
be more than one hundred and ten percent (110%) of the Minimum Rent allocated to
the BritWill-II November 1993 Group of Facilities for the prior calendar year.
6. Increases in Minimum Rent for the BritWill-II December 1994 Group of
Facilities.
(a) For the calendar year 2000, and for each calendar year
thereafter during the Term, including the Extended Term, but excluding each
Market Rate Adjustment Year, and subject to the limitations set forth in
subsections (b) and (d) below, the Minimum Rent for the BritWill-II December
1994 Group of Facilities shall be the sum of (i) (y) for 2000, the Annualized
Stub Period Minimum Rent for the BritWill-II December 1994 Group of Facilities
and (z) after 1999, the Minimum Rent for the BritWill-II December 1994 Group of
Facilities for the prior calendar year, and (ii) the BritWill-II December 1994
Rent Increase. The BritWill-II December 1994 Rent Increase for each such
calendar year shall be the greater of (i) the CPI Adjustment and (ii) the
Revenue Adjustment for the BritWill-II December 1994 Group of Facilities.
(b) Notwithstanding subsection 5(a), the Minimum Rent for the
BritWill-II December 1994 Group of Facilities for any calendar year between 2000
and 2006 shall not exceed ____________ Dollars ($______), increased by three and
one-half percent (3-1/2%) on a cumulative, compounded basis on January 1 of each
year commencing January 1, 2001. The Minimum Rent for the BritWill-II December
1994 Group of Facilities for any calendar year following any Market Rate
Adjustment Year shall not exceed the Minimum Rent for the Market Rate Adjustment
Year increased by three and
<PAGE> 132
one-half percent (3-1/2%) on a cumulative, compounded basis on January 1 of each
calendar year thereafter until the next Market Rate Adjustment Year.
(c) Section 3.1.2.5 of the Existing Lease with respect to the
BritWill-II December 1994 Facilities sets forth examples which illustrate the
operation of the procedures for increases to the Minimum Rent allocable to the
BritWill-II December 1994 Facilities, but the second example erroneously states
that on the basis of the facts therein stated, the increase in monthly
installments of Minimum Rent would be equal to the CPI Adjustment whereas such
example should state that on the basis of such facts the increase in monthly
installments of Minimum Rent would be equal to the Revenue Adjustment.
(d) Notwithstanding the foregoing, no adjustment pursuant to this
Paragraph 5 shall reduce the Minimum Rent for the BritWill-II December 1994
Group of Facilities below the Minimum Rent for the BritWill-II December 1994
Group of Facilities for the prior calendar year.
(e) The Minimum Rent allocable to the BritWill-II December 1994
Group of Facilities for each Market Rate Adjustment Year shall be the greater
of:
(i) the Fair Market Rent allocated to the BritWill-II December
1994 Group of Facilities in such calendar year, determined by an
appraisal pursuant to Article XXXIV of this Lease, and
(ii) one hundred three percent (103%) of the Minimum Rent
allocated to the BritWill-II December 1994 Group of Facilities for
the prior calendar year,
provided, however, that in no event shall the Minimum Rent allocated to the
BritWill-II December 1994 Group of Facilities in any Market Rate Adjustment Year
be more than one hundred and ten percent (110%) of the Minimum Rent allocated to
the BritWill-II December 1994 Group of Facilities for the prior calendar year.
7. Minimum Rent For the Signature Facilities; Increases. The Minimum
Rent for the Signature Facilities for the Stub Period with respect to such
Facilities shall be Nine Thousand Nine Hundred Forty-Two Dollars Forty-Seven
Cents ($9,942.47). Beginning January 1, 1999, the Minimum Rent for the Signature
Facilities shall be Three Million Six Hundred Twenty-Nine Thousand Dollars
($3,629,000.00) per year. Thereafter, on each succeeding Adjustment Date, the
Minimum Rent for the Signature Facilities shall be increased by Ninety Thousand
Seven Hundred Dollars ($90,700.00) and the monthly installments shall be
increased accordingly, provided, however, that if any Signature Facilities are
purchased or sold pursuant to Article XVIII of this Lease, such increase in the
Minimum Rent shall be reduced in proportion to the reduction in Minimum Rent
attributable to such purchase or sale.
<PAGE> 133
8. Minimum Rent for the Additional Texas Facilities; Increases. The
Minimum Rent for the Additional Texas Facilities for the period beginning on the
Additional Texas Facilities Effective Date and ending December 31 in the year in
which the Additional Texas Facilities Effective Date falls shall be set forth in
an amendment hereto at the time such Facilities are added to this Lease. For
each calendar year after the year in which the Additional Texas Facilities
Effective Date falls, the Minimum Rent for the Additional Texas Facilities shall
be the sum of (i) the Minimum Rent for the Additional Texas Facilities for the
prior calendar year (annualized if such year has fewer than 365 days), and (ii)
the Additional Texas Facilities Rent Increase. The Additional Texas Facilities
Rent Increase for each such calendar year shall be the greater of (i) the CPI
Adjustment and (ii) the Revenue Adjustment for the Additional Texas Facilities,
provided, however, that the Minimum Rent for the Additional Texas Facilities for
any calendar year after the year in which the Additional Texas Facilities
Effective Date falls shall not exceed the Minimum Rent for the Additional Texas
Facilities for the prior calendar year (annualized if such year has fewer than
365 days), increased by three and one-half percent (3-1/2%) on a cumulative,
compounded basis on each Adjustment Date.
<PAGE> 134
EXHIBIT "I"
LESSEE'S CERTIFICATE
The undersigned, Lessees under that certain Master Lease (the "Omega
New Master Lease") dated _________ __ , 1998 and made with Omega Healthcare
Investors, Inc., a Maryland corporation ("Lessor"), hereby certify:
1. That they are the Lessees under the Lease; that attached hereto as
Exhibit "A" is a true and correct copy of the Omega New Master Lease; that said
Omega New Master Lease is now in full force and effect and has not been amended,
modified or assigned except as disclosed or included in Exhibit "A"; and that
said Omega New Master Lease constitutes the entire agreement between Lessor and
Lessees.
2. That there exist no defenses or offsets to enforcement of the Omega
New Master Lease; that there are, as of the date hereof, no breaches or uncured
Events of Default on the part of Lessees or defaults by Lessor thereunder; and
that Lessees have no notice or knowledge of any prior assignment, hypothecation,
subletting or other transfer of Lessor's interest in the Omega New Master Lease.
3. That the Minimum Rent for the current Lease Year under the Omega New
Master Lease is $____; all Rent which is due has been paid, and there are no
unpaid Additional Charges owing by the Lessees under the Omega New Master Lease
as of the date hereof; no Minimum Rent or other items (including without
limitation security deposit and any impound account or funds) have been paid by
Lessees in advance under the Omega New Master Lease except for the security
deposit held by Lessor [in the form of an irrevocable letter of credit] in the
amount of [*$0,000,000*] and the monthly installment of Minimum Rent that became
due on ______ .
4. That Lessees have no claim against Lessor for any security deposit,
impound account or prepaid Rent except as provided in paragraph 3 of this
Certificate.
5. That there are no actions, whether voluntary or otherwise, pending
against the undersigned under the bankruptcy laws of the United States or any
state thereof, nor have Lessees nor, to the best of Lessee's knowledge has
Lessor begun any action, or given or received any notice for the purpose of
termination of the Omega New Master Lease.
6. That there are, as of the date hereof, no breaches or uncured
defaults on the part of Lessees under any other agreement executed connection
with the Omega New Master Lease.
<PAGE> 135
7. This Estoppel Certificate has been requested by Lessor pursuant to
Article XXI, Section 21.3 of the Omega New Master Lease and for the benefit of
__________ ("Relying Party"). The Relying Party is entitled to rely on the
statements of Lessees contained in this certificate.
8. All capitalized terms used herein and not defined herein shall have
the meanings for such terms set forth in the Omega New Master Lease.
Dated:_________________
<PAGE> 136
EXHIBIT "J"
MEMORANDUM OF LEASE
<PAGE> 137
EXHIBIT K-1
COLONIAL PINES
<PAGE> 138
EXHIBIT K-2
WEST PLACE
<PAGE> 139
EXHIBIT K-3
SOUTH PLACE
<PAGE> 140
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
ARTICLE I.....................................................................3
1.1 Assumption and Amendment of Existing Leases; Release
of Indiana Returned Facilities...................................3
1.2 Leased Property..................................................3
1.2 Term.............................................................3
ARTICLE II....................................................................4
2.1 Definitions......................................................4
ARTICLE III..................................................................19
3.1 Rent............................................................19
3.2 Additional Charges..............................................20
3.3 Late Charge.....................................................20
3.4 Method of Payment of Minimum Rent...............................21
3.5 Net Lease.......................................................21
3.6 Limitation on Counterclaim......................................21
ARTICLE IV...................................................................21
4.1 Payment of Impositions..........................................21
4.2 Notice of Impositions...........................................23
4.3 Adjustment of Impositions.......................................23
4.4 Utility Charges.................................................23
4.5 Insurance Premiums..............................................23
ARTICLE V....................................................................23
5.1 No Termination, Abatement, etc..................................23
ARTICLE VI...................................................................24
6.2 Lessor's Personal Property......................................24
6.3 Lessees' Personal Property......................................25
6.4 Grant of Security Interest in Lessees' Personal Property
and Accounts....................................................25
ARTICLE VII..................................................................25
7.1 Condition of the Leased Property................................25
7.3 Certain Environmental Matters...................................26
ARTICLE VIII.................................................................33
8.1 Compliance with Legal and Insurance Requirements, Instruments,
etc.............................................................33
8.2 Legal Requirement Covenants.....................................33
i
<PAGE> 141
8.3 Certain Covenants...............................................34
8.3.1 Certain Financial Covenants..............................34
8.3.1.1 Consolidated Tangible Net Worth of Unison........34
8.3.1.2 Consolidated Tangible Net Worth of Lessees.......34
8.3.1.3 Lessees' Consolidated Current Ratio..............34
8.3.1.4 Lessees' Consolidated Fixed Charge Ratio.........34
8.3.1.5 Limitation of Distributions......................34
8.3.1.6 Minimum Capital Expenditures.....................34
8.3.1.7 Borrowings..............................................35
8.3.1.7.1 Accounts Receivable............................35
8.3.1.7.2 Equipment Financing............................35
8.3.1.7.3 Guaranties by Lessees..........................35
8.3.1.7.4 Other Borrowings...............................35
8.4 Covenants Regarding Kendalville.................................35
8.5 Management Agreement; Amendments............................36
8.6 Other Healthcare Facilities.................................36
8.7 Continuous Operations.......................................36
ARTICLE IX...................................................................37
9.1 Maintenance and Repair..........................................37
9.2 Encroachments, Restrictions, etc................................40
ARTICLE X....................................................................40
10.1 Construction of Major Alterations to Leased Property...........40
10.2 Payment for Improvements.......................................41
10.3 Construction of Alterations and Additions to the Leased
Property.......................................................42
10.4 Salvage........................................................42
10.5 Abandonment of Demolition or Construction......................43
ARTICLE XI...................................................................43
11. Liens..........................................................43
ARTICLE XII..................................................................43
12.1 Permitted Contests.............................................43
12.2 Lessor's Requirement for Deposits Following Default............44
ARTICLE XIII.................................................................45
13.1 General Insurance Requirements.................................45
13.2 Replacement Cost...............................................46
13.3 Additional Insurance...........................................47
13.4 Waiver of Subrogation..........................................47
13.5 Form Satisfactory, etc.........................................47
13.6 Increase in Limits.............................................47
13.7 Blanket Policy.................................................48
ii
<PAGE> 142
13.8 No Separate Insurance..........................................48
ARTICLE XIV..................................................................48
14.1 Insurance Proceeds.............................................48
14.2 Restoration in the Event of Damage or Destruction Covered by
Insurance......................................................49
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance...........................................50
14.4 Restoration of Lessees' Personal Property......................50
14.5 Restoration of Lessee's Property Other than Lessees' Personal
Property.......................................................50
14.6 No Abatement of Rent...........................................51
14.7 Damage Near End of Term........................................51
14.8 Waiver.........................................................51
14.9 Procedure for Disbursement of Insurance Proceeds Equal to or
Greater Than Two Hundred Fifty Thousand Dollars ($250,000).....51
14.10 Insurance Proceeds Paid to Facility Mortgagee.................53
ARTICLE XV...................................................................53
15.1 Condemnation Article Definitions...............................53
15.2 Parties Rights and Obligations.................................54
15.3 Total Taking...................................................54
15.4 Allocation of Portion of Award.................................54
15.5 Partial Taking.................................................54
15.6 Temporary Taking...............................................55
15.7 Condemnation Awards Paid to Facility Mortgagee.................55
ARTICLE XVI..................................................................56
16.1 Events of Default..............................................56
16.2 Certain Remedies...............................................60
16.3 Damages........................................................60
16.4 Lessee's Obligation to Purchase................................61
16.5 Waiver.........................................................62
16.6 Application of Funds...........................................62
16.7 General Provisions Affecting Remedies..........................62
ARTICLE XVII.................................................................62
17. Lessor's Right to Cure Lessee's Default........................62
ARTICLE XVIII................................................................63
18. Provisions Relating to Purchase of the Leased Property; Sale
by Lessor......................................................63
18.1 General...................................................63
ARTICLE XIX..................................................................63
19.1 Renewal........................................................63
19.2 Savings Provisions........................................63
iii
<PAGE> 143
ARTICLE XX...................................................................64
20.1 Holding Over...................................................64
20.2 Indemnity......................................................64
ARTICLE XXI..................................................................64
21.1 Subordination..................................................64
21.2 Attornment.....................................................65
21.3 Lessee's Certificate...........................................65
ARTICLE XXII.................................................................65
22. Risk of Loss...................................................65
ARTICLE XXIII................................................................66
23. Indemnification................................................66
23.1 General........................................................66
23.2 Indemnification With Respect to Signature Facilities...........66
23.3 Lessor's Indemnification.......................................67
23.4 Survival.......................................................67
ARTICLE XXIV.................................................................67
24.1 General Prohibition against Assignment.........................67
24.2 Corporate or Partnership Transactions..........................68
24.3 Offer to Purchase..............................................68
24.4 Subordination and Attornment...................................68
24.5 Sublease Limitation............................................69
ARTICLE XXV..................................................................69
25.1 Officer's Certificates and Financial Statements................69
25.2 Public Offering Information....................................71
ARTICLE XXVI.................................................................72
26. Lessor's Right to Inspect......................................72
ARTICLE XXVII................................................................72
27. No Waiver......................................................72
ARTICLE XXVIII...............................................................72
28. Remedies Cumulative............................................72
ARTICLE XXIX.................................................................72
29. Acceptance of Surrender........................................72
ARTICLE XXX..................................................................72
iv
<PAGE> 144
30.1 No Merger of Title.............................................72
30.2 No Partnership.................................................73
ARTICLE XXXI.................................................................73
31. Conveyance by Lessor...........................................73
ARTICLE XXXII................................................................73
32. Quiet Enjoyment................................................73
ARTICLE XXXIII...............................................................73
33. Notices........................................................73
ARTICLE XXXIV................................................................75
34. Appraisers.....................................................75
ARTICLE XXXV.................................................................76
35.1 Breach by Lessor...............................................76
35.2 Compliance With Facility Mortgage..............................76
ARTICLE XXXVI................................................................77
36.1.Lessor's Option to Purchase Lessees' Personal Property.........77
36.2 Facility Trade Names...........................................77
36.3 Transfer of Operational Control of the Facility................77
ARTICLE XXXVII...............................................................79
37. Arbitration....................................................79
ARTICLE XXXVIII..............................................................79
38.1 Miscellaneous..................................................79
38.1.1 Survival, Choice of Law................................79
38.1.2 Limitation on Recovery.................................80
38.1.3 Waivers................................................80
38.1.4 Consents...............................................80
38.1.5 Counterparts...........................................80
38.1.6 Options Personal.......................................80
38.1.7 Rights Cumulative......................................81
38.1.8 Entire Agreement.......................................81
38.1.9 Amendments in Writing..................................81
38.1.10 Severability..........................................81
38.1.11 Successors............................................81
38.1.12 Time of the Essence...................................81
ARTICLE XXXIX................................................................81
39. Commissions....................................................81
v
<PAGE> 145
ARTICLE XL...................................................................82
40. Memorandum of Lease............................................82
ARTICLE XLI..................................................................82
41.1 Security Deposit...............................................82
41.2 Application of Security Deposit................................82
41.3 Transfer of Security Deposit...................................82
ARTICLE XLII.................................................................83
42. Existing Leases................................................83
vi
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO OMEGA NEW MASTER LEASE
THIS FIRST AMENDMENT TO OMEGA NEW MASTER LEASE ("First Amendment") is
dated as of February 1, 1999 and is entered into by OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation, having its principal office at 900 Victors Way,
Suite 350, Ann Arbor, Michigan 48108 ("Lessor"), and the entities designated
Lessees on the signature page hereof (each a "Lessee" and collectively,
"Lessees").
RECITALS
--------
This First Amendment is made and entered into with reference to the
following recitals:
A. Capitalized terms used and not otherwise defined herein have the
respective meanings given them in the Omega New Master Lease (as
hereinafter defined).
B. Pursuant to the Orders under Bankruptcy Code Sections 363(f) and
365 (i) Approving Sale Leaseback Transaction Regarding Signature
Facilities entered by the United States Bankruptcy Court for the
District of Arizona in the jointly-administered Chapter 11 cases
In Re: Unison HealthCare Corporation (Case Nos.
B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re:
BritWill Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through
B-98-1075-PHX-GBN)("Cases"), effective December 31, 1998, Lessor
acquired the Signature Facilities and Lessor and the Signature
Subsidiaries entered into a lease of the Signature Facilities
("Omega New Master Lease").
C. In accordance with Debtors' First Amended Joint Plan of
Reorganization dated October 15, 1998, as amended ("Plan"), which
was confirmed with respect to the Cases effective January 31,
1999, the Omega New Master Lease (as amended) shall encompass,
assume, restate and supercede the Existing Leases of the Britwill
Indiana Facilities, BritWill-II November 1993 Facilities and
BritWill-II December 1994 Facilities.
D. Lessor and Lessees are entering into this First Amendment for the
purpose of adding Brit Indiana and Brit-II as Lessees,
accomplishing such assumption of the Existing Leases and amending
certain provisions of the Omega New Master Lease.
NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties to this First Amendment agree as follows:
1. The BritWill Indiana Facilities, BritWill-II November 1993
Facilities and BritWill-1994 Facilities are hereby added to the
Omega New Master Lease.
2. Each of the Existing Leases is hereby assumed, amended,
supplemented, superseded and replaced by the Omega New Master
Lease, subject only to the provisions of Section 4 hereof with
respect to the Indiana Returned Facilities.
<PAGE> 2
3. Lessees acknowledge and agree that they are jointly and severally
liable to Lessor for the payment of all amounts due Lessor from,
and the performance of all obligations of, any one or more or all
of the Lessees under the Omega New Master Lease, as set forth
therein.
4. Upon the terms and conditions set forth in the Indiana Returned
Facilities Agreement, BritWill Indiana has agreed to release and
relinquish to Lessor any and all right, title and interest in and
to the Indiana Returned Facilities, and Lessor has agreed to
terminate the Omega New Master Lease with respect to the Indiana
Returned Facilities, after the Indiana Returned Facilities
License Transfer. Pending the Indiana Returned Facilities
Transfer, notwithstanding anything to the contrary elsewhere in
the Omega New Master Lease:
a. All revenue and expenses in connection with the ownership and
operation of the Indiana Returned Facilities which accrue during
the Interim Operating Period shall be for the account and
liability of Lessor. Lessees shall disburse Indiana Returned
Facilities Gross Revenue in the following order of priority:
First, to pay the Indiana Returned Facilities Interim
Manager a management fee of five percent (5%) of
Indiana Returned Facilities Gross Revenue, which fee
shall accrue if not paid at any time during the
Interim Operating Period and shall be payable in the
first order of priority out of Indiana Returned
Facilities Gross Revenue in succeeding months, and if
not paid during the Interim Operating Period shall be
paid by Lessor as soon as the amount accrued and
unpaid shall be determined;
Next, to pay Indiana Returned Facilities Operating
Expenses that accrue and become due during the Interim
Operating Period, as and when the payment of the same
is due without penalty or interest (operating expenses
that accrue prior to the Interim Operating Period
being the responsibility of Brit Indiana, and not
Lessor, as set forth in the Indiana Returned
Facilities Agreement);
Next, to pay Additional Charges with respect to the
Indiana Returned Facilities which accrue and become
payable during the Interim Operating Period
(Additional Charges with respect to the Indiana
Returned Facilities that accrue prior to the Interim
Operating Period being the responsibility of Brit
Indiana, and not Lessor, as set forth in the Indiana
Returned Facilities Agreement);
Next, to pay to Lessor the Indiana Returned Facilities
Net Cash Flow, if any. Indiana Returned Facilities Net
Cash Flow for a calendar month, if any, shall be paid
to Lessor within fifteen (15) business days after the
same has been determined, subject to reasonable and
appropriate reserves approved by Lessor for the
payment of future Indiana Returned Facilities
Operating Expenses that are reasonably expected to
accrue and become due and payable during the Interim
Operating Period, provided, however, that any and all
Indiana Returned Facilities Net Cash Flow that has not
been previously paid to Lessor on or before the
Indiana Returned Facilities Lease Termination Date
shall be paid to Lessor within fifteen (15) business
days
2
<PAGE> 3
after such date, except that any such Indiana Returned
Facilities Net Cash Flow received by Lessees after the
Indiana Returned Facilities Lease Termination Date
shall be paid to Lessor within fifteen (15) Business
Days after receipt thereof.
If Gross Revenues are insufficient to pay any Indiana
Returned Facilities Operating Expense or Additional
Charge which accrues and is payable during the Interim
Operating Period as and when such Indiana Returned
Facilities Expense or Additional Charge becomes due,
upon Notice Lessor shall supply Lessees with such
additional funds as are necessary for such payment.
b. Except for the payment thereof in the order of
priority set forth in the preceding subparagraph out
of, and only to the extent of, available Indiana
Returned Facilities Gross Revenue, Lessees shall not
be responsible for the payment of Additional Charges
that are payable and accrue with respect to the
Indiana Returned Facilities during the Interim
Operating Period, provided, however, that Lessees
shall give Lessor such Notice as is feasible of the
due date and the amount of any Additional Charges
which accrue and are due during such period and which
exceed the Indiana Returned Facilities Gross Revenues
available to Lessees for the payment thereof on or
before the date on which such Additional Charges are
due and payable without penalty. Lessees shall have no
obligation to pay with respect to the Indiana Returned
Facilities the site inspection fee required under
Section 3.2 of the Omega New Master Lease or any other
fee, charge or expense except as otherwise set forth
in this First Amendment.
c. The failure of Lessees to pay with respect to the
Indiana Returned Facilities any amount due, other than
Indiana Returned Facilities Net Cash Flow payable to
Lessor, or to perform any act required under the
Lease, during the Interim Operating Period, shall not
constitute an Event of Default if at the time such
amount is due or such act is required to be performed
sufficient Indiana Returned Facilities Gross Revenues
are not available to Lessees to enable Lessees to pay
such amount or to pay for the performance of such act
and Lessor, after receipt of timely Notice from
Lessees, fails to provide Lessees with such additional
funds as may be necessary at the time to pay such
amount or pay for the performance of such act,
provided, however, that a violation by Lessees during
such period of any Legal Requirement or Insurance
Requirement applicable to the Indiana Returned
Facilities, resulting from willful misconduct or gross
negligence on the part of Lessees, beyond any
applicable grace or cure period provided in the Omega
New Master Lease shall constitute an Event of Default
as provided in Section 16.1.17.
d. No Obligation or Right to Make Capital Improvements
Lessees shall have neither the right nor the
obligation to make any capital improvements to the
Indiana Returned Facilities without the express
written approval of Lessor, whether or not made
necessary as a result of a Legal Requirement
3
<PAGE> 4
or an Insurance Requirement, damage from a casualty, a
Taking or deterioration, and without Lessor's prior
written approval Lessees shall only be obligated to
make such capital repairs and restoration as may
reasonably be required in an emergency in which time
does not permit Lessees to obtain such written
approval, and Lessor shall promptly reimburse Lessees
for the reasonable cost of any such emergency repairs.
Lessor alone shall in its discretion decide whether or
not to repair, restore and rebuild an Indiana Returned
Facility following a casualty. In the event of a
casualty that prevents carrying on the normal
operation of an Indiana Returned Facility for any
period in excess of five (5) business days, and if,
upon Notice from Lessees, Lessor does not make
arrangements reasonably satisfactory to Lessees to
cause the damaged property within thirty (30) days of
the date of the casualty to be restored to the extent
that the interference with the normal operation of
such Facility is eliminated, Lessees shall have the
right to terminate this Lease as to the damaged
Indiana Returned Facility upon at least fifteen (15)
days prior written notice to Lessor. Notwithstanding
the foregoing, Lessees may take any action reasonably
required of Lessees to maintain the licenses to
operate the Indiana Returned Facilities as healthcare
providers until such time as Lessees are relieved of
any and all obligations thereunder with respect to the
Indiana Returned Facilities, and Lessees shall not be
liable to Lessor for any such reasonable actions
taken.
e. No Right to Proceeds of Insurance and Condemnation
Awards. Except for the purpose of paying any Accrued
Fees, Lessees shall have no right to retain any Net
Proceeds received or receivable with respect to the
Indiana Returned Facilities.
f. No Right or Obligation to Contest. Lessees shall
neither be required nor permitted to engage in any
contest of any Legal Requirement or Insurance
Requirement applicable to the Indiana Returned
Facilities without prior Notice to, and the approval
of, Lessor.
g. Management Agreement Approved. Lessor hereby approves
the Indiana Returned Facilities Interim Management
Agreement between Lessees and Indiana Returned
Facilities Interim Manager dated February 1, 1999. Any
amendment of the Indiana Returned Facilities
Management Agreement shall be ineffective without the
prior, written approval of the parties hereto.
h. Authority and Responsibility of Lessees. The current
licensee of the Indiana Returned Facilities shall
remain the responsible licensee thereof and as such
shall retain complete responsibility and legal
liability for all the patient care and for the overall
supervision and control of the business, assets and
properties which are part of the Indiana Returned
Facilities.
i. Interpretation of Omega New Master Lease with Respect
to Indiana Returned Facilities. Lessor and Lessees
originally intended the Indiana Returned Facilities
Lease Termination Date to be January 31, 1999.
4
<PAGE> 5
Because processing of required licensure applications
is not complete, Lessor and Lessees are agreeing to
include the Indiana Returned Facilities among the
Facilities covered by the Omega New Master Lease. The
intent of Lessor and Lessees with respect to the
Indiana Returned Facilities is to give Lessor from and
after February 1, 1999 the same economic benefit, and
to impose upon Lessor the same economic burdens, as if
the Indiana Returned Facilities were not included in
the Omega New Master Lease, and Lessor and Lessees
intend that the Omega New Master Lease be interpreted
and construed consistent with the foregoing intent and
with the provisions of the Indiana Returned Facilities
Agreement.
j. Indemnification of Lessees. Lessor shall protect,
indemnify, save harmless and defend Lessees, their
principals, officers, directors and agents and
employees for, from and against all liabilities,
obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses),
to the extent permitted by law, imposed upon or
incurred by or asserted against Lessees or any of them
by reason of the inclusion of the Indiana Returned
Facilities as Facilities leased under the Omega New
Master Lease during the Interim Operating Period,
excluding any such liabilities, obligations, claims,
damages, penalties, causes of action, costs and
expenses (including, without limitation, reasonable
attorneys' fees and expenses) arising out of the gross
negligence or willful misconduct of Lessees or Manager
or the agents or employees of Lessees or Manager.
k. Termination of Lease with Respect to Indiana Returned
Facilities. The Omega New Master Lease shall terminate
with respect to the Indiana Returned Facilities on the
Indiana Returned Facilities Lease Termination Date.
Lessees shall have the right to terminate this Lease
as to the Indiana Returned Facilities on the Indiana
Returned Facilities Termination Date by Notice to
Lessor if Lessor fails to provide funds to Lessees for
the payment of Accrued Management Fees, Indiana
Returned Facilities Operating Expenses and Additional
Charges as required under Section 4.a., above or any
other sums due from Lessor with respect to the Indiana
Returned Facilities, within five (5) Business Days
after a Notice from Lessees' as to the amount and
purpose of such funds.
Except as hereinabove provided, the terms and conditions of
the Omega New Master Lease shall be fully applicable to the Indiana Returned
Facilities until the Indiana Returned Facilities Lease Termination Date without
further modification or amendment.
5. The definitions set forth in Article II of the Omega New Master
Lease are amended as follows:
Accrued Fees: Fees payable to the Indiana Returned
Facilities Interim Manager under the Indiana Returned
Facilities Interim Management Agreement and this First
Amendment which are due as provided herein but are unpaid.
5
<PAGE> 6
Additional Texas Facilities Land: The real property
described in Exhibit K-1, Exhibit K-2 and Exhibit K-3 attached to
this Lease.
Effective Date: As to the Signature Facilities,
December 31, 1998; as to the BritWill Indiana Facilities,
BritWill-II November 1993 Facilities and BritWill-II December 1994
Facilities, February 1, 1999.
Indiana Returned Facilities Agreement: The Indiana
Returned Facilities Agreement between Lessor and BritWill Indiana
dated as of the date of this First Amendment.
Indiana Returned Facilities Gross Revenue: The Gross
Revenues received or receivable from or by reason of the operation
of the Indiana Returned Facilities during the Interim Operating
Period.
Indiana Returned Facilities Interim Management
Agreement: The Indiana Returned Facilities Interim Management
Agreement between Lessees and Indiana Returned Facilities Interim
Manager of even date herewith.
Indiana Returned Facilities Interim Manager: RainTree
Healthcare Corporation.
Indiana Returned Facilities Lease Termination Date:
The earlier of (a) the last day of the month in which the operation
of the Indiana Returned Facilities may lawfully be transferred to
an entity of Lessor's choice which has been legally licensed to
operate the Indiana Returned Facilities, (b) the date which is ten
(10) Business Days after a Notice from Lessees to Lessor in which
Lessees elect to terminate the Omega New Master Lease as to the
Indiana Returned Facilities pursuant to Section 4.k., above and (c)
September 1, 1999.
Indiana Returned Facilities License Transfer: The
transfer to Lessor's designee, or issuance directly to Lessor's
designee, as the case may be, of all licenses and permits required
for the continuation of the operation of the Indiana Returned
Facilities in the manner in which such Facilities are being
operated on February 1, 1999, provided, however, that Lessees shall
have no obligation to incur any costs in connection with any
transfer or direct issuance to Lessor's designee of such licenses
and permits.
Indiana Returned Facilities Net Cash Flow: For the
Interim Operating Period, Indiana Returned Facilities Gross Revenue
minus Indiana Returned Facilities Operating Expenses.
Indiana Returned Facilities Operating Expenses:
Expenses which accrue and are payable in the ordinary course of
business during the Interim Operating Period for the operation of
the Indiana Returned Facilities.
6
<PAGE> 7
Interim Operating Period: The period from February 1,
1999 through the Indiana Returned Facilities Lease Termination
Date.
Omega Master Lease Guarantee: The New Omega Master
Lease Guarantee dated December 31, 1998.
6. Section 8.3.1.3 of the Omega New Master Lease is amended to read
as follows:
Lessees' Consolidated Current Ratio. At all times during the Term
(including any Extended Term), Lessees shall maintain Lessees'
Consolidated Current Ratio of at least 1.2.
7. Section 8.3.1.4 of the Omega New Master Lease is amended to read
as follows:
Lessees' Consolidated Fixed Charge Ratio. Lessees shall maintain
a Lessees' Consolidated Fixed Charge Ratio for 1999 of at least
1.4, for 2000 of at least 1.5 and at all times after January 1,
2001 of at least 1.55.
8. Section 8.3.1.5 of the Omega New Master Lease is amended to read
as follows:
Limitation of Distributions. In or with respect to Lease Year
1999 and any subsequent Lease Year, excluding the distribution of
the proceeds of Omega's Signature Facilities Investment, Lessees
shall not pay or distribute to their shareholders or any
Affiliate in the form of dividends, fees for management in excess
of those fees Lessees are required by the terms of the Management
Agreement to pay, or for any other services or reimbursements for
shareholder expenditures or overhead on behalf of Lessees unless
(A) after any and all such payments and distributions (i)
Lessees' Consolidated Tangible Net Worth equals or exceeds the
amount required by Section 8.3.1.2 above, and (ii) Lessees'
Consolidated Current Ratio is at least 1.2, and (B) Lessees have
maintained, for the four (4) calendar quarters immediately
preceding any such payments and distributions, a Lessees'
Consolidated Fixed Charge Ratio as required by Section 8.3.1.4.
9. Section 13 of the Omega New Master Lease is amended by the
addition of the following Subsection 13.9:
"13.9. The insurance provided by Lessees pursuant to Section
13.1.4 shall be written on an 'occurrence' and not a 'claims made
basis. In the event that the insurance provided by Lessees
pursuant to Section 13.1.5 is written on a 'claims made' basis,
Lessees shall also provide continuous coverage for claims arising
during the Term either by obtaining an endorsement providing for
an extended reporting period reasonably acceptable to Lessor in
the event such policy is canceled or not renewed for any reason
whatsoever, or by obtaining 'tail' insurance coverage converting
such policy to an 'occurrence' basis policy providing coverage
for a period of at least three (3) years beyond the expiration of
the Term."
7
<PAGE> 8
10. Exhibit H "Minimum Rent" is amended to read in its entirety as
set forth on attached EXHIBIT A.
11. The Minimum Rent for the BritWill Indiana Group of Facilities,
the BritWill-II November 1993 Group of Facilities and the
BritWill-II December 1994 Group of Facilities for the Stub
Period, the monthly installments thereof payable on or before the
twelfth (12th) day of each calendar month during the Stub Period
and the Minimum Rent for the Stub Period annualized for each such
Group of Facilities shall be:
<TABLE>
<CAPTION>
GROUP OF FACILITIES MINIMUM RENT FOR MONTHLY INSTALLMENT MINIMUM RENT FOR STUB
STUB PERIOD PAYABLE DURING PERIOD ANNUALIZED
STUB PERIOD
<S> <C> <C> <C>
BritWill Indiana Facilities $1,061,675.23 $96,515.93 $1,158,191.16
BritWill-II November 1993 Facilities $1,092,693.58 $99,335.78 $1,192,029.36
BritWill-II December 1994 Facilities $569,024.72 $51,729.52 $620,754.24
</TABLE>
11. Except as expressly amended hereby, the Omega New Master Lease is
in full force and effect without amendment or modification.
SIGNATURE PAGES FOLLOW
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
Omega Healthcare Investors, Inc.,
a Maryland corporation
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
LESSEES:
BritWill Indiana Partnership,
an Arizona general partnership
By: BritWill Investments-I, Inc.,
a Delaware corporation, its
General Partner
By:
Name:
Title:
BritWill Investments-II, Inc.,
a Delaware corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Amberwood Court, Inc., a
Colorado corporation
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
9
<PAGE> 10
The Arbors Health Care
Center, Inc.,
an Arizona corporation
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
Brookshire House, Inc., a
Colorado corporation
By:
------------------------------
Name:
---------------------------
Title:
---------------------------
Christopher Nursing Center, Inc.,
a Colorado corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Los Arcos, Inc., a Colorado
corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Pueblo Norte, Inc., a Colorado
corporation
10
<PAGE> 11
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Rio Verde Nursing Center, Inc.,
a Colorado corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
11
<PAGE> 1
Exhibit 10.3
REVOLVING CREDIT NOTE
$7,000,000 February 8, 1999
FOR VALUE RECEIVED, the undersigned, RAINTREE HEALTHCARE CORPORATION, a
Delaware corporation (f/k/a Unison Healthcare Corporation); SUNQUEST SPC, INC.,
an Arizona corporation; SAFFORD CARE, INC., a Colorado corporation; DOUGLAS
MANOR, INC., a Colorado corporation; CORNERSTONE CARE, INC., a Colorado
corporation; and ARKANSAS, INC., a Colorado corporation (collectively,
"Borrower"), jointly and severally, promise to pay, in lawful money of the
United States, to the order of HCFP FUNDING, INC., a Delaware corporation
(together with its successors and assigns, "Lender"), the principal sum of Seven
Million and No/100 Dollars ($7,000,000.00), or so much of such principal sum as
shall be advanced or readvanced and shall remain unpaid under the Loan
established pursuant to that certain "Loan And Security Agreement" dated
February 8, 1999, by and among the undersigned and Lender (as amended, modified,
restated or replaced from time to time, the "Loan Agreement"), plus interest on
the unpaid balance thereof, computed on a 360-day basis, at the rate per annum
that is set forth in the Loan Agreement.
1. All capitalized terms used and not otherwise specifically defined in
this Revolving Credit Note (as amended, modified, restated or replaced from time
to time, the "Note") shall have the meanings given to them in the Loan
Agreement.
2. This Note shall evidence the undersigned's obligation to repay all
sums advanced by Lender from time to time under the Loan Agreement and as part
of the Loan, and all other amounts due under the Loan Agreement. The actual
amount due and owing from time to time under this Note shall be evidenced by
Lender's records of receipts and disbursements with respect to the Loan, which
shall be conclusive evidence of that amount, absent manifest error.
3. Interest due pursuant to this Note shall be payable monthly, in
arrears, on the first Business Day of each month after the date of this Note
(for the previous month). For purposes of this Note, a "Business Day" shall mean
any day on which banks are open for business in Maryland, excluding Saturdays
and Sundays.
4. This Note shall become due and payable upon the earlier to occur of
(i) the Termination Date, or (ii) the termination of the Loan Agreement pursuant
to its terms, or any other event under the Loan Agreement or any other Loan
Documents which would result in the indebtedness evidenced by this Note becoming
due and payable. At such time, the entire principal balance of this Note and all
other interest, fees, costs and expenses, if any, shall be due and payable in
full. Lender shall then have the option at any time and from time to time to
exercise all of the rights and remedies set forth in this Note, the Loan
Agreement and in the other Loan Documents, as well as all rights and remedies
otherwise available to Lender at law or in equity, to collect the
<PAGE> 2
unpaid indebtedness under this Note, the Loan Agreement and the other Loan
Documents. This Note is secured by the Collateral, as defined in and described
in the Loan Agreement.
5. Whenever any principal and/or interest and/or fee under this Note
shall not be paid when due, whether at the stated maturity or by acceleration,
interest on such unpaid amounts shall thereafter be payable at a rate per annum
equal to the Default Rate stated in the Loan Agreement.
6. The undersigned and Lender intend to conform strictly to the
applicable usury laws in effect from time to time during the term of the Loan.
Accordingly, if any transaction contemplated by the Loan Agreement or this Note
would be usurious under such laws, then notwithstanding any other provision
hereof: (i) the aggregate of all interest that is contracted for, charged, or
received under this Note or under any other Loan Document shall not exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
promptly credited to the undersigned by Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly refunded to
the undersigned by Lender); (ii) neither the undersigned nor any other Person
(as defined in the Loan Agreement) now or hereafter liable hereunder shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum interest permitted by applicable law; and (iii) the effective
rate of interest shall be reduced to the Highest Lawful Rate (as defined in the
Loan Agreement). All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term of
this Note until payment is made in full so that the actual rate of interest does
not exceed the Highest Lawful Rate in effect at any particular time during the
full term thereof. If at any time the rate of interest under this Note exceeds
the Highest Lawful Rate, the rate of interest to accrue pursuant to this Note
shall be limited, notwithstanding anything to the contrary in this Note, to the
Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not
reduce the interest to accrue pursuant to this Note below the Highest Lawful
Rate until the total amount of interest accrued equals the amount of interest
that would have accrued if a varying rate per annum equal to the interest rate
under the Note had at all times been in effect. If the total amount of interest
paid or accrued pursuant to this Note under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate per
annum equal to the interest rate under this Note had been in effect, then the
undersigned agrees to pay to Lender an amount equal to the difference between
(x) the lesser of (A) the amount of interest that would have accrued if the
Highest Lawful Rate had at all times been in effect, or (B) the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect, and (y) the amount
of interest accrued in accordance with the other provisions of this Note and the
Loan Agreement.
7. This Note is the "Note" referred to in the Loan Agreement, and is
issued pursuant to the Loan Agreement. Reference is made to the Loan Agreement
for a statement of the additional rights and obligations of the undersigned and
Lender. In the event of any conflict between the terms of this Note and the
terms of the Loan Agreement, the terms of the Loan Agreement shall prevail. All
of the terms, covenants, provisions, conditions, stipulations, promises and
agreements contained in the Loan Documents to be kept, observed and/or performed
by the undersigned are made a part of this Note and are incorporated into this
Note by this reference to the same extent and with the
<PAGE> 3
same force and effect as if they were fully set forth in this Note; the
undersigned promises and agrees to keep, observe and perform them or cause them
to be kept, observed and performed, strictly in accordance with the terms and
provisions thereof.
8. Each party liable on this Note in any capacity, whether as maker,
endorser, surety, guarantor or otherwise, (i) waives presentment for payment,
demand, protest and notice of presentment, notice of protest, notice of
non-payment and notice of dishonor of this debt and each and every other notice
of any kind respecting this Note and all lack of diligence or delays in
collection or enforcement hereof; (ii) agrees that Lender at any time or times,
without notice to the undersigned or its consent, may grant extensions of time,
without limit as to the number of the aggregate period of such extensions, for
the payment of any principal, interest or other sums due hereunder; (iii) to the
extent permitted by law, waives all exemptions under the laws of the State of
Maryland and/or any state or territory of the United States; (iv) to the extent
permitted by law, waives the benefit of any law or rule of law intended for its
advantage or protection as an obligor under this Note or providing for its
release or discharge from liability on this Note, in whole or in part, on
account of any facts or circumstances other than full and complete payment of
all amounts due under this Note; and (v) agrees to pay, in addition to all other
sums of money due, all cost of collection and attorney's fees, whether suit be
brought or not, if this Note is not paid in full when due, whether at the stated
maturity or by acceleration.
9. No waiver by Lender of any one or more defaults by the undersigned
in the performance of any of its obligations under this Note shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different nature. No failure or delay on the part of Lender in exercising any
right, power or remedy under this Note (including, without limitation, the right
to declare this Note due and payable) shall operate as a waiver of such right,
power or remedy nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise of such right, power or
remedy or the exercise of any other right, power or remedy.
10. If any term, provision, covenant or condition of this Note or the
application of any term, provision, covenant or condition of this Note to any
party or circumstance shall be found by a court of competent jurisdiction to be,
to any extent, invalid or unenforceable, then the remainder of this Note and the
application of such term, provision, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, provision, covenant or condition
shall be valid and enforced to the fullest extent permitted by law. Upon
determination that any such term, provision, covenant or condition is invalid,
illegal or unenforceable, Lender may, but is not obligated to, advance funds to
Borrower under this Note until Borrower and Lender amend this Note so as to
effect the original intent of the parties as closely as possible in a valid and
enforceable manner.
11. No amendment, supplement or modification of this Note nor any
waiver of any provision of this Note shall be made except in writing executed by
the party against whom enforcement is sought.
3
<PAGE> 4
12. This Note shall be binding upon the undersigned and its successors
and assigns. Notwithstanding the foregoing, the undersigned may not assign any
of its rights or delegate any of its obligations under this Note without the
prior written consent of Lender, which may be withheld in its sole discretion.
13. Each entity constituting Borrower shall be jointly and severally
liable for all of the obligations of Borrower under this Note and under the Loan
Agreement.
14. THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MARYLAND WITHOUT RESPECT TO ANY OTHERWISE APPLICABLE
CONFLICTS-OF-LAWS PRINCIPLES, BOTH AS TO INTERPRETATION AND PERFORMANCE, AND THE
PARTIES EXPRESSLY CONSENT AND AGREE TO THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF MARYLAND AND THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MARYLAND AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND,
WAIVING ALL CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE, INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY CONSENTS TO SERVICE OF
PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY CERTIFIED OR REGISTERED
MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH IN SECTION 9.4 OF THE
LOAN AGREEMENT. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
15. THE UNDERSIGNED HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY
BY THE UNDERSIGNED, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS NOTE TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF THE UNDERSIGNED'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT
OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
TO ANY BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION.
16. THE UNDERSIGNED HEREBY AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE
BEFORE ANY COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO
APPEAR ON BEHALF OF THE
4
<PAGE> 5
UNDERSIGNED IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF
OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST THE
UNDERSIGNED IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS NOTE (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
THE UNDERSIGNED AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER
IN THE CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE
CITY, MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MARYLAND. THE UNDERSIGNED WAIVES THE BENEFIT OF ANY AND EVERY STATUTE,
ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON
BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF
EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR
IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE
AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE UNDERSIGNED
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT
EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT
THERETO; SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM
TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL
DEEM NECESSARY, CONVENIENT, OR PROPER.
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
date first above written.
BORROWER:
ATTEST: RAINTREE HEALTHCARE CORPORATION, a Delaware corporation
By: By:________________________________
Name:
Title:
ATTEST: SUNQUEST SPC, INC., an Arizona corporation
By: By:________________________________
Name:
Title:
ATTEST: SAFFORD CARE, INC., a Colorado corporation
By: By:________________________________
Name:
Title:
ATTEST: DOUGLAS MANOR, INC., a Colorado corporation
By: By:________________________________
Name:
Title:
ATTEST: CORNERSTONE CARE, INC., a Colorado corporation
By: By:________________________________
Name:
6
<PAGE> 7
Title:
ATTEST: ARKANSAS, INC., a Colorado corporation
By: By:________________________________
Name:
Title:
7
<PAGE> 1
Exhibit 10.4
$7,000,000.00
LOAN AND SECURITY AGREEMENT
by and among
RAINTREE HEALTHCARE CORPORATION
SUNQUEST SPC, INC.
SAFFORD CARE, INC.
DOUGLAS MANOR, INC.
CORNERSTONE CARE CENTER, INC.
ARKANSAS, INC.
(collectively, the "Borrower")
and
HCFP FUNDING, INC.
(the "Lender")
February 8, 1999
<PAGE> 2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement" or the "New LOC I Agreement")
is made as of this 8th day of February, 1999, by and among RAINTREE HEALTHCARE
CORPORATION, a Delaware corporation (f/k/a Unison Healthcare Corporation),
SUNQUEST SPC, INC., an Arizona corporation, SAFFORD CARE, INC., a Colorado
corporation, DOUGLAS MANOR, INC., a Colorado corporation, CORNERSTONE CARE
CENTER, INC., a Colorado corporation, and ARKANSAS, INC., a Colorado corporation
(collectively, "Borrower(s)"); and HCFP FUNDING, INC., a Delaware corporation
("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements with and borrow
funds from Lender, and Lender is willing to establish such arrangements for and
make loans and extensions of credit to Borrower, on the terms and conditions set
forth below.
B. Borrower includes some of the Debtors in the jointly administered Chapter 11
bankruptcies pending in the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") (Case Nos. B-98-06583-PHX-GBN through
B-98-06612-PHX-GBN, and Case Nos. B-98-0173-PHX-GBN through B-98-0175-PHX-GBN)
(the "Bankruptcy Cases").
C. By on Order dated January 29, 1999 entered in the Bankruptcy Cases, the
Bankruptcy Court has confirmed a plan of reorganization with respect to Borrower
(and the other Debtors) (as confirmed, the "Reorganization Plan"). The
Reorganization Plan contemplates that the Debtors, as reorganized, will obtain a
secured working line of credit of approximately $12,000,000.00 (defined in the
Reorganization Plan as the "New Line of Credit"). The New Line of Credit will be
comprised of the credit facility of up to the maximum principal amount of
$7,000,000.00 available to Borrower under this New LOC I Agreement, and the
credit facility of up to the maximum principal amount of $7,000,000.00 available
to New LOC II Borrower (as defined below) under the New LOC II Agreement (as
defined below). As provided below, the credit facilities available under this
New LOC I Agreement and under the New LOC II Agreement are limited in principal
amount to the aggregate of $12,000,000.00.
D. Borrower and New LOC II Borrower consist of some of the Debtors as
reorganized pursuant to the Reorganization Plan confirmed in the Bankruptcy
Cases.
E. The parties desire to define the terms and conditions of their relationship
in this Agreement.
NOW, THEREFORE, in consideration of the promises and covenants contained in this
Agreement, and for other consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
ARTICLE I
<PAGE> 3
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
SECTION 1.1. ACCOUNT. "Account" means any right to payment for goods sold or
leased or services rendered, whether or not evidenced by an instrument or
chattel paper, and whether or not earned by performance.
SECTION 1.2. ACCOUNT DEBTOR. "Account Debtor" means any Person obligated on any
Account of Borrower, including without limitation, any Insurer and any
Medicaid/Medicare Account Debtor.
SECTION 1.3. AFFILIATE. "Affiliate" means, with respect to a specified Person,
any Person directly or indirectly controlling, controlled by, or under common
control with the specified Person, including without limitation their
stockholders and any Affiliates thereof. A Person shall be deemed to control a
corporation if the Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and business of the corporation whether
through the ownership of voting securities, by contract, or otherwise.
SECTION 1.4. AGREEMENT. "Agreement" means this Loan and Security Agreement, as
it may be amended or supplemented from time to time. This Agreement is also
referred to herein from time to time as the "New LOC I Agreement".
SECTION 1.5. BASE RATE. "Base Rate" means a rate of interest equal to
eighty-five one-hundredths of one percent (0.85%) above the "Prime Rate of
Interest".
SECTION 1.6. BORROWED MONEY. "Borrowed Money" means any obligation to repay
money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of the Borrower or which is the substantial
equivalent of the financing of the property so leased.
SECTION 1.7. BORROWER(S). "Borrower" and "Borrowers" have the meanings set forth
in the Preamble, provided, however, that individual references to the singular
and the plural will not limit or affect the joint and several incurrence of
Obligations, granting of liens and security interests in Collateral, and
repayment and enforcement provisions provided herein.
SECTION 1.8. BORROWING BASE. "Borrowing Base" has the meaning set forth in
Section 2.1 (d).
SECTION 1.9. BUSINESS DAY. "Business Day" means any day on which financial
institutions are open for business in the State of Maryland, excluding Saturdays
and Sundays.
SECTION 1.10. CLOSING; CLOSING DATE. "Closing" and "Closing Date" have the
meanings set forth in Section 5.3.
-2-
<PAGE> 4
SECTION 1.11. COLLATERAL. "Collateral" has the meaning set forth in Section 3.1.
SECTION 1.12. COMMITMENT FEE. "Commitment Fee" has the meaning set forth in
Section 2.4(a).
SECTION 1.13. CONCENTRATION ACCOUNT. "Concentration Account" has the meaning set
forth in Section 2.3.
SECTION 1.14. CONTROLLED GROUP. "Controlled Group" means a "controlled group"
within the meaning of Section 4001(b) of ERISA.
SECTION 1.15. COST REPORT SETTLEMENT ACCOUNT. "Cost Report Settlement Account"
means an "Account" owed to Borrower by a Medicaid/Medicare Account Debtor
pursuant to any cost report, either interim, filed or audited, as the context
may require.
SECTION 1.16. DEFAULT RATE. "Default Rate" means a rate per annum equal to two
percent (2%) above the Base Rate.
SECTION 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
SECTION 1.18. EVENT OF DEFAULT. "Event of Default" and "Events of Default" have
the meanings set forth in Section 8.1.
SECTION 1.19. GAAP. "GAAP" means generally accepted accounting principles
applied in a matter consistent with the financial statements referred to in
Section 4.7.
SECTION 1.20. GOVERNMENTAL AUTHORITY. "Governmental Authority" means and
includes any federal, state, District of Columbia, county, municipal, or other
government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
SECTION 1.21. HAZARDOUS MATERIAL. "Hazardous Material" means any substances
defined or designated as hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance, or similar term, by any environmental statute,
rule or regulation or any Governmental Authority.
SECTION 1.22. HIGHEST LAWFUL RATE. "Highest Lawful Rate" means the maximum
lawful rate of interest referred to in Section 2.8 that may accrue pursuant to
this Agreement.
SECTION 1.23. INSURER. A Person that insures a Patient against certain of the
costs incurred in the receipt by such Patient of Medical Services, or that has
an agreement with Borrower to compensate Borrower for providing services to a
Patient.
SECTION 1.23A. ISSUING BANK. "Issuing Bank" shall refer to Fleet Bank, N.A., or
such other bank mutually acceptable to Lender and Borrower from which Lender
obtains the issuance of any of the Letters of Credit in accordance with Section
2.1(e).
SECTION 1.24. LENDER. "Lender" has the meaning set forth in the Preamble.
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SECTION 1.24A. LETTERS OF CREDIT. "Letters of Credit" has the meaning set forth
in Section 2.1(e).
SECTION 1.25. LOAN. "Loan" has the meaning set forth in Section 2.1(a).
SECTION 1.26. LOAN DOCUMENTS. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified, or
supplemented from time to time.
SECTION 1.27. LOAN MANAGEMENT FEE. "Loan Management Fee" has the meaning set
forth in Section 2.4(c).
SECTION 1.28. LOCKBOX. "Lockbox" has the meaning set forth in Section 2.3(a).
SECTION 1.29. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth in Section
2.3(a).
SECTION 1.30. MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the meaning set
forth in Section 2.1(a).
SECTION 1.31. MEDICAID/MEDICARE ACCOUNT DEBTOR. "Medicaid/ Medicare Account
Debtor" means any Account Debtor which is (i) the United States of America
acting under the Medicaid/Medicare program established pursuant to the Social
Security Act, (ii) any state or the District of Columbia acting pursuant to a
health plan adopted pursuant to Title XIX of the Social Security Act or (iii)
any agent, carrier, administrator or intermediary for any of the foregoing.
SECTION 1.32. MEDICAL SERVICES. Medical and health care services provided to a
Patient, including, but not limited to, medical and health care services
provided to a Patient and performed by Borrower which are covered by a policy of
insurance issued by an Insurer, and includes physician services, nurse and
therapist services, dental services, hospital services, skilled nursing facility
services, comprehensive outpatient rehabilitation services, home health care
services, residential and out-patient behavioral healthcare services, and
medicine or health care equipment provided by Borrower to a Patient for a
necessary or specifically requested valid and proper medical or health purpose.
SECTION 1.32A. NEW LOC I AGREEMENT. "New LOC I Agreement" means this Loan and
Security Agreement, as it may be amended or supplemented from time to time. The
term "New LOC I Agreement" is completely synonymous and interchangeable with
"Agreement" as defined above.
SECTION 1.32B. NEW LOC II AGREEMENT. "New LOC II Agreement" means that certain
Loan and Security Agreement between Lender and New LOC II Borrower of even date
herewith, as it may be amended or supplemented from time to time. Under the New
LOC II Agreement, Lender makes available to New LOC II Borrower a credit
facility of up to the maximum principal amount of $7,000,000.00 under the terms
and conditions stated in the New LOC II Agreement.
SECTION 1.32C. NEW LOC II BORROWER. "New LOC II Borrower" means collectively the
following Affiliates of Borrower: RAINTREE HEALTHCARE CORPORATION, a Delaware
corporation
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(f/k/a Unison Healthcare Corporation), BRITWILL HEALTHCARE COMPANY, a Delaware
corporation, BRITWILL FUNDING CORPORATION, a Delaware corporation, CEDAR CARE,
INC., an Indiana corporation, SHERWOOD HEALTHCARE CORP., an Indiana corporation,
BRITWILL INVESTMENTS-I, INC., a Delaware corporation, BRITWILL INVESTMENTS-II,
INC., a Delaware corporation BRITWILL INDIANA PARTNERSHIP, an Arizona general
partnership, BROOKSHIRE HOUSE, INC., a Colorado corporation (f/k/a Asbury
Circle, Inc.), CHRISTOPHER NURSING CENTER, INC., a Colorado corporation,
AMBERWOOD COURT, INC., a Colorado corporation (f/k/a Valley Hi, Inc.), THE
ARBORS HEALTH CARE CORPORATION, an Arizona corporation, LOS ARCOS, INC., a
Colorado corporation, PUEBLO NORTE, INC., a Colorado corporation (f/k/a
Signature Health Care of California Corporation), RIO VERDE NURSING CENTER,
INC., a Colorado corporation, SIGNATURE HEALTH CARE CORPORATION, a Delaware
corporation, and SIGNATURE MANAGEMENT GROUP, INC., a Colorado corporation.
SECTION 1.33. NOTE. "Note" has the meaning set forth in Section 2.1(c).
SECTION 1.34. OBLIGATIONS. "Obligations" has the meaning set forth in Section
3.1.
SECTION 1.35. PATIENT. "Patient" means any Person receiving Medical Services
from Borrower and all Persons legally liable to pay Borrower for such Medical
Services other than Insurers.
SECTION 1.36. PERMITTED LIENS. "Permitted Liens" means: (a) liens for taxes not
delinquent, or which are being contested in good faith and by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Lender's sole discretion, involve any substantial danger of the sale, loss or
forfeiture of such property or assets or any interest therein); (b) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance; (c) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the collection
thereof and in respect of which adequate reserves have been made (provided that
such proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (e) liens and encumbrances in favor of Lender; (f) liens
granted in connection with the lease or purchase of property or assets financed
by borrowings permitted by Section 7.1 (provided, however, that no such
borrowings permitted by Section 7.1 may be secured by liens on any of the
Collateral); and (g) liens set forth on Schedule 1.36.
SECTION 1.37. PERSON. "Person" means an individual, partnership, corporation,
trust, joint venture, joint stock company, limited liability company,
association, unincorporated organization, Governmental Authority, or any other
entity.
SECTION 1.38. PLAN. "Plan" has the meaning set forth in Section 4.12.
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SECTION 1.39. PREMISES. "Premises" has the meaning set forth in Section 4.14.
SECTION 1.40. PRIME RATE OF INTEREST. "Prime Rate of Interest" means that rate
of interest quoted by Fleet National Bank of Connecticut, N.A., or any successor
thereto, as the same may from time to time fluctuate.
SECTION 1.41. PROHIBITED TRANSACTION. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
SECTION 1.42. QUALIFIED ACCOUNT. "Qualified Account" means an Account of
Borrower generated in the ordinary course of Borrower's business from the sale
of goods or rendition of medical services which Lender, in its reasonable credit
judgment, deems to be a Qualified Account. Without limiting the generality of
the foregoing, no Account shall be a Qualified Account if: (a) it is payable
directly to Borrower by a Medicaid/Medicare Account Debtor or commercial medical
Insurer acceptable to Lender in its reasonable discretion, and remains unpaid
more than one hundred twenty (120) days past the claim or service date
(provided, however, that to be Qualified such Medicaid/Medicare Account must be
billed within thirty (30) days after the applicable Medical Services have been
rendered); (b) it or any portion thereof is payable by an individual
beneficiary, recipient or subscriber individually and remains unpaid more than
thirty (30) days after the applicable Medical Services have been rendered (it
being agreed by Borrower that, outstanding Revolving Credit Loans with respect
to such pre-billed Accounts shall at no time exceed $1,300,000.00); (c) the
Account is subject to any defense, set-off, counterclaim, deduction, discount,
credit, chargeback, freight claim, allowance, or adjustment of any kind; (d) any
part of any goods the sale of which has given rise to the Account has been
returned, rejected, lost, or damaged; (e) if it arises from the sale of goods by
Borrower, such sale was not an absolute sale or on consignment or on approval or
on a sale-or-return basis or subject to any other repurchase or return
agreement, or such goods have not been shipped to the Account Debtor or its
designee; (f) if it arises from the performance of services, such services have
not been actually been performed or were undertaken in violation of any law; (g)
the Account is subject to a lien other than a Permitted Lien; (h) the Borrower
knows or should have known of the bankruptcy, receivership, reorganization, or
insolvency of the Account Debtor; (i) the Account is evidenced by chattel paper
or an instrument of any kind in which Lender does not have a first priority,
perfected security interest, or has been reduced to judgment; (j) it is an
Account of an Account Debtor having its principal place of business or executive
office outside the United States; (k) the Account Debtor is an Affiliate or
Subsidiary of Borrower; (l) more than ten percent (10%) of the aggregate balance
of all Accounts owing from the Account Debtor obligated on the Account (other
than Medicaid or Medicare Account Debtors) are outstanding more than one hundred
twenty (120) days past their invoice date; (m) more than fifteen percent (15%)
of the aggregate balance of all Accounts owing from any individual Medicaid
Account Debtor obligated on the Account are outstanding more than one hundred
fifty (150) days past their invoice date; (n) more than twenty percent (20%) of
the aggregate balance of all Accounts owing from any individual Account Debtor
(other than a Medicaid/Medicare Account Debtor) obligated on the Account are
outstanding more than one hundred fifty (150) days past their invoice date; (o)
fifty percent (50%) or more of the Accounts from the Account Debtor are not
deemed Qualified Accounts hereunder; (p) the total unpaid Accounts of the
Account Debtor, except for a Medicaid/Medicare Account Debtor, exceed twenty
percent (20%) of the net amount of all Qualified Accounts; (q) the Account has
been
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generated through the operation of one of the nursing home facilities listed on
Schedule 4.15 as to which Lender has not yet received an estoppel certificate
that is substantially in the form of Exhibit D attached hereto or is otherwise
acceptable to Lender in form and substance (r) any covenant, representation or
warranty contained in the Loan Documents with respect to such Account has been
breached; or (s) the Account fails to meet such other specifications and
requirements which may from time to time be established by Lender.
SECTION 1.43. REPORTABLE EVENT. "Reportable Event" means a "reportable event" as
defined in Section 4043(b) of ERISA.
SECTION 1.44. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the meaning set
forth in Section 2.1(b).
SECTION 1.45. TERM. "Term" has the meaning set forth in Section 2.8.
SECTION 1.46. USAGE FEE. "Usage Fee" has the meaning set forth in Section
2.4(b).
ARTICLE II
LOAN
SECTION 2.1. TERMS.
(a) The maximum aggregate principal amount of credit extended by Lender
to Borrower hereunder (the "Loan") that may be outstanding at any time is Seven
Million and No/100 ($7,000,000.00) (the "Maximum Loan Amount"). Notwithstanding
the foregoing, or anything else in this Agreement to the contrary, however, the
total of the aggregate outstanding principal amount of the Loan made under this
Agreement and the aggregate outstanding principal amount of the Loan under the
New LOC II Agreement shall not exceed Twelve Million and No/100
($12,000,000.00).
(b) The Loan shall be in the nature of a revolving line of credit, and
shall include sums advanced and other credit extended by Lender to or for the
benefit of the Borrower from time to time under this Article 2 (each a
"Revolving Credit Loan"), limited at all times to the least of: (i) the Maximum
Loan Amount; (ii) the availability in the Borrowing Base; or (iii) the
difference between $12,000,000.00 and the outstanding Loan owing pursuant to the
New LOC II Agreement (as defined therein). Depending on the requests of Borrower
pursuant to the terms and conditions of Sections 2.1(e) and 2.2 below, the
outstanding principal balance of the Loan may fluctuate from time to time, to be
reduced by repayments made by Borrower (which may be made without penalty or
premium), and to be increased by future Revolving Credit Loans, advances and
other extensions of credit to or for the benefit of Borrower, and shall be due
and payable in full upon the expiration of the Term. For purposes of this
Agreement, any determination as to whether there is ability within the Borrowing
Base for advances or extensions of credit shall be made by Lender in its
reasonable discretion and is final and binding upon Borrower.
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(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing Borrower's unconditional obligation to repay Lender
for Revolving Credit Loans, advances, and other extensions of credit made under
the Loan (including without limitation Borrower's obligations with respect to
Letters of Credit), in the form of Exhibit A to this Agreement (the "Note"),
dated the date hereof, payable to the order of Lender in accordance with the
terms thereof. The Note (and the principal balance of the Loan outstanding from
time to time thereunder, but not including the portion of the Loan owing for
undrawn Letters of Credit) shall bear interest from the date thereof until
repaid, with interest payable monthly in arrears on the first Business Day of
each month, at a rate per annum (on the basis of the actual number of days
elapsed over a year of 360 days) equal to the Base Rate, provided that after an
occurrence or during the continuance of an Event of Default such rate shall be
equal to the Default Rate. Each Revolving Credit Loan, advance and other
extension of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) As used herein, the term "Borrowing Base" shall mean that amount
equal, at any applicable time, to eighty-five percent (85%) of Qualified
Accounts due and owing from any Medicaid/Medicare Account Debtor, Insurer or
other Account Debtor. Notwithstanding any other provision of this Agreement,
advances under the Loan shall not be made in an amount that would cause the
total amount outstanding under the Loan (after taking into account a proposed
advance) to exceed the amount of the Borrowing Base.
(e) Borrower may request from time to time that Lender obtain from
Issuing Bank irrevocable standby letters of credit (collectively, the "Letters
of Credit") issued on behalf of Borrower for the benefit of third parties
identified by Borrower, provided that: (i) the aggregate amount that
beneficiaries of outstanding Letters of Credit may draw at any time may not
exceed the amount equal to $2,500,000.00 less the aggregate face amount of all
Letters of Credit outstanding pursuant to the New LOC II Agreement; and (ii)
when a Letter of Credit is issued, the maximum amount that can be drawn on that
Letter of Credit by the beneficiary thereof shall be deemed an advance under
this Agreement for purposes of determining Borrower's borrowing capacity under
the Loan. Such advances shall be deemed Revolving Credit Loans and therefore
part of the Loan owing by Borrower hereunder, but shall be deemed to be repaid
as the amounts that can be drawn under Letters of Credit are reduced from time
to time in accordance with the terms and conditions thereof. In the event of any
draw under a Letter of Credit: (i) Borrower shall immediately thereafter pay to
Lender an amount equal to all amounts that Lender has paid to, or owes, Issuing
Bank in relation to that Letter of Credit; and (ii) the portion of the Loan
comprised of Borrower's obligations with respect to the Letter of Credit drawn
upon shall thereafter bear interest at the applicable rate for the remainder of
the Loan (not including obligations related to other Letters of Credit). Payment
and performance of all obligations and liabilities of Borrower to Lender arising
in connection with the Letters of Credit, including but not limited to all
obligations and liabilities of Borrower to Lender under the fee and
reimbursement agreement (in a form acceptable to Lender in its sole discretion)
that shall be entered into by Borrower and Lender with respect to each Letter of
Credit, shall be secured by the liens and security interests in the Collateral
granted to Lender under this Agreement. Notwithstanding any of the foregoing,
Lender's failure, for any reason, to obtain a Letter of Credit on behalf of
Borrower following a request by Borrower shall not constitute a default by
Lender under this Agreement.
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SECTION 2.2. LOAN ADMINISTRATION. Borrowings under the Loan shall be as follows:
(a) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Lender notice
of its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date, not later than 2:00 p.m.
Eastern time one (1) Business Day prior to the proposed borrowing date;
provided, however, that no such request may be made at a time when there exists
an Event of Default; and (ii) the becoming due (after the expiration of the
applicable grace period, if any) of any amount required to be paid under this
Agreement, whether as interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested, as
follows: (i) the proceeds of each Revolving Credit Loan requested under
subsection 2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank
account as may be agreed upon by Borrower and Lender from time to time or
elsewhere if pursuant to written direction from Borrower; and (ii) the proceeds
of each Revolving Credit Loan requested under subsection 2.2(a)(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other
Obligation.
(c) All Revolving Credit Loans, advances and other extensions of credit
to or for the benefit of Borrower shall constitute the Obligation of Borrower,
and shall be secured by Lender's lien upon all of the Collateral of the
Borrower.
(d) Lender shall enter all Revolving Credit Loans as debits to a loan
account in the name of Borrower and shall also record in said loan account all
payments made by Borrower on any Obligations and all proceeds of Collateral
which are indefeasibly paid to Lender, and may record therein, in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower. All collections
into the Concentration Account pursuant to Section 2.3 shall be applied first to
fees, costs and expenses due and owing under the Loan Documents, then to
interest due and owing under the Loan Documents, and then to principal
outstanding with respect to Revolving Credit Loans.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall, absent manifest error, be deemed
final, binding and conclusive upon Borrower unless Lender is notified by
Borrower in writing to the contrary within thirty (30) days of the date each
accounting is mailed to Borrower. Such notice shall be deemed an objection to
those items specifically objected to therein.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING AVAILABILITY, AND LOCKBOX
ACCOUNT. Borrower shall maintain one or more lockbox accounts (collectively, the
"Lockbox") with Bank One Arizona, N.A. (the "Lockbox Bank"), subject to the
provisions of this Agreement, and shall execute with the Lockbox Bank a Lockbox
Agreement in the form acceptable to Lender, and such other
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agreements related thereto as Lender may require. Borrower shall ensure that all
collections of Accounts are paid directly from Account Debtors into the Lockbox,
and that all funds paid into the Lockbox are immediately transferred into a
depository account maintained by Lender at Bank One Arizona, N.A. or U.S. Bank
N.A., as determined by Lender in its sole discretion and communicated to
Borrower (the "Concentration Account"). Lender shall apply, on a daily basis,
all funds transferred into the Concentration Account pursuant to this Section
2.3 to reduce the outstanding indebtedness under the Loan, with future Revolving
Credit Loans, advances and other extensions of credit to be made by Lender under
the conditions set forth in this Article II. To the extent that any collections
of Accounts or proceeds of other Collateral are not sent directly to the Lockbox
but are received by Borrower, such collections shall be held in trust for the
benefit of Lender and immediately remitted, in the form received, to the Lockbox
Bank for transfer to the Concentration Account immediately upon receipt by
Borrower. Borrower acknowledges and agrees that its compliance with the terms of
this Section 2.3 is essential, and that upon its failure to comply with any such
terms Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Base Rate by two percent (2%) per annum during any
period of non-compliance. Lender shall be entitled to assess such fee whether or
not an Event of Default is declared or otherwise occurs. All funds transferred
from the Concentration Account for application to Borrower's indebtedness to
Lender shall be applied to reduce the Loan balance, but for purposes of
calculating interest, shall be subject to a five (5) Business Day clearance
period. If as the result of collections of Accounts pursuant to the terms and
conditions of this Section 2.3 a credit balance exists with respect to the
Concentration Account, such credit balance shall not accrue interest in favor of
Borrower, but shall be available to Borrower at any time or times for so long as
no Event of Default exists.
SECTION 2.4. FEES.
(a) Upon execution of this Agreement, Borrower shall unconditionally
pay to Lender a commitment fee equal to Ten Thousand and No/100 Dollars
($10,000.00) (the "Commitment Fee").
(b) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly usage fee (the "Usage Fee") equal
to one twelfth (1/12th) of one and one-quarter percent (1.25%) of the average
amount by which the Maximum Loan Amount exceeds the average amount of the
outstanding principal balance of the Revolving Credit Loans during the preceding
month. The Usage Fee shall be payable monthly in arrears on the first day of
each successive calendar month.
(c) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a quarterly loan management fee (the "Loan
Management Fee") equal to Three Thousand Seven Hundred Fifty and No/100 Dollars
($3,750.00) per quarter within the Term. The Loan Management Fee shall be
payable quarterly in advance on the first day of each February, May, August and
November while this Agreement remains in effect.
(d) Borrower shall pay to Lender all reasonable audit and appraisal
fees in connection with audits and appraisals of Borrower's books and records on
not more than a quarterly basis while no Event of Default exists and is
continuing, which shall be due and payable on the first Business
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Day of the month following the date of issuance by Lender of a request for
payment thereof to Borrower; provided, however, that (i) absent an Event of
Default the payment by Borrower of the quarterly Loan Management Fee shall
satisfy its payment obligations under this Section 2.4(d) for the applicable
quarter, and (ii) following the occurrence or during the continuation of an
Event of Default the hourly rates of the professionals selected by Lender to
perform the audits and appraisals shall be reasonable in relation to the scope
of the services performed.
(e) Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender or any participant pays to a bank or other similar
institution (including, without limitation, any fees paid by Lender to any
participant) arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower, by Lender, of proceeds of Revolving
Credit Loans made by Lender to Borrower pursuant to this Agreement, and (ii) the
depositing for collection, by Lender or any participant, of any check or item of
payment received or delivered to Lender or any participant on account of
Obligations.
(f) Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender pays to Issuing Bank arising out of or in connection with
any Letter of Credit issued on behalf of Borrower. In addition, on the date that
any Letter of Credit is issued or renewed by Issuing Bank, Borrower shall pay to
Lender a fee equal to four percent (4%) of the face amount of the Letter of
Credit issued or renewed.
SECTION 2.5. PAYMENTS. Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Borrower of any proceeds of any of the Collateral, to the extent of
such proceeds, (ii) any draw under a Letter of Credit, to the extent provided in
Section 2.1(e) hereof, (iii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the Obligations
are accelerated, or (iv) the termination of this Agreement pursuant to Section
2.8 hereof; provided, however, that if any advance made by Lender in excess of
the Borrowing Base shall exist at any time, Borrower shall, immediately upon
demand, repay such overadvance. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month (for
the immediately preceding month), computed on the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which the Loan and the maturity of the payment of the Obligations are
accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8
hereof. Except to the extent otherwise set forth in this Agreement, all payments
of principal and of interest on the Loan, all other charges and any other
obligations of Borrower hereunder, shall be made to Lender to the Concentration
Account, in immediately available funds.
SECTION 2.6. USE OF PROCEEDS. The proceeds of Lender's advances under the Loan
shall be used solely for working capital and for other costs of Borrower arising
in the ordinary course of Borrower's business.
SECTION 2.7. INTEREST RATE LIMITATION. The parties intend to conform strictly to
the applicable usury laws in effect from time to time during the term of the
Loan. Accordingly, if any transaction contemplated hereby would be usurious
under such laws, then notwithstanding any other provision hereof: (a) the
aggregate of all interest that is contracted for, charged, or received under
this
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Agreement or under any other Loan Document shall not exceed the maximum amount
of interest allowed by applicable law, and any excess shall be promptly credited
to Borrower by Lender (or, to the extent that such consideration shall have been
paid, such excess shall be promptly refunded to Borrower by Lender); (b) neither
Borrower nor any other Person now or hereafter liable hereunder shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum interest permitted by applicable law (the "Highest Lawful Rate");
and (c) the effective rate of interest shall be reduced to the Highest Lawful
Rate. All sums paid, or agreed to be paid, to Lender for the use, forbearance,
and detention of the debt of Borrower to Lender shall, to the extent permitted
by applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed the
Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the Highest
Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful Rate
until the total amount of interest accrued equals the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect. If the total amount of interest paid
or accrued pursuant to this Agreement under the foregoing provisions is less
than the total mount of interest that would have accrued if a varying rate per
annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between (a)
the lesser of (i) the amount of interest that would have accrued if the Highest
Lawful Rate had at all times been in effect, or (ii) the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect, and (b) the amount of interest accrued
in accordance with the other provisions of this Agreement.
SECTION 2.8. TERM.
(a) Subject to Lender's right to cease making Revolving Credit Loans to
Borrower upon or after any Event of Default, this Agreement shall be in effect
for a period of three (3) years from the Closing Date, unless terminated as
provided in this Section 2.8 (the "Term"), and this Agreement may be renewed for
one-year periods thereafter upon the mutual written agreement of the parties.
(b) Upon at least thirty (30) days prior written notice to Borrower,
Lender may terminate this Agreement as of the end of the Term. In all events,
however, Lender may terminate this Agreement without notice upon or after the
occurrence of an Event of Default.
(c) Upon at least thirty (30) days prior written notice to Lender (the
"Termination Notice Period"), Borrower may terminate this Agreement before the
third annual anniversary of the Closing Date, provided that, at the effective
date of such termination, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations owing under the
terms of this Agreement and any other Loan Documents) as liquidated damages for
the loss of bargain and not as a penalty, an amount equal to (i) two percent
(2%) of the Maximum Loan Amount if the effective date of such termination by
Borrower is on or before the first annual anniversary of the Closing Date, (ii)
one percent (1%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the first annual anniversary of the Closing
Date and before the
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second annual anniversary of the Closing Date, and (iii) one percent (1%) of the
Maximum Loan Amount if the effective date of such termination by Borrower is
after the second annual anniversary of the Closing Date and before the third
annual anniversary of the Closing Date.
(d) All of the Obligations shall be immediately due and payable upon
the termination date of this Agreement (the "Termination Date"); provided that,
notwithstanding anything in Section 2.8(c) to the contrary, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the Termination Notice Period. All undertakings, agreements,
covenants, warranties, and representations of Borrower contained in the Loan
Documents shall survive any such termination and Lender shall retain its liens
in the Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds.
(e) Notwithstanding any provision of this Agreement which makes
reference to the continuance of an Event of Default, nothing in this Agreement
shall be construed to permit Borrower to cure an Event of Default following the
lapse of the applicable cure period, and Borrower shall have no such right in
any instance unless specifically granted in writing by Lender.
SECTION 2.9. Joint and Several Liability; Binding Obligations. Each entity
comprising Borrower and executing this Agreement on behalf of Borrower shall be
jointly and severally liable for all of the Obligations. In addition, each
entity comprising Borrower hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in this Agreement shall be applicable to and shall be
binding upon each individual entity comprising Borrower, and shall be binding
upon all such entities when taken together.
ARTICLE III
COLLATERAL
SECTION 3.1. GENERALLY. As security for the payment of all liabilities of
Borrower to Lender, including without limitation: (i) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, and all other
liabilities and obligations of every kind or nature whatsoever of Borrower to
Lender, whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due, including but not limited to any extensions, modifications,
substitutions, increases and renewals thereof, (ii) the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its rights
hereunder and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"), Borrower hereby assigns
and grants to Lender a continuing first priority lien on and security interest
in, upon, and to the following property (the "Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper,
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documents and instruments with respect thereto, together with all fees and other
payments due Borrower in connection with its management of nursing homes and
other healthcare facilities;
(b) All of Borrower's now owned and hereafter acquired or arising
general intangibles of every kind and description pertaining to its Accounts,
accounts receivable and other rights to payment, including, but not limited to,
all existing and future customer lists, choses in action, claims, books,
records, contracts, licenses, formulae, tax and other types of refunds, returned
and unearned insurance premiums, rights and claims under insurance policies
relating to any of the Collateral, and computer information, software, records,
and data;
(c) All of Borrower's now or hereafter acquired deposit accounts into
which Accounts are deposited, including the Lockbox Account;
(d) All of Borrower's monies and other property of every kind and
nature now or at any time or times hereafter in the possession of or under the
control of Lender or a bailee or Affiliate of Lender;
(e) All of Borrower's other general intangibles (including, without
limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names, including the right to make,
use, and vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
(f) All of Borrower's now owned or hereafter acquired inventory of
every description which is held by Borrower for sale or lease or is furnished by
Borrower under any contract of service or is held by Borrower as raw materials,
work in process or materials used or consumed in a business, wherever located,
and as the same may now and hereafter from time to time be constituted, together
with all cash and non-cash proceeds and products thereof;
(g) All of Borrower's now owned or hereafter acquired machinery,
equipment, computer equipment, tools, tooling, furniture, fixtures, goods,
supplies, materials, work in process, whether now owned or hereafter acquired,
together with all additions, parts, fittings, accessories, special tools,
attachments, and accessions now and hereafter affixed thereto and/or used in
connection therewith, all replacements thereof and substitutions therefor, and
all cash and non-cash proceeds and products thereof; and
(h) The proceeds (including, without limitation, insurance proceeds) of
all of the foregoing.
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In addition, and without in any way limiting the foregoing, the continuing first
priority lien on and security interest in, upon, and to the Collateral granted
by Borrower to Lender shall secure payment, performance and observance by New
LOC II Borrower of each covenant, condition, provision and agreement contained
in the New LOC II Agreement and related loan and security documents.
Notwithstanding anything in this Agreement to the contrary, the parties agree
that if (i) Lender has extended credit hereunder equal to the Maximum Loan
Amount, and (ii) thereafter Borrower receives an offer, term sheet or commitment
(for purposes of the Section, an "Offer") from any Person to provide permanent,
long term, short term or any other financing (for purposes of this Section,
"Additional Financing") with respect to Borrower, Borrower shall first forward
the Offer to the Lender, and the Lender shall have thirty (30) days after
receipt (the "Option Period") to agree to provide the Additional Financing in
place of such third party upon the terms and conditions set forth in the Offer
and to notify Borrower in writing of the Lender's acceptance of the Offer (the
"Acceptance Notice"). If Borrower has not received an Acceptance Notice within
the Option Period, then Borrower shall be free to consummate the transaction
described in the Offer with the third party providing the Offer (the
"Transaction"), provided that (a) any liens on Collateral granted to such third
party shall be generated solely and exclusively through the operation of one or
more nursing homes or other healthcare facilities not owned, operated or managed
by any of the entities comprising Borrower as of the Closing Date, and (b)
Lender shall obtain signed documentation from such third party financing source
confirming (in form and substance satisfactory to Lender, in its sole
discretion) that such third party has no security interest in any of the
Collateral generated at any nursing home or other healthcare facility owned,
operated or managed by any of the entities comprising Borrower as of the Closing
Date. If the Transaction is not consummated with such third party during the
longer of (i) the one hundred twenty (120) day period following the expiration
of the Option Period, and (ii) the period (if any) proposed in the Offer for
completion of the Transaction, then Borrower shall not be permitted to
consummate the Transaction without again complying with this Section. For
purposes of this Section only, the "Lender" shall mean and include either of
HCFP Funding, Inc., HCFP Funding II, Inc., HealthCare Financial Partners REIT, a
Maryland corporation, or any other parent company, subsidiary or Affiliate of
HCFP Funding, Inc. or the parent company or subsidiaries of any of such
entities.
SECTION 3.2. LIEN DOCUMENTS. At Closing and thereafter as Lender deems necessary
in its sole discretion, Borrower shall execute and deliver to Lender, or have
executed and delivered (all in form and substance satisfactory to Lender in its
sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform Commercial Code
in effect in the jurisdictions in which Borrower operates, which Lender may file
in any State where any Collateral is or may be located and in any other
jurisdiction that Lender deems appropriate; provided that a carbon,
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement;
(b) Any other agreements, documents, instruments, and writings deemed
necessary by Lender or as Lender may otherwise request from time to time in its
reasonable discretion to evidence, perfect, or protect Lender's liens and
security interests in the Collateral required hereunder.
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SECTION 3.3. COLLATERAL ADMINISTRATION.
(a) All Collateral (except deposit accounts) will at all times be kept
by Borrower at its principal office(s) as set forth on Schedule 4.15 hereto and
shall not, without the prior written approval of Lender, be moved therefrom.
(b) Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit to Lender on such
periodic basis as Lender shall request a sales and collections report for the
preceding period, in form satisfactory to Lender. In addition, if Accounts in an
aggregate face amount in excess of $50,000.00 become ineligible because they
fall within one of the specified categories of ineligibility set forth in the
definition of Qualified Accounts or otherwise, Borrower shall notify Lender of
such occurrence on the first Business Day following such occurrence (or
immediately upon Borrower's preparation of a monthly aging schedule if the
reason for ineligibility is that the Account has remained unpaid for longer than
the applicable period for Qualified Accounts), and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of claims,
invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
the validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Lender. Lender retains the right
at all times after the occurrence and during the continuance of an Event of
Default, subject to applicable law regarding Medicaid/Medicare Account Debtors,
to notify Account Debtors that Accounts have been assigned to Lender and to
collect Accounts directly in its own name and to charge the collection costs and
expenses, including attorneys' fees to Borrower.
SECTION 3.4. OTHER ACTIONS. In addition to the foregoing, Borrower (i) shall
provide prompt written notice to each private indemnity, managed care or other
Insurer who either is currently an Account Debtor or becomes an Account Debtor
at any time following the date hereof that the Lender has been granted a first
priority lien and security interest in, upon and to all Accounts applicable to
such Insurer, and hereby authorizes Lender to send any and all similar notices
to such Insurers by Lender, and (ii) shall do anything further that may be
lawfully required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including but not limited to the execution and
delivery of lockbox agreements, continuation statements, amendments to financing
statements, and any other documents required hereunder. At Lender's request,
Borrower shall also immediately deliver to Lender all items for which Lender
must receive possession to obtain a perfected security interest. Borrower shall,
on Lender's demand, deliver to Lender all notes, certificates, and documents
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of title, chattel paper, warehouse receipts, instruments, and any other similar
instruments constituting Collateral.
SECTION 3.5. SEARCHES. Prior to Closing, and thereafter (as and when requested
by Lender in its reasonable discretion), Borrower shall obtain and deliver to
Lender the following searches against Borrower (the results of which are to be
consistent with Borrower's representations and warranties under this Agreement),
all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of State and
local filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate tax lien searches, in each
jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good standing
in its state of formation and in each other state in which it is doing and
presently intends to do business for which qualification is required.
SECTION 3.6. POWER OF ATTORNEY. To the extent permitted by applicable bankruptcy
law, each of the officers of Lender is hereby, or, if required, upon application
to the bankruptcy court, may be, irrevocably made, constituted and appointed the
true and lawful attorney for Borrower (without requiring any of them to act as
such) with full power of substitution to do the following: (a) endorse the name
of Borrower upon any and all checks, drafts, money orders, and other instruments
for the payment of money that are payable to Borrower and constitute collections
on Borrower's Accounts; (b) execute in the name of Borrower any financing
statements, schedules, assignments, instruments, documents, and statements that
Borrower is obligated to give Lender hereunder; and (c) do such other and
further acts and deeds in the name of Borrower that Lender may deem necessary or
desirable to enforce any Account or other Collateral or perfect Lender's
security interest or lien in any Collateral. In addition, if Borrower breaches
its obligation to direct payments of the proceeds of the Collateral to the
Lockbox Account, Lender, as the irrevocably made, constituted and appointed true
and lawful attorney for Borrower pursuant to this paragraph, may, by the
signature or other act of any of Lender's officers (without requiring any of
them to do so), direct any federal, state or private payor or fiscal
intermediary to pay proceeds of the Collateral to Borrower by directing payment
to the Lockbox Account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower, jointly and severally, represents and
warrants to Lender, and shall be deemed to represent and warrant on each day on
which any Obligations shall be outstanding hereunder, that:
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SECTION 4.1. SUBSIDIARIES. Except as set forth in Schedule 4.1, Borrower has no
subsidiaries.
SECTION 4.2. ORGANIZATION AND GOOD STANDING. Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation, is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it therein or the
nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses and qualifications required
under all laws, regulations, ordinances, or orders of public authorities
necessary for the ownership and operation of all of its properties and
transaction of all of its business.
SECTION 4.3. AUTHORITY. Borrower has full corporate power and authority to enter
into, execute, and deliver this Agreement and to perform its obligations
hereunder, to borrow the Loan, to execute and deliver the Note, and to incur and
perform the obligations provided for in the Loan Documents, all of which have
been duly authorized by all necessary corporate action. No consent or approval
of shareholders of, or lenders to, Borrower and no consent, approval, filing or
registration with any Governmental Authority is required as a condition to the
validity of the Loan Documents or the performance by Borrower of its obligations
thereunder.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan Documents
constitute, and the Note, when issued and delivered pursuant hereto for value
received, will constitute, the valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
SECTION 4.5. LITIGATION. Except as disclosed in Schedule 4.5, there are no
actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of the Borrower, could have a material adverse effect on the
business, properties, condition (financial or otherwise) or operations, present
or prospective, of Borrower, or upon its ability to perform its obligations
under the Loan Documents. Borrower is not in default with respect to any order
of any court, arbitrator, or Governmental Authority applicable to Borrower or
its properties.
SECTION 4.6. NO CONFLICTS. Except as disclosed in Schedule 4.6, the execution
and delivery by Borrower of this Agreement and the other Loan Documents do not,
and the performance of its obligations thereunder will not, violate, conflict
with, constitute a default under, or result in the creation of a lien or
encumbrance upon the property of Borrower under: (a) any provision of Borrower's
articles of incorporation or its bylaws, (b) any provision of any law, rule, or
regulation applicable to Borrower, or (c) any of the following: (i) any lease,
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound; or (ii) any judgment, order or decree
of any court, arbitration tribunal, or Governmental Authority having
jurisdiction over Borrower which is applicable to Borrower.
SECTION 4.7. FINANCIAL CONDITION. The audited financial statements of Unison
Healthcare Corporation and its subsidiaries (including the entities comprising
the Borrower) (collectively, the "Consolidated Company") as of December 31,
1997, certified by Ernst & Young, and the unaudited
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financial statements of the Consolidated Company as of November 30, 1998,
certified by an officer of the Consolidated Company, which have been delivered
to Lender, fairly present the financial condition of the Consolidated Company
and the results of its operations and changes in financial condition as of the
dates and for the periods referred to, and have been prepared in accordance with
GAAP. There are no material unrealized or anticipated liabilities, direct or
indirect, fixed or contingent, of the Consolidated Company as of the dates of
such financial statements which are not reflected therein or in the notes
thereto, except as otherwise disclosed in the disclosure statement with respect
to the Reorganization Plan filed by the Debtors in the Bankruptcy Cases. The
Consolidated Company's fiscal year ends on December 31. The federal tax
identification numbers for the entities comprising the Borrower are listed on
Schedule 4.7.
SECTION 4.8. NO DEFAULT. Except as disclosed in Schedule 4.6, Borrower is not in
default under or with respect to any obligation in any respect which could be
adverse to its business, operations, property or financial condition, or which
could adversely affect the ability of Borrower to perform its obligations under
the Loan Documents. No Event of Default or event which, with the giving of
notice or lapse of time, or both, could become an Event of Default, has occurred
and is continuing.
SECTION 4.9. TITLE TO PROPERTIES. Borrower has good and marketable title to its
properties and assets, including the Collateral and the properties and assets
reflected in the financial statements described in Section 4.7, subject to no
lien, mortgage, pledge, encumbrance or charge of any kind, other than Permitted
Liens. Borrower has not agreed or consented to cause any of its properties or
assets whether owned now or hereafter acquired to be subject in the future (upon
the happening of a contingency or otherwise) to any lien, mortgage, pledge,
encumbrance or charge of any kind other than Permitted Liens.
SECTION 4.10. TAXES. Except as disclosed on Schedule 4.10, Borrower has filed,
or has obtained extensions for the filing of, all federal, state and other tax
returns which are required to be filed, and has paid all taxes shown as due on
those returns and all assessments, fees and other amounts due as of the date
hereof. All tax liabilities of Borrower were, as of November 30, 1998, and are
now, adequately provided for on Borrower's books. No tax liability has been
asserted by the Internal Revenue Service or other taxing authority against
Borrower for taxes in excess of those already paid.
SECTION 4.11. SECURITIES AND BANKING LAWS AND REGULATIONS.
(a) The use of the proceeds of the Loan and Borrower's issuance of the
Note will not directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including without limitation
Regulations U, T, G, or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
(b) Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
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SECTION 4.12. ERISA. No employee benefit plan (a "Plan") subject to the Employee
Retirement Income Security Act of 1974 ("ERISA") and regulations issued pursuant
thereto that is maintained by Borrower or under which Borrower could have any
liability under ERISA (a) has failed to meet minimum funding standards
established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable rulings and regulations thereunder, (c) has engaged in or been
involved in a prohibited transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not assumed,
or received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when due
all contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
SECTION 4.13. COMPLIANCE WITH LAW. Except as described in Schedule 4.13,
Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses, permits,
franchises, and other governmental authorizations necessary for the ownership of
its properties and the conduct of its business. Borrower is current with all
reports and documents required to be filed with any state or federal securities
commission or similar Governmental Authority and is in full compliance with all
applicable rules and regulations of such commissions.
SECTION 4.14. ENVIRONMENTAL MATTERS. No use, exposure, release, generation,
manufacture, storage, treatment, transportation or disposal of Hazardous
Material has occurred or is occurring on or from any real property on which the
Collateral is located or which is owned, leased or otherwise occupied by
Borrower (the "Premises"), or off the Premises as a result of any action of
Borrower, except as described in Schedule 4.14. All Hazardous Material used,
treated, stored, transported to or from, generated or handled on the Premises,
or off the Premises by Borrower, has been disposed of on or off the Premises by
or on behalf of Borrower in a lawful manner. There are no underground storage
tanks present on or under the Premises owned or leased by Borrower. No other
environmental, public health or safety hazards exist with respect to the
Premises.
SECTION 4.15. PLACES OF BUSINESS. The only places of business of Borrower, and
the places where it keeps and intends to keep the Collateral and records
concerning the Collateral, are at the addresses set forth in Schedule 4.15.
Schedule 4.15 also lists the owner of record of each such property.
SECTION 4.16. INTELLECTUAL PROPERTY. Borrower exclusively owns or possesses all
the patents, patent applications trademarks trademark applications, service
marks, trade names, copyrights, franchises, licenses, and rights with respect to
the foregoing necessary for the present and planned future conduct of its
business, without any conflict with the rights of others. A list of all such
intellectual property (indicating the nature of Borrower's interest), as well as
all outstanding franchises and licenses given by or held by Borrower, is
attached as Schedule 4.16. Borrower is not in default of any obligation or
undertaking with respect to such intellectual property or rights.
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SECTION 4.17. STOCK OWNERSHIP. The identity of the stockholders of all classes
of the outstanding stock of each entity comprising Borrower, together with the
respective ownership percentages held by such stockholders, are as set forth on
Schedule 4.17.
SECTION 4.18. MATERIAL FACTS. Neither this Agreement nor any other Loan Document
nor any other agreement, document, certificate, or statement furnished to Lender
by or on behalf of Borrower in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to Borrower that adversely
affects or in the future may adversely affect the business, operations, affairs
or financial condition of Borrower, or any of its properties or assets.
SECTION 4.19. INVESTMENTS, GUARANTEES, AND CERTAIN CONTRACTS. Borrower does not
own or hold any equity or long-term debt investments in, have any outstanding
advances to, have any outstanding guarantees for the obligations of, or have any
outstanding borrowings from, any Person, except as described on Schedule 4.19.
Borrower is not a party to any contract or agreement, or subject to any charter
or other corporate restriction, which adversely affects its business.
SECTION 4.20. BUSINESS INTERRUPTIONS. Within five years prior to the date
hereof, neither the business, property or assets, or operations of Borrower has
been adversely affected in any way by any casualty, strike, lockout, combination
of workers, or order of the United States of America or other Governmental
Authority, directed against Borrower. There are no pending or threatened labor
disputes, strikes, lockouts, or similar occurrences or grievances against
Borrower or its business.
SECTION 4.21. NAMES. Within five years prior to the date hereof, Borrower has
not conducted business under or used any other name (whether corporate or
assumed) other than as shown on Schedule 4.21. Borrower is the sole owner of all
names listed on that Schedule and any and all business done and invoices issued
in such names are Borrower's sales, business, and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate
corporate subsidiary or independent Affiliate.
SECTION 4.22 JOINT VENTURES. Borrower is not engaged in any joint venture or
partnership with any other Person, except as set forth on Schedule 4.22.
SECTION 4.23 ACCOUNTS. Lender may rely, in determining which Accounts are
Qualified Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be, and is
not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery of (or,
in the case of an Account relating to individual recipients of Medical Services,
a bona fide pre-billing for) goods or rendition of services by Borrower in the
ordinary course of its business and in accordance with the
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terms and conditions of all purchase orders, contracts, certification,
participation, certificate of need, or other documents relating thereto and
forming a part of the contract between Borrower and Account Debtor (provided,
however, that in the case only of pre-billed Accounts to individual recipients
of Medical Services covered by such Account, the services will be rendered in
full within thirty (30) days following the claim or invoice date);
(c) It is for a liquidated amount maturing as stated in a duplicate
claim or invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender (or in the case only of Accounts
owed by Medicaid/Medicare Account Debtors, Borrower has furnished Lender with
evidence reasonably satisfactory to Lender that the Medical Services have been
rendered but have not yet been invoiced solely as a result of applicable
Medicaid/Medicare billing procedures);
(d) Such Account, and Lender's security interest therein, is not, and
will not (by voluntary act or omission by Borrower), be in the future, subject
to any offset, lien, deduction, defense, dispute, counterclaim or any other
adverse condition, and each such Account is absolutely owing to Borrower and is
not contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way impair
the validity or enforceability of any Accounts or tend to reduce the amount
payable thereunder from the face amount of the claim or invoice and statements
delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, the Account Debtor thereunder
(i) had the capacity to contract at the time any contract or other document
giving rise to the Account was executed and (ii) such Account Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectibility of such Account;
(h) It has been billed and forwarded to the Account Debtor for payment
in accordance with applicable laws and compliance and conformance with any and
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account (or in the case only of Accounts
owed by Medicaid/Medicare Account Debtors, Borrower has furnished Lender with
evidence reasonably satisfactory to Lender that the Medical Services have been
rendered but have not yet been invoiced solely as a result of applicable
Medicaid/Medicare billing procedures), and such Account if due from a
Medicaid/Medicare Account Debtor is properly payable directly to Borrower; and
(i) Borrower has obtained and currently has all certificates of need,
Medicaid and Medicare provider numbers, licenses, permits and authorizations as
necessary in the generation of such Accounts.
SECTION 4.24. SOLVENCY. Both before and after giving effect to the transactions
contemplated by the terms and provisions of this Agreement (and following the
effective date of the Reorganization
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Plan): (i) Borrower (taken as a whole) owns property whose fair saleable value
is greater than the amount required to pay all of Borrower's Indebtedness
(including contingent debts), (ii) Borrower (taken as a whole) was and is able
to pay all of its Indebtedness as such Indebtedness matures, and (iii) Borrower
(taken as a whole) had and has capital sufficient to carry on its business and
transactions and all business and transactions in which it about to engage. For
purposes hereof, the term "Indebtedness" means, without duplication (x) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Borrower
as of the date on which Indebtedness is to be determined, (y) all obligations of
any other person or entity which such Borrower has guaranteed, and (z) the
Obligations.
SECTION 4.25. NO APPROVALS, ETC. No approval, authorization, bond, consent,
certificate, franchise, license, permit, registration, qualification, or other
action or grant by or filing with any Governmental Authority or other Person is
required in connection with the execution, delivery, or performance (other than
performance which is not yet due) by any Borrower of the Loan Documents.
SECTION 4.26. PURPOSE OF ADVANCES. The purpose of each advance under the Loan
is a business purpose, and the proceeds of each advance will be used solely for
working capital and for other costs of Borrower arising in the ordinary course
of Borrower's business.
SECTION 4.27. APPROVALS AND PERMITS; ASSETS AND PROPERTY. To the best knowledge
of Borrower, Borrower has obtained and there are in full force and effect all
approvals and permits presently necessary for the conduct of the business of
each Borrower, and each Borrower owns, leases, or licenses all assets and
property necessary for conduct of the business and operations of such Borrower,
except as otherwise permitted pursuant to this Agreement, except for any failure
to own, lease or license such assets and property that would not, individually
or in the aggregate, be materially adverse to the business, properties, assets,
operations, prospects, or condition (financial or otherwise) of Borrower.
SECTION 4.28. GOVERNMENTAL REGULATION. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, and
Investment Company Act of 1940, the Interstate Commerce Act (as any of the
preceding have been amended), or any other law which regulates the incurring by
Borrower of indebtedness, including but not limited to laws relating to common
or contract carriers or the sale of electricity, gas, steam, water, or other
public utility services.
SECTION 4.29. YEAR 2000 COMPLIANCE. Borrower will use its best efforts to
insure that all devices, systems, machinery, information technology, computer
software and hardware, and other date sensitive technology (jointly and
severally, the "Systems") necessary for Borrower to carry on its business as
presently conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time calculated
to result in no material disruption of any of Borrower's business operations.
For purposes of these provisions, "Year 2000 Compliant" means that such Systems
are designed to be used prior to, during and after the Gregorian calendar year
2000 A.D. and will operate during each such time period without error relating
to date data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century.
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ARTICLE V
CLOSING AND CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO AGREEMENT. The obligation of Lender to
enter into and perform this Agreement and to make Revolving Credit Loans is
subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this Agreement and
all other Loan Documents required to be executed and delivered at or prior to
Closing (other than the Note, as to which Lender shall receive only one
original), executed by Borrower and any other required Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by section 3.5.
(c) Borrower shall have complied and shall then be in compliance with
all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event which,
with the giving of notice or the lapse of time, or both, could constitute such
an Event of Default.
(e) The representations and warranties contained in Article IV shall be
true and correct.
(f) Lender shall have received copies of all board of directors
resolutions and other corporate action taken by Borrower to authorize the
execution, delivery and performance of the Loan Documents and the borrowing of
the Loan thereunder, as well as the names and signatures of the officers of
Borrower authorized to execute documents on its behalf in connection herewith,
all as also certified as of the date hereof by an officer of Borrower, and such
other papers as Lender may require.
(g) Lender shall have received copies, certified as true, correct and
complete by a corporate officer of Borrower, of the articles of incorporation
and bylaws of Borrower, with any amendments thereto, and all other documents
necessary for performance of the obligations of Borrower under this Agreement
and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, substantially in the form of Exhibit C.
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered
hereunder, including without limitation an initial borrowing base certificate
calculating the Borrowing Base.
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(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been
established.
(l) INTENTIONALLY OMITTED.
(m) Lender shall have received a certificate of Borrower's chief
financial officer, dated the Closing Date, certifying that (i) all of the
conditions specified in this Section have been fulfilled, (ii) no Event of
Default has occurred, and that no event has occurred which, with the giving of
notice or the lapse of time, or both, could constitute an Event of Default, and
(iii) the representations and warranties contained in Article IV are true and
correct.
(n) Lender shall have received copies of certificates of insurance that
show that the insurance requirements stated in Section 6.7 of this Agreement
have been satisfied, and that the insurance is in full force and effect.
SECTION 5.2. CONDITIONS PRECEDENT TO ADVANCES. Notwithstanding any other
provision of this Agreement, no Loan proceeds, Revolving Credit Loans, advances
or other extensions of credit under the Loan shall be disbursed hereunder unless
the following conditions have been satisfied or waived immediately prior to such
disbursement:
(a) Lender shall have received from Borrower a Borrowing Base Report
and Compliance Certificate in a form acceptable to Lender in its sole
discretion.
(b) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the
then most recent annual and interim financial statements of Borrower furnished
to Lender pursuant to Section 6.1 hereof).
(c) No Event of Default or event which, with the giving of notice of
the lapse of time, or both, could become an Event of Default shall have occurred
and be continuing or would result from the making of the disbursement or
advance.
(d) No adverse change in the condition (financial or otherwise),
properties, business, or operations of Borrower shall have occurred and be
continuing with respect to Borrower since the date hereof.
(e) Borrower shall have used its best efforts to obtain and provide to
Lender an estoppel certificate substantially in the form of Exhibit D attached
hereto from Borrower's landlord or sublandlord, as the case may be, with respect
to each of the facilities identified on Schedule 4.15.
SECTION 5.3. CLOSING. Subject to the conditions of this Article V, the Loan
shall be made available on the date as is mutually agreed by the parties (the
"Closing Date") at such time as may by mutually
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agreeable to the parties upon the execution hereof (the "Closing") at such place
as may be requested by Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing hereunder, or by making
advances under the Loan, Lender does not waive a breach of any representation or
warranty of Borrower hereunder or under any other Loan Document, and all of
Lender's claims and rights resulting from any breach or misrepresentation by
Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents:
SECTION 6.1. FINANCIAL STATEMENTS AND COLLATERAL REPORTS. Borrower will furnish
to Lender (a) a sales and collections report and accounts receivable aging
schedule on a form acceptable to Lender within fifteen (15) days after the end
of each calendar month; (b) payable aging schedules within fifteen (15) days
after the end of each calendar month; (c) internally prepared monthly financial
statements for the Consolidated Company (as such term is defined in Section
4.7), certified by a duly authorized officer of Borrower, within forty-five (45)
days of the end of each calendar month; (d) quarterly financial statements for
the Consolidated Company on Form 10-Q, certified by a duly authorized officer of
Borrower, within forty-five (45) days of the end of each fiscal quarter of
Borrower; (e) to the extent prepared by Borrower, annual projections, profit and
loss statements, balance sheets, and cash flow reports (prepared on a monthly
basis) for the succeeding fiscal year within thirty (30) days before the end of
each of Borrower's fiscal years; (f) internally prepared annual financial
statements for Borrower within sixty (60) days after the end of each of
Borrower's fiscal years; (g) annual audited financial statements for the
Consolidated Company prepared by Ernst & Young or a firm of independent public
accountants satisfactory to Lender, within ninety (90) days after the end of
each of Borrower's fiscal years; (h) promptly upon receipt thereof, copies of
any reports submitted to Borrower by independent accountants in connection with
any interim audit of the books of Borrower and copies of each management control
letter provided to Borrower by independent accountants; (i) as soon as
available, copies of all financial statements and notices provided by Borrower
to all of its stockholders; and (j) such additional information, reports or
statements as Lender may from time to time request. Annual financial statements
shall set forth in comparative form figures for the corresponding periods in the
prior fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
SECTION 6.2. PAYMENTS HEREUNDER. Borrower will make all payments of principal,
interest, fees, and all other payments required hereunder, under the Loan, and
under any other agreements with Lender to which Borrower is a party, as and when
due.
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SECTION 6.3. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS. Borrower will
do or cause to be done all things necessary (a) to obtain and keep in full force
and effect all corporate existence, rights, licenses, privileges, and franchises
of Borrower necessary to the ownership of its property or the conduct of its
business, and comply with all applicable present and future laws, ordinances,
rules, regulations, orders and decrees of any Governmental Authority having or
claiming jurisdiction over Borrower; and (b) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law or
by Section 6.7 hereof.
SECTION 6.4. LEGALITY. The making of the Loan and each disbursement or advance
under the Loan shall not be subject to any penalty or special tax, shall not be
prohibited by any governmental order or regulation applicable to Borrower, and
shall not violate any rule or regulation of any Governmental Authority, and
necessary consents, approvals and authorizations of any Governmental Authority
to or of any such disbursement or advance shall have been obtained.
SECTION 6.5. LENDER'S SATISFACTION. All instruments and legal documents and
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Lender and its counsel, and
Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
SECTION 6.6. TAXES AND CHARGES. Borrower will timely file all tax reports and
pay and discharge all post-petition taxes, assessments and governmental charges
or levies imposed upon Borrower, or its income or profits or upon its properties
or any part thereof, before the same shall be in default and prior to the date
on which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the properties or any part thereof of Borrower; provided, however, that the
Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith and by appropriate
proceedings by Borrower, and the Borrower shall have set aside on their books
adequate reserve therefor; and provided further, that such deferment of payment
is permissible only so long as Borrower's title to, and its right to use, the
Collateral is not adversely affected thereby and Lender's lien and priority on
the Collateral are not adversely affected, altered or impaired thereby.
SECTION 6.7. INSURANCE. Borrower will carry adequate public liability and
professional liability insurance with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area,
including without limitation insurance on the Collateral covering such risks and
in such form and amount as may be required by Lender from time to time, with
loss payable to Lender as its interests may appear. Upon request, Borrower will
deliver certificates of insurance regarding such insurance, or copies of the
insurance policy or policies, to Lender.
SECTION 6.8. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and
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permit any officer, employee or agent of Lender to visit and inspect any of the
properties, to examine the minute books, books of account and other records,
including management letters prepared by Borrower's auditors, of Borrower, and
make copies thereof or extracts therefrom, and to discuss its and their business
affairs, finances and accounts with, and be advised as to the same by, the
accountants and officers of Borrower, all at such times and as often as Lender
may require.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower will maintain, keep and preserve
all of its properties in good repair, working order and condition and from time
to time make all needful and proper repairs, renewals, replacements, betterments
and improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
Borrower promptly will notify Lender upon the occurrence of: (a) any Event of
Default; (b) any event which, with the giving of notice or lapse of time, or
both, could constitute an Event of Default; (c) any event, development or
circumstance whereby the financial statements previously furnished to Lender
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operational results of Borrower; (d) any judicial,
administrative or arbitration proceeding pending against Borrower, and any
judicial or administrative proceeding known by Borrower to be threatened against
it which, if adversely decided, could adversely affect its condition (financial
or otherwise) or operations (present or prospective) or which may expose
Borrower to uninsured liability of $25,000.00 or more; (e) any default claimed
by any other creditor for borrowed money of Borrower other than Lender, or any
lessor; and (f) any other development in the business or affairs of Borrower
which may be materially adverse; in each case describing the nature thereof and
(in the case of notification under clauses (a) and (b)) the action Borrower
proposes to take with respect thereto.
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower will (a) comply with the funding
requirements of ERISA with respect to the Plans for its employees, or will
promptly satisfy any accumulated funding deficiency that arises under Section
302 of ERISA; (b) furnish Lender, promptly after filing the same, with copies of
all reports or other statements filed with the United States Department of
Labor, the Pension Benefit Guaranty Corporation, or the Internal Revenue Service
with respect to all Plans, or which Borrower, or any member of a Controlled
Group, may receive from such Governmental Authority with respect to any such
Plans, and (c) promptly advise Lender of the occurrence of any Reportable Event
or Prohibited Transaction with respect to any such Plan and the action which
Borrower proposes to take with respect thereto. Borrower will make all
contributions when due with respect to any multi-employer pension plan in which
it participates and will promptly advise Lender: (a) upon its receipt of notice
of the assertion against Borrower of a claim for withdrawal liability; (b) upon
the occurrence of any event which could trigger the assertion of a claim for
withdrawal liability against Borrower; and (c) upon the occurrence of any event
which would place Borrower in a Controlled Group as a result of which any member
(including Borrower) thereof may be subject to a claim for withdrawal liability,
whether liquidated or contingent.
SECTION 6.12. FINANCING STATEMENTS. Borrower shall provide to Lender evidence
satisfactory to Lender as to the due recording of termination statements,
releases of collateral, and Forms UCC-2 and UCC-3 (as applicable), and shall
cause to be recorded financing statements on Form UCC-1 and/or UCC-3, duly
executed by Borrower and Lender, in all places necessary to release all existing
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security interests and other liens in the Collateral (other than as permitted
hereby) and to perfect and protect Lender's first priority lien and security
interest in the Collateral, as Lender may request.
SECTION 6.13. FINANCIAL RECORDS. Borrower shall keep current and accurate books
of records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP.
SECTION 6.14. COLLECTION OF ACCOUNTS. Borrower shall continue to collect its
Accounts in the ordinary course of business.
SECTION 6.15. PLACES OF BUSINESS. Borrower shall give thirty (30) days' prior
written notice to Lender of any change in the location of any of its places of
business, of the places where its records concerning its Accounts are kept, of
the places where the Collateral is kept, or of the establishment of any new, or
the discontinuance of any existing, places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the business
presently conducted by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any line of
business substantially different from the business conducted by it immediately
prior to the Closing Date, or engage in business or lines of business which are
not reasonably related thereto.
SECTION 6.17. LITIGATION AND OTHER PROCEEDINGS. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
court, arbitrator (or arbitration panel), or Governmental Authority against or
affecting Borrower if the amount claimed is more than $50,000.00.
SECTION 6.18. BANK ACCOUNTS. Borrower shall assign all of its depository (which
shall not include Borrower's operating account) and disbursement accounts to
Lender.
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. Borrower will, on demand of
Lender, make available to Lender copies of shipping and delivery receipts
evidencing the shipment of goods that gave rise to an Account, medical records,
insurance verification forms, assignment of benefits, in-take forms or other
proof of the satisfactory performance of services that gave rise to an Account,
a copy of the claim or invoice for each Account and copies of any written
contract or order from which the Account arose. Borrower shall promptly notify
Lender if an Account becomes evidenced or secured by an instrument or chattel
paper and upon request of Lender, will promptly deliver any such instrument or
chattel paper to Lender.
SECTION 6.20. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower will maintain
all certificates of need, provider numbers and licenses necessary to conduct its
business as presently conducted, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and services. If required, all Medicaid/Medicare costs reports will be
properly filed.
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SECTION 6.21. OFFICER'S CERTIFICATES. Together with the monthly financial
statements delivered pursuant to clause (c) of Section 6.1, and together with
the audited annual financial statements delivered pursuant to clause (g) of that
Section, Borrower shall deliver to Lender a certificate of a duly authorized
officer in form and substance satisfactory to Lender setting forth:
(a) The information (including detailed calculations), to the best of
Borrower's knowledge, required in order to establish whether Borrower is in
compliance with the requirements of Articles VI and VII as of the end of the
period covered by the financial statements then being furnished; and
(b) That the signer has reviewed the relevant terms of this Agreement,
and has made (or caused to be made under his supervision) a review of the
transactions and conditions of Borrower from the beginning of the accounting
period covered by the income statements being delivered to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or which
is then, or with the passage of time or giving of notice or both, could become
an Event of Default, and if any such condition or event existed during such
period or now exists, specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.
SECTION 6.22. VISITS AND INSPECTIONS. Borrower will permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the properties of Borrower,
and to inspect, audit and make extracts from its books and records, and discuss
with its officers, its employees and its independent accountants, Borrower's
business, assets, liabilities, financial condition, business prospects and
results of operations. All inspections by representatives of Lender are for the
sole purpose of protecting the rights and interests of Lender and are not to be
construed as a representation by Lender that there has been compliance with any
of the requirements of this Agreement. Borrower may make or cause to be made
such other independent inspections as Borrower may desire for its own
protection.
SECTION 6.23. DEFENSE OF TITLE.
(a) Borrower will defend the Collateral and the title and interest
therein of Borrower against all matters, including, without limitation, (a) any
attachment, levy, or other seizure by legal process or otherwise of any or all
the Collateral; (b) any lien or encumbrance or claim thereof on any or all of
the Collateral; and (c) any attempt to foreclose or otherwise realize upon any
or all of the Collateral under any lien or encumbrance. Borrower will notify
Lender promptly in writing of any of the foregoing and will provide such
information with respect thereto as Lender may from time to time request.
(b) Borrower will defend all assets other than Collateral and the title
and interest therein of Borrower against all matters, including, without
limitation, (a) any attachment, levy, or other seizure by legal process or
otherwise of any or all of such assets; (b) any lien or encumbrance or claim
thereof on any or all of such assets; and (c) any attempt to foreclose, conduct
a trustee's sale, or otherwise realize upon any or all of such assets under any
lien or encumbrance or claim thereof
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on any of all of such assets. Borrower will notify Lender promptly in writing of
any of the foregoing and will provide such information with respect thereto as
Lender may from time to time request.
SECTION 6.24. YEAR 2000 COMPLIANCE. Borrower covenants and agrees with Lender
that, while any Loan Document is in effect, Borrower will furnish such
additional information, statements and other reports with respect to Borrower's
activities, course of action and progress towards becoming Year 2000 Compliant
as Lender may request from time to time.
ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees that so long as Borrower may borrow hereunder
and until payment in full of the Note and performance of all other obligations
of the Borrower under the Loan Documents:
SECTION 7.1. BORROWING. Borrower will not create, incur, assume or suffer to
exist any liability for Borrowed Money except: (i) indebtedness to Lender; (ii)
indebtedness of Borrower secured by mortgages, encumbrances or liens expressly
permitted by Section 7.3 hereof; (iii) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged
more than one hundred twenty (120) days from the billing date or more than
thirty (30) days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are being
contested in good faith and by appropriate and lawful proceedings, and Borrower
shall have set aside such reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by Borrower and its independent accountants; and
(iv) borrowings incurred in the ordinary course of its business and not
exceeding $250,000.00 in the aggregate outstanding at any one time. Borrower
will not make prepayments on any existing or future indebtedness for Borrowed
Money to any Person (other than Lender, to the extent permitted by this
Agreement or any subsequent agreement between Borrower and Lender).
SECTION 7.2. JOINT VENTURES. Borrower will not invest directly or indirectly in
any joint venture for any purpose without the prior written notice to, and the
express written consent of, Lender, which consent may be withheld in Lender's
sole discretion.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower will not create, incur, assume or
suffer to exist any mortgage, pledge, lien or other encumbrance of any kind
(including the charge upon property purchased under a conditional sale or other
title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except as described on
Schedule 1.36 and Schedule 4.19.
SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES. Borrower will not (a) enter
into any merger or consolidation with any Person without the prior written
consent of the Lender, which consent shall not be unreasonably withheld, (b)
acquire all or substantially all of the assets of any Person, unless such
acquisition is done for a commercially reasonable price, and with the purpose of
expanding
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Borrower's existing business or entering into new businesses that are reasonably
related to Borrower's existing business, or (c) sell, lease, or otherwise
dispose of any of its assets except in the ordinary course of its business (such
prohibition to include, without limitation, the transfer of any nursing home or
other healthcare facility from any entity comprising Borrower to any other
entity comprising Borrower or any other Affiliate of Unison Healthcare
Corporation) without the prior written consent of the Lender, which consent
shall not be unreasonably withheld. Consistent with the foregoing, until the
Obligations are repaid in full none of the entities comprising Borrower shall
transfer, assign, convey or grant to any other Person the right to operate or
control any of the nursing homes listed on Schedule 4.15, whether by lease,
sublease, management agreement, joint venture agreement or otherwise.
SECTION 7.5. SALE AND LEASEBACK. Except to the extent permitted by Section 7.1,
Borrower will not, directly or indirectly, enter into any arrangement whereby
Borrower sells or transfers all or any part of its assets and thereupon and
within one year thereafter rents or leases the assets so sold or transferred
without the prior written notice to, and the express written consent of, Lender,
which consent may be withheld in Lender's sole discretion.
SECTION 7.6. DIVIDENDS AND MANAGEMENT FEES. Except under the circumstances
described in Schedule 7.6, Borrower will not declare or pay any dividends,
purchase, redeem or otherwise acquire for value any of its outstanding stock, or
return any capital of its stockholders, nor shall Borrower pay or become
obligated to pay management fees or fees of a similar nature to any Person;
provided, however, that so long as no Event of Default has occurred hereunder,
Borrower may make any such dividends or purchase, redeem or otherwise acquire
such outstanding stock, return any such capital, or pay any such management
fees, so long as doing so would not violate any of the other terms and
conditions of this Agreement.
SECTION 7.7. LOANS. Borrower will not make loans or advances to any Person,
other than (i) trade credit extended in the ordinary course of its business,
(ii) advances for business travel and similar temporary advances in the ordinary
course of business to officers, stockholders, directors, and employees, or (iii)
loans or advances in the ordinary course of business from one entity comprising
Borrower to another entity comprising Borrower.
SECTION 7.8. CONTINGENT LIABILITIES. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except (a) for guarantees of indebtedness otherwise
permitted by Section 7.1, or (b) by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
SECTION 7.9. SUBSIDIARIES. Borrower will not form any subsidiary or other Person
except for the purpose of expanding Borrower's existing business or entering
into new businesses that are reasonably related to Borrower's business, and will
not make any investment in or any loan in the nature of an investment to, any
other Person.
SECTION 7.10. COMPLIANCE WITH ERISA. Borrower will not permit with respect to
any Plan covered by Title IV of ERISA any Prohibited Transaction or any
Reportable Event.
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SECTION 7.11. CERTIFICATES OF NEED. Borrower will not seek to, or otherwise,
amend, alter or suspend or terminate or make provisional in any material way,
any certificate of need or provider number without the prior written consent of
Lender.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Except as otherwise expressly
permitted by this Agreement, Borrower will not enter into any transaction,
including without limitation the purchase, sale, or exchange of property, or the
loaning or giving of funds to any Affiliate or subsidiary, except in the
ordinary course of business and pursuant to the reasonable requirements of
Borrower's business and upon terms substantially the same and no less favorable
to Borrower as it would obtain in a comparable arm's length transaction with any
Person not an Affiliate or subsidiary, and so long as the transaction is not
otherwise prohibited hereunder. For purposes of the foregoing, Lender consents
to the transactions described on Schedule 7.12.
SECTION 7.13. USE OF LENDER'S NAME. Borrower will not use Lender's name (or the
name of any of Lender's affiliates) in connection with any of its business
operations. Borrower may disclose to third parties that Borrower has a borrowing
relationship with Lender. Nothing herein contained is intended to permit or
authorize Borrower to make any contract on behalf of Lender.
SECTION 7.14. CHANGE IN CAPITAL STRUCTURE. There shall occur no change in the
Borrower's capital structure, or change in control of Borrower through a change
in the ownership of Borrower's capital stock, both as set forth in Schedule
4.17. For so long as this Agreement remains in effect Michael Jeffries shall be
engaged full-time in the management and operation of Borrower's business.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower will not become or be a party
to any contract or agreement which would breach this Agreement, or breach any
other instrument, agreement, or document to which Borrower is a party or by
which it is or may be bound.
SECTION 7.16. MARGIN STOCK. Borrower will not carry or purchase any "margin
security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not furnish to
Lender any certificate or other document that contains any untrue statement of a
material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.
SECTION 7.18. CENSUS. With respect to any twelve (12) month period during the
Term, Borrower will not allow the average patient census for such 12-month
period, on an aggregate basis at all facilities listed in Schedule 4.15 attached
hereto and made a part hereof, to fall below ninety percent (90%) of the overall
patient occupancy rate at all facilities listed in Schedule 4.15 as of the
Closing Date.
SECTION 7.19. PROHIBITION ON AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. No Borrower
will amend, modify, restate, supplement, or terminate its respective certificate
of incorporation or bylaws (or other organizational documents) in any manner
that would materially affect the validity and
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enforceability of the Obligations or such Borrower's ability to borrow
hereunder, or that would materially impair any security for the Obligations.
SECTION 7.20. NAME, FISCAL YEAR AND ACCOUNTING METHOD. No Borrower shall change
its name, fiscal year or accounting methods except as required by GAAP.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. Each of the following (individually, an "Event
of Default" and collectively, the "Events of Default") shall constitute an event
of default hereunder:
(a) A default in the payment of any installment of principal of, or
interest upon, the Note when due and payable, whether at maturity or otherwise,
which default shall have continued unremedied for a period of five (5) days
after written notice thereof from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or other
monetary obligations owing to Lender arising out of or incurred in connection
with this Agreement when such payment is due and payable, which default shall
have continued unremedied for a period of five (5) days after written notice
from Lender;
(c) A default in the due observance or performance by Borrower of any
other term, covenant or agreement contained in any of the Loan Documents, which
default shall have continued unremedied for a period of thirty (30) days after
written notice from Lender;
(d) If any representation or warranty made by Borrower herein or in any
of the other Loan Documents, any financial statement, or any statement or
representation made in any other certificate, report or opinion delivered in
connection herewith or therewith proves to have been incorrect or misleading in
any material respect when made, which default shall have continued unremedied
for a period of thirty (30) days after written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder) for the payment of Borrowed Money in excess of $50,000.00 is not paid
when due or within any applicable grace period, or such obligation becomes or is
declared to be due and payable prior to the expressed maturity thereof, or there
shall have occurred a monetary default which, with the giving of notice or lapse
of time, or both, would cause any such obligation to become, or allow any such
obligation to be declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of creditors,
offers a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter conducted by
Borrower;
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(g) If Borrower files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver of
or any trustee for itself or any substantial part of its property, commences any
proceeding relating to itself under any reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Borrower any such proceeding which remains undismissed for a period of sixty
(60) days, or any Borrower by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding or the appointment of any receiver of or
any trustee for a Borrower or any substantial part of its property, or suffers
any such receivership or trusteeship to continue undischarged for a period of
sixty (60) days;
(h) If one or more final judgments against Borrower or attachments
against its property not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of ten (10) days;
(i) A Reportable Event which might constitute grounds for termination
of any Plan covered by Title IV of ERISA or for the appointment by the
appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any such Plan or to appoint a
trustee to administer any such Plan, or a lien or encumbrance is entered to
secure any deficiency or claim;
(j) If any outstanding stock of Borrower is sold or otherwise
transferred by the Person owning such stock on the date hereof, provided,
however, that this provision will not be violated such that an Event of Default
has occurred if publicly traded stock of Borrower Unison Healthcare Corporation
is bought and sold in ordinary course by non-insider stockholders of that
entity;
(k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral;
(l) If Borrower breaches or violates the terms of, or if a default or
an event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process against
Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business operations
as presently conducted;
(o) If any indication or evidence is received by Lender that Borrower
may have directly or indirectly been engaged in any type of activity which, in
Lender's discretion, might result in the
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forfeiture of any property of Borrower to any Governmental Authority, which
default shall have continued unremedied for a period of ten (10) days after
written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or contest,
in any action, suit or proceeding, the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral.
(r) There shall occur a material adverse change in the financial
condition or business prospects of Borrower, or if Lender in good faith deems
itself insecure as a result of acts or events bearing upon the financial
condition of Borrower or the repayment of the Note, which default shall have
continued unremedied for a period of ten (10) days after written notice from
Lender.
(s) The occurrence of any event of default under the New LOC II
Agreement or related loan and security documents.
(t) If Borrower fails to pay all amounts owing under Section 2.1(e)
with respect to any draw on a Letter of Credit within five (5) Business Days
after receiving written notice from Lender of the draw on the Letter of Credit,
provided, however, that Borrower may use a Revolving Credit Loan to fund any
such payments to Lender if and to the extent credit is otherwise available to
Borrower under the terms and conditions of this Agreement.
SECTION 8.2. ACCELERATION. Upon the occurrence of any of the foregoing Events of
Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified in Section 8.1.(g) hereof, the Note shall
be immediately due and payable without declaration or other notice to Borrower.
SECTION 8.3. REMEDIES.
(a) In addition to all other rights, options, and remedies granted to
Lender under this Agreement, upon the occurrence of an Event of Default Lender
may (i) suspend, or halt forever, any of its obligations under this Agreement to
make advances to Borrower, (ii) terminate this Agreement, whereupon all
outstanding Obligations shall be immediately due and payable, (iii) exercise all
other rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdiction(s) and under any other applicable
law, and/or (iv) exercise all rights and remedies under all Loan Documents now
or hereafter in effect, including the following rights and remedies (which list
is given by way of example and is not intended to be an exhaustive list of all
such rights and remedies):
(i) The right to take possession of, send notices regarding, and
collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to
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Lender with respect to the Collateral under the Uniform Commercial Code in
effect in the jurisdiction(s) in which such Collateral is located;
(ii) Subject to applicable law regarding Medicaid/Medicare Account
Debtors, Lender shall have the additional rights and remedies with respect to
the Accounts, all of which may be exercised with or without further notice to
Borrower: to notify any and all parties to any of the Accounts that the same
have been assigned to Lender and that all performance thereunder shall
thereafter be rendered to Lender; to renew, extend, modify, amend, accelerate,
accept partial performance on, release, settle, compromise, compound, collect or
otherwise liquidate or deal with, on terms acceptable to Lender, in whole or in
part, the Accounts and all of Borrower's rights or interests therein; to enter
into any other agreement relating to or affecting the Accounts; to enforce
performance and prosecute any action or proceeding with respect to any and all
of the Accounts, and take or bring, in Lender's name or in the name of Borrower,
all steps, actions, suits or proceedings deemed by Lender necessary or desirable
with respect to the Accounts; and to exercise all other rights, powers and
remedies of Lender with respect to the Accounts; provided, however, that Lender
shall have no liability or responsibility for any act or omission taken with
respect thereto. Borrower hereby nominates and appoints Lender as
attorney-in-fact to perform all acts and execute all documents deemed necessary
by Lender in furtherance of the terms hereof;
(iii) The right to (by its own means or with judicial assistance)
enter any of Borrower's premises and take possession of the Collateral, or
render it unusable, or dispose of the Collateral on such premises in compliance
with subsection (b), without any liability for rent, storage, utilities, or
other sums, and Borrower shall not resist or interfere with such action;
(iv) The right to require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender;
(v) The right to reduce the Maximum Loan Amount or to use the
Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(vi) The right to relinquish or abandon any Collateral or any
security interest therein.
(b) Borrower agrees that a notice received by it at least five (5) days
before the time of any intended public sale, or the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized marked may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral, Lender may
(to the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. At any sale or disposition of Collateral, Lender may (to
the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. Borrower covenants and agrees
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not to interfere with or impose any obstacle to Lender's exercise of its rights
and remedies with respect to the Collateral.
SECTION 8.4. NATURE OF REMEDIES. Lender shall have the right to proceed against
all or any portion of the Collateral to satisfy in any order: (i) the
liabilities and Obligations of Borrower to Lender, and (ii) upon the occurrence
of an event of default under the New LOC II Agreement, the liabilities and
obligations of New LOC II Borrower under the New LOC II Agreement and related
loan and security documents.. All rights and remedies granted Lender hereunder
and under any agreement referred to herein, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until the
Loans, and all other existing and future liabilities and obligations of Borrower
to Lender, are satisfied in full. The exercise of any one right or remedy shall
not be deemed a waiver or release of any other right or remedy, and Lender, upon
the occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and in
any order.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. EXPENSES AND TAXES.
(a) Borrower agrees to pay, whether or not the Closing occurs, a
reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation, legal review and
execution of each of the Loan Documents. In addition, Borrower shall pay all
such fees associated with any amendments to the Loan Documents following
Closing.
(b) Borrower shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues or any personal property tax), if any,
in connection with the issuance of the Note and the recording of the security
documents therefor. The obligations of Borrower under this clause (b) shall
survive the payment of Borrower's indebtedness hereunder and the termination of
this Agreement.
SECTION 9.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other Loan
Documents constitute the full and entire understanding and agreement among the
parties with regard to their subject matter and supersede all prior written or
oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party hereto of any
one or more defaults by the other party in the performance of any of the
provisions of this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different
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nature. No failure or delay on the part of any party 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 any party hereto at law, in equity or
otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and personally delivered, mailed by registered or
certified mail (return receipt requested and postage prepaid), sent by
telecopier (with a confirming copy sent by regular mail), or sent by prepaid
overnight courier service, and addressed to the relevant party at its address
set forth below, or at such other address as such party may, by written notice,
designate as its address for purposes of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
2 Wisconsin Circle, 4th floor
Chevy Chase, MD 20815
Attn: Michael Gardullo
Telephone: (301) 664-9850
Telecopier: (301) 664-9890
and a copy to:
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John J. Dawson, Esq.
John A. Harris, Esq.
Streich Lang, P.A.
Renaissance One
Two North Central
Phoenix, Arizona 85004-2391
Telephone: (602) 229-5200
Telecopier: (602) 229-5690
(b) If to Borrower, at:
c/o RainTree HealthCare Corporation
15300 N. 90th Street, Suite 100
Scottsdale, AZ 85260
Attention: Treasurer
Telephone: (602) 423-1954
Telecopier: (602) 423-1929
And a copy to:
Thomas J. Salerno, Esq.
Jordan A. Kroop, Esq.
Squire Sanders & Dempsey
40 North Central Avenue
Suite 2700
Phoenix, AZ 85004
Telephone: (602) 528-4000
Telecopier: (602) 253-8129
If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal delivery or telecopier, notice shall be deemed to be given when
delivered, and if sent by prepaid courier, notice shall be deemed to be given on
the next Business Day following deposit with the courier.
SECTION 9.5. SEVERABILITY. If any term, covenant or condition of this Agreement,
or the application of such term, covenant or condition to any party or
circumstance shall be found by a court of competent jurisdiction to be, to any
extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
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SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the other
Loan Documents shall be binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder with ten calendar
days' notice to, but without requiring the consent of, Borrower.
SECTION 9.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
SECTION 9.8. INTERPRETATION. No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any party because that party
or its legal representative drafted that provision. The titles of the paragraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Any pronoun used in this Agreement
shall be deemed to include singular and plural and masculine, feminine and
neuter gender as the case may be. The words "herein," "hereof," and "hereunder"
shall be deemed to refer to this entire Agreement, except as the context
otherwise requires.
SECTION 9.9. SURVIVAL OF TERMS. All covenants, agreements, representations and
warranties made in this Agreement, any other Loan Document, and in any
certificates and other instruments delivered in connection therewith shall be
considered to have been relied upon by Lender and shall survive the making by
Lender of the Loans herein contemplated and the execution and delivery to Lender
of the Note, and shall continue in full force and effect until all liabilities
and obligations of Borrower to Lender are satisfied in full.
SECTION 9.10. RELEASE OF LENDER. Borrower releases Lender, its officers,
employees, and agents, of and from any claims for loss or damage resulting from
acts or conduct of any or all of them, unless caused by Lender's recklessness,
gross negligence, or willful misconduct.
SECTION 9.11. TIME. Whenever Borrower is required to make any payment or perform
any act on a Saturday, Sunday, or a legal holiday under the laws of the State of
Maryland (or other jurisdiction where Borrower is required to make the payment
or perform the act), the payment may be made or the act performed on the next
Business Day. Time is of the essence in Borrower's performance under this
Agreement and all other Loan Documents.
SECTION 9.12. COMMISSIONS. The transaction contemplated by this Agreement was
brought about by Lender and Borrower acting as principals and without any
brokers, agents, or finders being the effective procuring cause. Borrower
represents that it has not committed Lender to the payment of any brokerage fee,
commission, or charge in connection with this transaction. If any such claim is
made on Lender by any broker, finder, or agent or other person, Borrower will
indemnify, defend, and hold Lender harmless from and against the claim and will
defend any action to recover on that claim, at Borrower's cost and expense,
including Lender's counsel fees. Borrower further agrees that until any such
claim or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the Collateral.
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SECTION 9.13. THIRD PARTIES. No rights are intended to be created hereunder or
under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including without limitation Borrower's duties under any account or
contract in which Lender has a security interest.
SECTION 9.14. DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its reasonable
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (a) obtain insurance
covering any of the Collateral as required hereunder; (b) pay for the
performance of any of Borrower's obligations hereunder; (c) discharge taxes,
liens, security interests, or other encumbrances at any time levied or placed on
any of the Collateral in violation of this Agreement unless Borrower is in good
faith with due diligence by appropriate proceedings contesting those items; and
(d) pay for the maintenance and preservation of any of the Collateral. Expenses
and advances shall be added to the Loan, until reimbursed to Lender and shall be
secured by the Collateral. Such payments and advances by Lender shall not be
construed as a waiver by Lender of an Event of Default.
SECTION 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any
participant it may obtain in the Loan, or any portion thereof, all information,
and furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement or
any other Loan Document.
SECTION 9.16. INDEMNITY. Borrower hereby agrees to indemnify and hold harmless
Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties hereunder, or from the breach of any of the representations
or warranties contained in Article IV hereof. In addition, with the exception of
claims asserted in the motion for approval of debtor in possession financing,
Borrower shall defend Indemnitee against and save it harmless from all claims of
any Person with respect to the Collateral. Notwithstanding any contrary
provision in this Agreement, the obligation of Borrower under this Section 9.16
shall survive the payment in full of the Obligations and the termination of this
Agreement.
SECTION 9.17. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY COLLECTION ACTION ARISING OUT OF THIS AGREEMENT OR THE
NOTE IS COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT LOCATED IN
THE STATE OF MARYLAND, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND.
ANY PROCESS IN ANY SUCH ACTION SHALL BE
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DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT
ITS ADDRESS DESCRIBED IN SECTION 9.4 HEREOF.
SECTION 9.18. WAIVER OF TRIAL BY JURY. BORROWER HEREBY (A) COVENANTS AND AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO
SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWER'S
WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.
SECTION 9.19. CONFESSION OF JUDGMENT. BORROWER AUTHORIZES ANY ATTORNEY ADMITTED
TO PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH
COURT TO APPEAR ON BEHALF OF BORROWER IN ANY COURT IN ONE OR MORE PROCEEDINGS,
OR BEFORE ANY CLERK THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO
CONFESS JUDGMENT AGAINST BORROWER IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON
THIS AGREEMENT (INCLUDING PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES,
FEES AND COSTS) PLUS ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE
AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF
BORROWER FOR PRIOR HEARING. BORROWER AGREES AND CONSENTS THAT VENUE AND
JURISDICTION SHALL BE PROPER IN THE CIRCUIT COURT OF ANY COUNTY OF THE STATE OF
MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND. BORROWER WAIVES THE BENEFIT OF ANY AND EVERY
STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING
UPON BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF
EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR
IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE
AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT
BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO;
SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO
TIME, IN THE SAME
-43-
<PAGE> 45
OR DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT,
OR PROPER.
-44-
<PAGE> 46
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
ATTEST: HCFP FUNDING, INC.,
a Delaware corporation
By:________________________ By:________________________________
Name: Name:
Title: Title:
ATTEST: RAINTREE HEALTHCARE CORPORATION, a
Delaware corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Senior Vice President - Finance, Treasurer
ATTEST: SUNQUEST SPC. INC., an Arizona corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Vice President
ATTEST: SAFFORD CARE, INC., a Colorado corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Vice President
-45-
<PAGE> 47
ATTEST: DOUGLAS MANOR, INC., a Colorado
corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Vice President
ATTEST: CORNERSTONE CARE CENTER, INC., a
Colorado corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Vice President
ATTEST: ARKANSAS, INC., a Colorado
corporation
By:________________________ By:________________________________
Name: Name: Clayton Kloehr
Title: Title: Vice President
-46-
<PAGE> 48
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - INTENTIONALLY DELETED
Exhibit C - Opinion Letter from Borrower's Counsel
Exhibit D - Form of Estoppel Certificate
-47-
<PAGE> 49
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.6 - Loan Defaults to be Discharged
Schedule 4.7 - Tax Identification Numbers
Schedule 4.10 - Taxes
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business with patient census
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.6 - Dividends and Management Fees
Schedule 7.12 - Transactions with Affiliates
-48-
<PAGE> 1
EXHIBIT 10.5
SECOND AMENDMENT TO OMEGA NEW MASTER LEASE
THIS SECOND AMENDMENT TO OMEGA NEW MASTER LEASE ("Second Amendment") is
dated as of February 2, 1999 and is entered into by OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation, having its principal office at 900 Victors Way,
Suite 350, Ann Arbor, Michigan 48108, ("Lessor"), and the entities designated
Lessees on the signature page hereof (each a "Lessee" and collectively,
"Lessees").
RECITALS
This Second Amendment is made and entered into with reference to the
following recitals:
A. Capitalized terms used and not otherwise defined herein have
the respective meanings given them in the Omega New Master
Lease (as hereinafter defined).
B. Pursuant to the Orders under Bankruptcy Code Sections 363(f)
and 365 (i) Approving Sale Leaseback Transaction Regarding
Signature Facilities entered by the United States Bankruptcy
Court for the District of Arizona in the jointly-administered
Chapter 11 cases In Re: Unison HealthCare Corporation (Case
Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re:
BritWill Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN
through B-98-1075-PHX-GBN)("Cases"), effective December 31,
1998, Lessor acquired the Signature Facilities, and Lessor and
the Signature Subsidiaries entered into a lease of the
Signature Facilities ("Omega New Master Lease").
C. Debtors' First Amended Joint Plan of Reorganization dated
October 15, 1998, as amended ("Plan") having been confirmed
with respect to the Cases to be effective January 31, 1999, in
accordance with the Plan Lessor and Lessees entered into a
First Amendment to Omega New Master Lease dated as of February
1, 1999 ("First Amendment"), pursuant to which the Omega New
Master Lease was amended, BritWill Indiana and BritWill-II
were added as Lessees and the BritWill Indiana Facilities,
BritWill-II November 1993 Facilities and BritWill-II December
1994 Facilities were added to the Omega New Master Lease.
References in this Second Amendment to the Omega New Master
Lease shall be
1
<PAGE> 2
deemed references to the Omega New Master Lease as amended by
the First Amendment.
D. Lessor having obtained, through foreclosure and otherwise, the
fee and leasehold interests in and to the Additional Texas
Facilities, the Additional Texas Facilities are to be added to
the Omega New Master Lease in accordance with the Plan.
E. Lessor and Lessees are entering into this Second Amendment for
the purpose of adding the Additional Texas Facilities to the
Omega New Master Lease and setting forth the Additional Texas
Facilities Minimum Rent for the Stub Period as required by the
Omega New Master Lease.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties to this Second Amendment agree as follows:
1. The Additional Texas Facilities are hereby added to the Omega
New Master Lease.
2. The definitions set forth in Article II of the Omega New
Master Lease are amended as follows:
Effective Date: As to the Signature Facilities,
December 31, 1998, as to the BritWill Indiana Facilities,
BritWill-II November 1993 Facilities and BritWill-II December
1994 Facilities, February 1, 1999, and as to the Additional
Texas Facilities, February 2, 1999.
Additional Texas Facilities Minimum Rent: As defined
in Exhibit H.
3. The Additional Texas Facilities Minimum Rent for the Stub
Period is $1,530,996.11; the Additional Texas Facilities Base
Rent for the Stub Period annualized is $1,240,593.81;and the
Additional South Place Rent for the Stub Period annualized is
$396,170.04.
4. Lessor acknowledges receipt of the Additional Texas Facilities
Minimum Rent for the period from and including February 2,
1999 through February 28, 1999. Commencing March 1, 1999, the
Additional Texas Facilities Minimum Rent for the Stub Period
shall be paid in successive monthly installments of One
Hundred Thirty Nine Thousand Six Hundred Thirty
2
<PAGE> 3
Two and 09/100 Dollars ($139,632.09) each on the twelfth
(12th) day of each calendar month during the Stub Period.
5. In accordance with Section 8 of Exhibit H to the Omega New
Master Lease, the Minimum Rent for the Additional Texas
Facilities for calendar year 2000 shall be the sum of the
following: (i) the Additional Texas Facilities Base Rent for
the Stub Period annualized (i.e., $1,240,593.81), plus the
Additional Texas Facilities Base Rent Increase, determined as
set forth in Section 8(a) of Exhibit H, (ii) the Additional
South Place Rent for the Stub Period annualized (i.e.,
$396,170.04) plus the Additional South Place Increment,
determined as set forth in Exhibit H, and (iii) $38,821.20.
The Minimum Rent for the Additional Texas Facilities for
calendar years after calendar year 2000 shall be determined as
set forth in Exhibit H.
6. Section 3.1.2 of the Omega New Master Lease is amended to read as
follows:
Under the procedures set forth in EXHIBIT H, the Minimum Rent
for the Brit Indiana Facilities, BritWill-II November 1993
Facilities, BritWill-II December 1994 Facilities and
Additional Texas Facilities for any year will not be known
until sometime into that year. Lessees shall continue to pay
the Minimum Rent for such Facilities at the rate previously in
effect until Lessor has given Lessees Notice of its
determination of the increased Minimum Rent for such
Facilities (but no Notice of the annual increase in the
Minimum Rent for the Signature Properties shall be required,
and the Signature Subsidiaries shall begin paying such
increased Minimum Rent for the Signature Properties effective
as of the Adjustment Date therefor in each Lease Year). Upon
such determination, the Minimum Rent shall be increased
effective retroactively as of the Adjustment Date. On or
before the second (2nd) Rent Payment Date following receipt by
Lessees (other than the Signature Subsidiaries) of Lessor's
Notice of the increase, Lessees shall make such payment to
Lessor as will bring the Minimum Rent current, commencing with
the Adjustment Date for such increase through the date of any
installments then due. Thereafter, Lessees shall pay the new
adjusted Minimum Rent in correspondingly adjusted monthly
installments until the next date for increase in the Minimum
Rent. The additional payment required shall bear interest at
the Prime Rate from the Adjustment Date until paid,
notwithstanding the fact that the amount of the increase is
not determined as of the Adjustment Date, in order that Lessor
shall receive the economic effect of an increase in the
Minimum Rent as of the Adjustment Date. This Section 3.1.2
shall survive termination of the Lease with respect to any
increases in Minimum Rent for the Brit Indiana Facilities,
BritWill-II November 1993 Facilities, BritWill-II December
1994
3
<PAGE> 4
Facilities and Additional Texas Facilities which are not known
or not fully paid as of the date of termination of the Lease.
7. Except as expressly amended hereby, the Omega New Master Lease
is in full force and effect without amendment or modification.
SIGNATURE PAGES FOLLOW
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Second Amendment by
their duly authorized officers as of the date first above written.
LESSOR:
Omega Healthcare Investors, Inc.,
a Maryland corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
LESSEES:
BritWill Indiana Partnership, an Arizona
general partnership
By: BritWill Investments-I, Inc., a Delaware
corporation, its General Partner
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
BritWill Investments-II, Inc., a Delaware
corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Amberwood Court, Inc., a Colorado
corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
5
<PAGE> 6
The Arbors Health Care Center, Inc.,
an Arizona corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Brookshire House, Inc., a Colorado
corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Christopher Nursing Center, Inc.,
a Colorado corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Los Arcos, Inc., a Colorado corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Pueblo Norte, Inc., a Colorado corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
6
<PAGE> 7
Rio Verde Nursing Center, Inc., a Colorado
corporation
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
7
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO OMEGA NEW MASTER LEASE GUARANTEE
This FIRST AMENDMENT TO OMEGA NEW MASTER LEASE GUARANTEE ("First
Amendment") is given as of February 2, 1999, by RAINTREE HEALTHCARE CORPORATION
(FORMERLY UNISON HEALTHCARE CORPORATION), a Delaware corporation, SIGNATURE
HEALTH CARE CORPORATION, a Delaware corporation, BRITWILL HEALTHCARE COMPANY, a
Delaware corporation, BRITWILL INVESTMENTS-I, Inc., a Delaware corporation,
CEDAR CARE, INC., an Indiana corporation and SHERWOOD HEALTHCARE CORPORATION, an
Indiana corporation (each a "Guarantor" and collectively, "Guarantors"), in
favor of OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation ("Omega") with
reference to the following facts:
This First Amendment is given in accordance with, and on the terms and
conditions set forth in, the Debtors' First Amended Joint Plan of Reorganization
dated October 15, 1998, as amended, entered in the United States Bankruptcy
Court for the District of Arizona in the matters of In Re: Unison HealthCare
Corporation (Case Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re:
BritWill Investments-I, Inc. (Case Nos.
B-98-0173-PHX-GBN through B-98-1075-PHX-GBN)("Plan").
Omega and certain subsidiaries of Signature Health Care Corporation
entered into a lease dated December 31, 1998 ("Omega New Master Lease").
Guarantors executed and delivered to Omega an Omega New Master Lease Guarantee
dated December 31, 1998 ("Omega New Master Lease Guarantee").
The Omega New Master Lease has been amended by the First Amendment to
Master Lease, dated February 1, 1999 ("First Amendment to Master Lease") and by
the Second Amendment to Master Lease of even date herewith ("Second Amendment to
Master Lease").
Omega has requested that Guarantors ratify and confirm their guarantee
of the payment when due of all Rent (as defined in the New Omega Master Lease)
and all other sums payable by the Lessees under the Omega New Master Lease as
amended by the First Amendment to Omega New Master Lease and the Second
Amendment to Omega New Master Lease, and Guarantors have agreed to do so.
NOW THEREFORE the parties hereto hereby agree as follows:
1. Guarantors hereby jointly and severally unconditionally and
irrevocably ratify and confirm their guarantee to Omega of the payment when due
of all Rent (as defined in the New Omega Master Lease) and all other sums
payable by the Lessees (as defined in the Omega New Master Lease as
<PAGE> 2
amended) under the Omega New Master Lease as amended by the First Amendment to
Master Lease and the Second Amendment to Master Lease.
2. Except for their ratification and confirmation of their guarantee as
set forth in Section 1 hereof, Guarantors acknowledge and agree that the Omega
New Master Lease Guarantee is in full force and effect without amendment or
modification.
SIGNATURE PAGES FOLLOW
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
to Omega New Master Lease Guarantee as of the date first written above.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
SIGNATURE HEALTH CARE CORPORATION,
a Delaware corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
BRITWILL HEALTHCARE COMPANY,
a Delaware corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
<PAGE> 4
BRITWILL INVESTMENTS-I, Inc.,
a Delaware corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
CEDAR CARE, INC., an Indiana corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
SHERWOOD HEALTHCARE CORPORATION,
an Indiana corporation
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
<PAGE> 1
EXHIBIT 10.7
(Indiana Leasehold)
FIRST AMENDMENT TO SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT ("FIRST AMENDMENT") is made
and entered into as of February 1, 1999 by and among OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation ("OMEGA") and BRITWILL INDIANA PARTNERSHIP, an
Arizona general partnership ("BRITWILL INDIANA") as Successor in Interest to
BRITWILL INVESTMENTS-I, INC., a Delaware corporation ("BRITWILL I")(collectively
"Debtor").
RECITALS:
This First Amendment is given pursuant to Debtors' First Amended Joint
Plan of Reorganization dated October 15, 1998, as amended, entered in the United
States Bankruptcy Court for the District of Arizona in the matters of In Re:
Unison HealthCare Corporation (Case Nos. B-98-06583-PHX-GBN through
B-98-06612-PHX-GBN) and In Re: BritWill Investments-I, Inc. (Case Nos.
B-98-0173-PHX-GBN through B-98-1075-PHX-GBN)(the "PLAN") which was confirmed
effective January 31, 1999.
1. BritWill I and the Secured Party entered into a Master Lease as of
November 1, 1992 pursuant to which the Secured Party leased to BritWill I nine
(9) healthcare facilities located in Indiana ("INDIANA MASTER LEASE").
2. To secure its obligations under the Indiana Master Lease, BritWill I
executed and delivered to Secured Party a Leasehold Mortgage, Security
Agreement, Financing Statement and Fixture Filing dated as of November 25, 1992
("OMEGA INDIANA LEASEHOLD MORTGAGE") and a Security Agreement dated as of
November 25, 1992 ("OMEGA INDIANA LEASEHOLD SECURITY AGREEMENT") covering the
leasehold interest of BritWill I in certain other healthcare facilities in
Indiana, more particularly described on attached Exhibit A, and the personal
property therein. BritWill Indiana is the assignee of the leasehold interest of
BritWill I, has assumed the liability of BritWill I under the Omega Indiana
Leasehold Mortgage and Omega Indiana Leasehold Security Agreement and is the
Debtor as defined in the Omega Indiana Leasehold Security Agreement.
3. In accordance with the Plan, the Indiana Master Lease has been
assumed, amended, restated and supplemented by the Omega New Master Lease (as
hereinafter defined).
4. In accordance with the Plan, the Indiana Leasehold Security
Agreement is to secure, in addition to the Omega Indiana Leasehold Mortgage, the
obligations of the
<PAGE> 2
(Indiana Leasehold)
Omega New Master Lessees under the Omega New Master Lease and the obligations of
BritWill Indiana under the Indiana Returned Facility Note (as hereinafter
defined).
5. Capitalized terms used but not defined herein shall have the
respective meanings given them in the Omega Indiana Leasehold Security
Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, the parties agree as follows:
1. The following provision is added to the Omega Indiana Leasehold Security
Agreement:
" DEFINITIONS. The following terms shall have the following
meanings:
"INDIANA RETURNED FACILITY NOTE " means the Three
Million Dollar ($3,000,000.00) Indiana Returned
Facility Note dated January 31, 1999 given by
BritWill Indiana Partnership to Secured Party.
"OMEGA NEW MASTER LEASE" means the Omega New Master
Lease entered into as of December 31, 1998, as
amended by First Amendment to Omega New Master Lease
of even date herewith and as the same may be amended
from time to time hereafter.
"OMEGA NEW MASTER LEASE LESSEES" means the Lessees
named in the Omega New Master Lease.
2. The definition of "Liabilities" in the Omega Indiana Leasehold
Security Agreement is hereby amended to include the payment of all amounts now
or hereafter due and owing to Secured Party (i) from the Omega New Master Lease
Lessees under the Omega New Master Lease and (ii) from BritWill Indiana under
the Indiana Returned Facility Note, or any extensions or renewals thereof, and
the performance of any and all other obligations incurred thereunder or in
connection therewith, however created, evidenced or arising, whether direct or
indirect, absolute or contingent, now or hereafter existing, due or to become
due, plus all interest, costs, out-of-pocket expenses and reasonable attorneys'
fees which may be made or incurred by Secured Party in the administration, and
collection thereof and in the protection, maintenance, and liquidation of the
Collateral.
3. BritWill Indiana ratifies the grant of a security interest in the
Collateral to Omega by BritWill I as set forth in the Indiana Leasehold Security
Agreement and reaffirms the warranties and covenants of BritWill I as set forth
in the Omega Indiana Leasehold
2
<PAGE> 3
(Indiana Leasehold)
Security Agreement as fully as if the same were repeated in full herein. All
references in the Omega Indiana Leasehold Security Agreement to BritWill I and
Debtor shall be deemed to be references to BritWill Indiana.
4. The phrase "Event of Default under the Master Lease and the
Leasehold Mortgage" wherever it appears in the Omega Indiana Leasehold Security
Agreement is hereby amended to read "Event of Default under the Leasehold
Mortgage, Event of Default under the Omega New Master Lease or Event of Default
under the Indiana Returned Facility Note."
5. The following provisions of the Omega Indiana Leasehold Security
Agreement are amended as follows:
a. Section 6(c) is hereby deleted.
b. Section 9(a) is hereby amended to read as follows: "The
occurrence of any Event of Default under the Omega New Master
Lease or any Event of Default under the Indiana Returned
Facility Note shall constitute an Event of Default ("Event of
Default") for purposes of this Security Agreement."
c. The last sentence of Section 10 is hereby amended to read
as follows: "The obligations of BritWill Indiana under this
Section 10 shall survive the termination of the Omega New
Master Lease and the payment in full of the Indiana Returned
Facility Note."
d. The first sentence of Section 11(c) is hereby amended to
read as follows: "Any delay on the part of Omega in exercising
any power, privilege or right under the Omega New Master Lease
or the Indiana Returned Facility Note, this Security Agreement
or under any other instrument or document executed by BritWill
Indiana in connection herewith shall not operate as a waiver
thereof."
e. Section 11(d) is hereby amended to read as follows: "All
rights, remedies and powers of Omega hereunder are irrevocable
and cumulative, and not alternative or exclusive, and shall be
in addition to all rights, remedies and powers given by the
Omega New Master Lease, the Indiana Returned Facility Note,
the Leasehold Mortgage, the other Lease Documents, or the
Commercial Code, or any other applicable laws now existing or
hereafter enacted."
3
<PAGE> 4
(Indiana Leasehold)
f. Section 11(l) is hereby amended by the substitution of
"Michigan" for "Indiana."
g. Section 11(p) is hereby amended to read in its entirety:
"All notices, demands, requests, consents, approvals and other
communications ("Notice" or "Notices") hereunder shall be in
writing and personally served upon an Executive Officer (as
defined below) of the party being served or mailed (by
registered or certified mail, return receipt requested and
postage prepaid), or delivered by national overnight delivery
service such as Federal Express or D.H.L., or sent by
facsimile transmission addressed to the respective parties, as
follows:
(i) if to BritWill Indiana:
BritWill Indiana Partnership
c/o Unison HealthCare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
ATTN: Michael A. Jeffries
Tel: (602) 607-4000
Fax: (602) 607-4014
with a copy to:
ATTN: Nir E. Margalit
Tel: (602) 607-4000
Fax: (602) 607-4114
(ii) if to Omega:
Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, MI 48108
ATTN: Essel W. Bailey, Jr.
Tel: (734) 747-9890
Fax: (734) 996-0020
4
<PAGE> 5
(Indiana Leasehold)
with a copy to:
Dykema Gossett
ATTN: Fred J. Fechheimer
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
Tel: (248) 203-0743
Fax: (248) 203-0763
or to such other address as a party may by Notice hereafter
designate. Notice shall be deemed to have been given on the
date of delivery if such delivery is made on a Business Day,
or if not, on the first Business Day after delivery, or if
delivery is refused, on the date delivery was first attempted,
provided however that a Notice sent by facsimile transmission
shall be deemed given upon confirmation to the sender by the
recipient that such Notice was received. "Executive Officer"
shall mean the Chairman of the Board of Directors, the
President, any Vice President and the Secretary of any
corporation upon which service is to be made."
12. This First Amendment may be executed in separate counterparts, each
of which shall be considered as original when each party has executed and
delivered to the other one or more copies of this First Amendment.
13. Except as expressly modified by this Amended Indiana Leasehold
Security Agreement, the Indiana Leasehold Security Agreement remains in full
force and effect without amendment or modification.
SIGNATURE PAGES FOLLOW
5
<PAGE> 6
(Indiana Leasehold)
IN WITNESS WHEREOF the parties have executed this First Amendment to
Security Agreement.
OMEGA HEALTHCARE INVESTORS, INC., a Maryland
corporation
By: ________________________________
Name: _________________
Title: _________________
BRITWILL INDIANA PARTNERSHIP, an Arizona
general partnership
By: BritWill Investments-I, Inc.,
a Delaware corporation,
its General Partner
By: ________________________________
Name: _________________
Title: _________________
6
<PAGE> 7
(Indiana Leasehold)
EXHIBIT A
EXHIBIT A CONSISTS OF THE FOLLOWING EXHIBITS A-1 THROUGH A-4.
<PAGE> 8
(Indiana Leasehold)
EXHIBIT A-1
INDIANA LEASEHOLD MORTGAGE FACILITIES
WILLOW MANOR CONVALESCENT CENTER
LEGAL DESCRIPTION OF REAL ESTATE:
Part of Lower Prairie Survey No. One (1), Township Three (3) North,
Range Ten (10) West, bounded and described as follows:
Beginning Two Hundred (200) feet South, Fourteen (14) degrees East,
from the intersection of the center line of Thirteenth Street and the
Southwest right-of-way line of Federal Highway No. 41, said
right-of-way line being the Northeast line of Lower Prairie Survey No.
One (1); thence South, Fourteen (14) degrees East, on the Southwest
right-of-way line of said Highway No. 41, Three Hundred (300) feet to a
stake; thence South, Seventy-six (76) degrees West, Three Hundred (300)
feet to a stake; thence North Fourteen degrees (14) West, Three Hundred
(300) feet to a stake; thence North, Seventy-six (76) degrees East,
Three Hundred (300) feet to the place of beginning.
Also, part of Lower Prairie Survey No. One (1), Township Three (3)
North, Range Ten (10) West, being a rectangular strip of real property
Five Hundred (500) feet long and Twenty (20) feet wide bounded and
described as follows, to-wit:
Beginning Three Hundred (300) feet South, Seventy-six (76) degrees
West, of the intersection of the center line of Thirteenth Street with
the Southwest right-of-way line of U.S. Highway No. 41; said
right-of-way line being the Northeast line of Lower Prairie Survey No.
One (1); thence South, Fourteen (14) degrees East, Five Hundred (500)
feet to an iron stake; thence South, Seventy-six (76) degrees West,
Twenty (20) feet to a point, thence North, Fourteen (14) degrees West,
Five Hundred (500) feet to a point in the center line of Thirteenth
Street; thence North, Seventy-four (74) degrees Thirty-seven (37)
minutes East, along the center of Thirteenth Street, Twenty (20) feet
to the point of beginning.
MORTGAGOR AND DEBTOR: BritWill Indiana Partnership
ADDRESS: 5950 Berkshire, Suite 1100
2
<PAGE> 9
(Indiana Leasehold)
Dallas, Texas 75225
MORTGAGEE AND SECURED PARTY: Omega Healthcare Investors, Inc.
ADDRESS: 905 Eisenhower Circle, Suite 110
Ann Arbor, Michigan 48103
FEE TITLE OWNER: Kenneth W. Maikranz and Sandra Maikranz and
Charles L. Gray and Gale Ann Gray
NAME AND LOCATION
OF REAL ESTATE: Willow Manor Convalescent Center
1321 Willow Street
Vincennes, Indiana 47591
3
<PAGE> 10
(Indiana Leasehold)
EXHIBIT A-2
INDIANA LEASEHOLD MORTGAGE FACILITIES
HOLIDAY MANOR
LEGAL DESCRIPTION OF REAL ESTATE:
Part of Lots One Hundred Ninety-two (192), One Hundred Ninety-three
(193), One Hundred Ninety-four (194), One Hundred Ninety-five (195) and
One Hundred Ninety-six (196) in Tower Heights Subdivision of the City
of Princeton, Gibson County, Indiana (as said subdivision is platted
and recorded in Plat Book 1, page 259 in the Office of the Recorder of
Gibson County, Indiana), and further described as follows:
Begin at an iron at the Southwest corner of said Lot 196; thence North,
along the West line of Lots 196, 195, 194, 193 and 192, Four Hundred
Fifty and no hundredths (450.00) feet to an iron at the Northwest
corner of Lot 192; thence East, along the North line of said Lot 192,
Two Hundred Twenty and no hundredths (220.00) feet; thence South Four
Hundred Fifty and no hundredths (450.00) feet to the South line, Two
Hundred Twenty-two and Ninety Hundredths (222-90) feet to the place of
beginning.
MORTGAGOR AND DEBTOR: BritWill Indiana Partnership
ADDRESS: 5950 Berkshire, Suite 1100
Dallas, Texas 75225
MORTGAGEE AND
SECURED PARTY: Omega Healthcare Investors, Inc.
ADDRESS: 905 Eisenhower Circle, Suite 110
Ann Arbor, Michigan 48103
FEE TITLE OWNER: Kenneth W. Maikranz and Sandra Maikranz
A-2 Page 1
<PAGE> 11
(Indiana Leasehold)
and Charles L. Gray and Gale Ann Gray
NAME AND LOCATION
OF REAL ESTATE: Holiday Manor
305 North 6th Street
Princeton, Indiana 47670-3520
A-2 Page 2
<PAGE> 12
(Indiana Leasehold)
EXHIBIT A-3
OWENSVILLE CONVALESCENT CENTER
LEGAL DESCRIPTION OF REAL ESTATE:
Part of the West Half of the Northwest Quarter of Section Twelve (12),
Township Three (3) South, Range Twelve (12) West, in Montgomery
Township, Gibson County, Indiana, and further described as follows:
Begin at a 5/8 inch iron, which iron may be found by measuring East
along the South line of the Northwest Quarter of Section Twelve (12),
Township Three (3) South, Range Twelve (12) West, from the Southwest
corner of said Quarter Section, One Thousand One Hundred Forty-three
and Seventy Hundredths (1143.70) feet, and by measuring thence North,
parallel to the West line of said Quarter Section, Seven Hundred
Twenty-nine and Ten Hundredths (729.10) feet; and from said point of
beginning, bear West, perpendicular to the West line of said Quarter
Section, Three Hundred Thirty (330.0) feet to a 5/8 inch iron; thence
bear North, parallel to the West line of said Quarter Section, Six
Hundred Twenty-two (622.0) feet to a railroad spike in the centerline
of State Road #165, which point is witnessed with a 5/8 inch iron set
South Forty-six and Fifteen Hundredths (46.15) feet; thence measure
North 77 degrees and 02 minutes East, more or less, Three Hundred
Thirty-eight and Seventy-three Hundredths (338.73) feet, which
measurement is the long chord measurement of a part of a 3 degree curve
left to a railroad spike in the center of State Road #165; thence
measure South, parallel to the West line of the said Quarter Section,
Forty-four and Forty-five Hundredths (44.45) feet to a 5/8 inch iron;
continue measuring South, along said parallel line, Six Hundred
Fifty-three and Fifty-five Hundredths (653.55) feet to the place of
beginning.
MORTGAGOR AND DEBTOR: BritWill Indiana Partnership
ADDRESS: 5950 Berkshire, Suite 1100
Dallas, Texas 75225
MORTGAGEE AND
SECURED PARTY: Omega Healthcare Investors, Inc.
A-3 Page 1
<PAGE> 13
ADDRESS: 905 Eisenhower Circle, Suite 110
Ann Arbor, Michigan 48103
FEE TITLE OWNER: Owensville Convalescent Center, Inc., an Indiana corporation
NAME AND LOCATION
OF REAL ESTATE: Owensville Convalescent Center
Highway 165 West
Owensville, Indiana 47665
A-3 Page 2
<PAGE> 14
(Indiana Leasehold)
EXHIBIT A-4
BOONVILLE CONVALESCENT CENTER
LEGAL DESCRIPTION OF REAL ESTATE:
Part of Block Fifteen (15) in the South Half of the Northwest Quarter
of Section Thirty-five (35), Township Five (5) South, Range Eight (8)
West, according to the partition of realty in the Estate of James
McCulla, deceased, among his heirs-at-law as shown by Deed Record 17 at
page 100 in the Office of the Recorder of Warrick County, Indiana, set
off to Florinda Day West, bounded as follows:
Commencing at the Northeast corner of said Lot Fifteen (15); thence
Southwesterly along the center of, Indiana State Road #61, also known
as Boonville-Yankeetown Road, Four Hundred Ninety-one and Six Tenths
(491.6) feet; thence West Seven Hundred Ninety-five and Seventy-five
Hundredths (795.75) feet to an iron pin; thence North Four Hundred
Eighty (480) feet; thence East Nine Hundred Seven and Five Tenths
(907.5) feet to the center of Indiana State Road #61 and the point of
beginning, according to the plat of survey thereof recorded on May 12,
1966 in Plat Book 4, at page 253 in the Office of the Recorder of
Warrick County, Indiana.
MORTGAGOR AND DEBTOR: BritWill Indiana Partnership
ADDRESS: 5950 Berkshire, Suite 1100
Dallas, Texas 75225
MORTGAGEE AND
SECURED PARTY: Omega Healthcare Investors, Inc.
ADDRESS: 905 Eisenhower Circle, Suite 110
Ann Arbor, Michigan 48103
FEE TITLE OWNER: Boonville Convalescent Center, Inc., an Indiana corporation
NAME AND LOCATION
OF REAL ESTATE: Boonville Convalescent Center
725 South Second Street
Boonville, Indiana 47601
A-4 Page 1
<PAGE> 1
EXHIBIT 10.8
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "AMENDED AND RESTATED
SECURITY AGREEMENT") is made and entered into as of February 2, 1999 by and
among OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation (the "SECURED
PARTY") and the following: BRITWILL INDIANA PARTNERSHIP, an Arizona general
partnership, BRITWILL INVESTMENTS II, INC., a Delaware corporation, AMBERWOOD
COURT, INC., a Colorado corporation, THE ARBORS HEALTH CARE CENTER, INC., an
Arizona corporation, BROOKSHIRE HOUSE, INC., a Colorado corporation, CHRISTOPHER
NURSING CENTER, INC., a Colorado corporation, LOS ARCOS, INC., a Colorado
corporation, PUEBLO NORTE, INC., a Colorado corporation and RIO VERDE NURSING
CENTER, INC., a Colorado corporation (collectively, the "OMEGA NEW MASTER
LESSEES").
RECITALS:
This Amended and Restated Security Agreement is entered into pursuant
to the Debtors' First Amended Joint Plan of Reorganization dated October 15,
1998, as amended, entered in the United States Bankruptcy Court for the District
of Arizona in the matters of In Re: Unison HealthCare Corporation (Case Nos.
B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re: BritWill
Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through B-98-1075-PHX-GBN) (the
"CASES") which was entered in the United States Bankruptcy Court for the
District of Arizona (the "PLAN").
1. Pursuant to the Order under Bankruptcy Code Sections 363(f) and 365
Approving Sale Leaseback Transaction Regarding Signature Facilities ("SIGNATURE
SALE/LEASEBACK ORDER") entered in the Cases in the United States Bankruptcy
Court for the District of Arizona on December 21, 1998, Secured Party and the
Signature Subsidiaries entered into the Omega New Master Lease and as security
for their obligations under the Omega New Master Lease the Signature
Subsidiaries entered into a Security Agreement with Secured Party effective as
of December 31, 1998 (the "SECURITY AGREEMENT").
2. Pursuant to the Plan, (a) the Secured Party and New Omega Master
Lessees have entered into the First Amendment to Omega New Master Lease as of
February 1, 1999 (the "FIRST AMENDMENT TO OMEGA NEW MASTER Lease") pursuant to
which the BritWill Lessees have become parties to the Omega New Master Lease and
certain healthcare facilities previously leased by Secured Party to the BritWill
Lessees under Existing Leases (as defined in the Omega New Master Lease) have
been added to the Omega New Master Lease and (b) the Secured Party and New Omega
Master Lessees have entered into the Second Amendment to Omega New Master Lease
of even date
<PAGE> 2
herewith (the "SECOND AMENDMENT TO OMEGA NEW MASTER LEASE") pursuant to which
the Additional Texas Facilities (as defined in the Omega New Master Lease) have
been added to the Omega New Master Lease.
3. Pursuant to the Plan, BritWill Indiana Partnership ("BRIT INDIANA")
has executed and delivered to Secured Party the Indiana Returned Facility Note.
4. Pursuant to the Plan, the parties now wish to amend the Security
Agreement for the purpose of securing the obligations of each and all of the
Omega New Master Lessees under the Omega New Master Lease, as amended by the
First Amendment to Omega New Master Lease and Second Amendment to Omega New
Master Lease and as the same may be amended from time to time hereafter, and the
obligations of Brit Indiana under the Indiana Returned Facility Note, and
changing the definition of Collateral (as such term is defined in the Security
Agreement) as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, the parties agree as follows:
ARTICLE I - DEFINITIONS
Terms not otherwise defined herein shall have the meanings ascribed to
those terms in the Omega New Master Lease or the Commercial Code. In addition to
the other definitions contained herein, when used in this Agreement, the
following terms shall have the following meanings:
"BRITWILL LESSEES" means BritWill Investments-II, Inc., a Delaware
corporation, and BritWill Indiana Partnership, an Arizona general partnership.
"COLLATERAL" means the collateral described in Article II, Section 1
below.
"COMMERCIAL CODE" means the Uniform Commercial Code, as enacted and in
force from time to time in the state in which each Facility is located.
"FACILITIES" means the health care facilities described on attached
EXHIBIT A.
"FACILITY" means any of the Facilities.
"INDIANA RETURNED FACILITY NOTE" means the Three Million Dollar
($3,000,000.00) Indiana Returned Facilities Note dated as of January 31, 1999
given by Britwill Indiana Partnership to Secured Party.
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<PAGE> 3
"OMEGA NEW MASTER LEASE" means the Master Lease between Secured Party,
as Lessor, and Omega New Master Lessees, as Lessees, dated December 31, 1998, as
amended by the First Amendment to Omega New Master Lease and the Second
Amendment to Omega New Master Lease, as the same may be amended from time to
time hereafter.
"SIGNATURE SUBSIDIARIES" means Amberwood Court, Inc., The Arbors Health
Care Center, Inc., Brookshire House, Inc., Christopher Nursing Center, Inc., Los
Arcos, Inc., Pueblo Norte, Inc. and Rio Verde Nursing Center, Inc.
ARTICLE II - AGREEMENT
1. COLLATERAL.
The "Collateral" covered by this Amended and Restated Security
Agreement is all of the personal property described below relating to the
operation of any Facility or Facilities, wherever located, that Omega New Master
Lessees now own or shall hereafter acquire or create, immediately upon the
acquisition or creation thereof, consisting of the following:
(a) Accounts. To the extent permitted by law, all accounts,
accounts receivable, deposits, prepaid items, documents, chattel paper,
instruments, contract rights, general intangibles, choses in action (as those
terms may be defined in the Commercial Code) relating to the operation of any
Facility or Facilities, including any right to any refund of any taxes paid to
any governmental authority prior to or after the date of this Amended and
Restated Security Agreement, any letters of credit, and drafts under them, given
in support of any of the foregoing, and all ledgers, printouts, papers, data,
file materials and information relating to any account debtors in respect
thereof, and/or to the operation of any Facility or Facilities, and all rights
of access to such books, records, ledgers, printouts, data, file materials and
information, and all property in which such books, records, ledgers, printouts,
data, file materials and information are stored (the "Accounts"); and
(b) Inventory. All property, now owned or hereafter acquired,
held at any Facility or Facilities by or for Omega New Master Lessees for sale,
rent, or lease, or furnished or to be furnished by the Omega New Master Lessees
under any contract of service, or raw materials or work in process and their
products, or materials used or consumed in their operations, including but not
limited to all inventory, goods, raw materials, work in process, finished goods,
tangible property, stock in trade, wares,
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<PAGE> 4
containers and shelving useful for storing and merchandise used in, rented,
leased or sold in the operation of any Facility or Facilities; and
(c) Equipment. All equipment, furniture, fixtures and other
personal property used in connection with the operation of a Facility or
Facilities, whether now owned or hereafter acquired by Omega New Master Lessees,
wherever located, together with all accessions, additions, parts, attachments,
accessories, or appurtenances thereto including but not limited to machinery,
furniture, fixtures and movable equipment, leasehold improvements, any tools,
dies, substitutions, replacements and appurtenances to them or intended for use
with them, and all books and records now owned or hereafter acquired pertaining
to any of the above described property, including but not limited to any
computer readable memory and any computer hardware or software necessary to
process such memory, wherever located (the "Equipment"); and
(d) Instruments. Omega New Master Lessees' interest of any
kind in any negotiable instrument, as that term is defined in the Commercial
Code, or any other writing which evidences a right to payment of money and is of
a type which is, in the operation of any Facility or Facilities, transferred by
delivery alone or by delivery with any necessary endorsement or assignment; and
(e) Investment Property. All investment property, as that term
is defined in the Commercial Code, now owned or hereafter acquired pursuant to
the operation of any Facility or Facilities, including all securities, whether
certificated or uncertificated, security entitlements, securities accounts,
commodity contracts and commodity accounts; and
(f) Proceeds. Proceeds from the operation of any Facility or
Facilities, including, without limitation, proceeds of hazard or other insurance
policies and eminent domain or condemnation awards, of all of the Collateral,
together with any and all deposits or other sums at any time credited by or due
from Secured Party to Omega New Master Lessees and any and all instruments,
documents, policies and certificates of insurance, securities, goods, accounts
receivable, choses in action, chattel paper, cash, property and the proceeds
thereof (whether or not the same are Collateral or Proceeds thereof hereunder)
owned by Omega New Master Lessees or in which Omega New Master Lessees have an
interest, including but not limited to stock rights, subscription rights,
dividends, stock dividends, stock splits, or liquidating dividends, and all
cash, accounts, chattel paper and general intangibles arising from the sale,
rent, lease, casualty loss or other disposition of the Collateral, which are now
or at any time hereafter in possession or under the control of Secured Party or
in transit by mail or carrier to or from Secured Party or in the possession of
any third party acting on behalf of Secured Party, without regard to whether
Secured Party received the same in pledge, for safekeeping, as agent for
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<PAGE> 5
collection or transmission or otherwise, or whether Secured Party has
conditionally released the same (the "Proceeds"); and
(g) Insurance Rights. All rights under contracts of insurance
now owned or hereafter acquired covering any of the Collateral; and
(h) Other Property. All other tangible and intangible property
of Omega New Master Lessees now or hereinafter acquired by Omega New Master
Lessees and related to the operation of any Facility or Facilities; and
(i) Rights. All rights, remedies, powers and/or privileges of
Omega New Master Lessees with respect to any of the foregoing.
The form of a description of the Collateral to be attached to financing
statements to be executed by Omega New Master Lessees is attached hereto as
EXHIBIT B.
2. GRANT OF SECURITY INTEREST.
(a) Security Interest in Collateral. The Omega New Master
Lessees hereby grant, jointly and severally, to Secured Party a continuing
security interest in the Collateral to secure: (i) the payment of all amounts
now or hereafter due and owing to Secured Party from the Omega New Master
Lessees under the Omega New Master Lease, or any extension or renewal thereof,
and any and all other obligations incurred in connection therewith and (ii) the
payment of all amounts now or hereafter due and owing to Secured Party from
BritWill Indiana under the Indiana Returned Facilities Note or any extension or
renewal thereof, and any and all other obligations incurred in connection
therewith, together with all other obligations or indebtedness of the Omega New
Master Lessees to Secured Party however created, evidenced or arising, whether
direct or indirect, absolute or contingent, now or hereafter existing, due or to
become due, plus all interest, costs, out-of-pocket expenses and reasonable
attorneys' fees which may be made or incurred by Secured Party in the
administration, and collection thereof, and in the protection, maintenance, and
liquidation of the Collateral ("the "OBLIGATIONS"). The security interest
granted by this Section 2 shall be effective when, and continue in effect as
long as, any of the Obligations are outstanding and unpaid, and except as
otherwise permitted pursuant to the terms of this Agreement or the Omega New
Master Lease, Omega New Master Lessees will not sell, assign, transfer, pledge
or otherwise dispose of or encumber any Collateral to any third party while this
Amended and Restated Security Agreement is in effect without the prior and
express written consent of Secured Party.
3. PERFECTION OF SECURITY INTEREST. Omega New Master Lessees
shall execute and deliver to Secured Party, concurrently with Omega New Master
Lessees' execution of this Amended and Restated Security Agreement and at any
time or times
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<PAGE> 6
hereafter at the request of Secured Party, all financing statements,
continuation financing statements, assignments, affidavits, reports, notices,
letters of authority and all other documents that Secured Party may reasonably
request, in a form reasonably satisfactory to Secured Party, to perfect and
maintain perfected the security interests granted to the Secured Party under
Section 2 hereof. In order to fully consummate all of the transactions
contemplated hereunder, Omega New Master Lessees shall make appropriate entries
on their books and records disclosing the security interests created herein.
4. WARRANTIES AND COVENANTS. In addition to the warranties and
representations, if any, made in the Omega New Master Lease, Omega New Master
Lessees warrant, represent and agree that:
(a) Omega New Master Lessees are and will be the lawful owners
or lessees of all of the Collateral, with the right to subject the owned or
leased property to the security interests of Secured Party hereunder;
(b) Except for the security interests in the Collateral herein
granted to the Secured Party, there are no other security interests in the
Collateral that are known to Omega New Master Lessees, and there are no
financing statements covering any of the Collateral filed in any public office
created by or known to Omega New Master Lessees prior to the date hereof, except
as previously disclosed by Omega New Master Lessees to Secured Party. Omega New
Master Lessees shall defend Secured Party against any claims and demands of any
and all other persons to the Collateral inconsistent with this Amended and
Restated Security Agreement;
(c) Except as permitted under the Omega New Master Lease or
hereunder, Omega New Master Lessees shall not remove the Collateral from the
Facilities or the central billing location or home office of Lessees without
Secured Party's prior written consent and shall not use or permit the Collateral
to be used for any unlawful purpose whatsoever. Except as permitted under the
Omega New Master Lease or hereunder, Omega New Master Lessees shall not remove
any Collateral from the State in which the Facilities are located or the central
billing location or home office of Lessees without the prior written consent of
Secured Party;
(d) Except as permitted under the Omega New Master Lease, the
Signature Sale/Leaseback Order or the Plan, Omega New Master Lessees shall not
conduct business under any name at the Facilities other than that given above
nor will Omega New Master Lessees change or reorganize the type of business
entity under which they presently do business, except upon prior and express
written approval of Secured Party, and, if such approval is granted, Omega New
Master Lessees agree that all documents, instruments and agreements reasonably
requested by Secured Party and
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<PAGE> 7
relating to such change shall be prepared, filed and recorded at Omega New
Master Lessees' expense before the change occurs;
(e) Omega New Master Lessees shall not remove any records
concerning the Collateral located at the Facilities or the central billing
location or home office of Lessees nor keep any of its records concerning the
same at any other location unless written notice thereof is given to Secured
Party at least ten (10) days prior to the removal of such records to any new
addresses, provided, however, that any such records which are located at
locations other than the Facilities as of the date hereof, may remain at their
present location, subject to Secured Party's reasonable request to relocate such
records; and
(f) Omega New Master Lessees have the right and power and are
duly authorized to enter into this Amended and Restated Security Agreement. The
execution of this Amended and Restated Security Agreement does not and will not
constitute a breach of any provision contained in any agreement or instrument to
which Omega New Master Lessees are or may become a party or by which Omega New
Master Lessees are or may be bound or affected.
5. COLLECTION OF ACCOUNTS.
(a) Secured Party hereby authorizes and permits Omega New
Master Lessees to collect the Accounts from its debtors, which privilege may be
terminated by Secured Party at any time after notice from Secured Party upon the
occurrence and during the continuance of an Event of Default under the Omega New
Master Lease, whereupon Omega New Master Lessees shall execute, upon demand
therefor, such assignments so as to vest in Secured Party full title to the
Accounts (to the extent permitted under applicable law), and Secured Party
thereupon shall be entitled to and have all of the ownership, title, rights,
securities and guarantees of Omega New Master Lessees with respect thereto, and
with respect to the property evidenced thereby, including the right of stoppage
in transit, and Secured Party may notify any debtor or debtors of the
assignments of the Accounts and collect the same; thereafter, Omega New Master
Lessees will receive all payments on the Accounts as agent of and for Secured
Party and will transmit to Secured Party, on the day of receipt thereof, all
original checks, drafts, acceptances, notes and other evidence of payment
received in payment of or on account of the Accounts, including all cash moneys
similarly received by Omega New Master Lessees. Until such delivery, Omega New
Master Lessees shall keep all such remittances separate and apart from Omega New
Master Lessees' own funds, capable of identification as the property of Secured
Party, and shall hold the same in trust for Secured Party. All items or amounts
that are delivered by Omega New Master Lessees to Secured Party on account of
partial or full payment or otherwise as Proceeds of any of the Collateral shall
be deposited to the
7
<PAGE> 8
credit of a deposit account (the "COLLATERAL DEPOSIT ACCOUNT") at a financial
institution selected by Secured Party, as security for payment of the
Obligations. Omega New Master Lessees shall have no right to withdraw any funds
deposited in the Collateral Deposit Account. Secured Party may, from time to
time, at its discretion, and shall, upon request of Omega New Master Lessees
made no more than once in any week, apply all or any of the then balance,
representing collected funds, in the Collateral Deposit Account, toward payment
of the Obligations, whether or not then due, in such order of application as
Secured Party may determine, and Secured Party may, from time to time, in its
discretion, release all or any of such balance to Omega New Master Lessees.
Omega New Master Lessees, if an Event of Default occurs under this Amended and
Restated Security Agreement (and effective only during the continuance thereof)
will, upon demand by Secured Party, open all mail only in the presence of a
representative of Secured Party, who may take therefrom any remittance on
Accounts assigned to Secured Party. Secured Party or its representatives are
hereby authorized to endorse, in the name of Omega New Master Lessees, any item,
howsoever received by Secured Party, representing any payment on or other
proceeds of any of the Collateral, and may endorse or sign the name of Omega New
Master Lessees to any accounts, invoices, assignments, financing statements,
notices to debtors, bills of lading, storage receipts, or other instruments or
documents in respect to Accounts or the property covered thereby requested by
Secured Party. Omega New Master Lessees shall promptly give Secured Party, upon
demand, copies of all Accounts, to be accompanied by such information and by
such documents or copies thereof as Secured Party may require. Omega New Master
Lessees shall maintain such records with respect to the Accounts and the conduct
and operation of its business as Secured Party may request, and will furnish to
Secured Party all information with respect to the Accounts and the conduct and
operation of its business, including balance sheets, operating statements and
other financial information, as Secured Party may reasonably request from time
to time.
(b) Until such time as Secured Party shall notify Omega New
Master Lessees of the revocation of such power and authority by reason of an
Event of Default under the Omega New Master Lease (and effective only during the
continuance thereof), Omega New Master Lessees (i) may, only in the ordinary
course of business, at its own expense, sell, lease or furnish under contracts
of service any of the inventory normally held by Omega New Master Lessees for
such purpose; (ii) may use and consume any raw materials, work in process or
materials, the use and consumption of which is necessary in order to carry on
Omega New Master Lessees' business; (iii) replace Equipment in accordance with
the provisions of the Omega New Master Lease; and (iv) shall, at their own
expense, endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with respect to such
collection as Secured Party may reasonably request or, in the absence of such
request, as Omega New
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<PAGE> 9
Master Lessees may deem advisable. A sale in the ordinary course of business
shall not include a transfer in partial or total satisfaction of a debt.
6. DEFAULT/REMEDIES
(a) The occurrence of any of the following shall constitute an
Event of Default under this Amended and Restated Security Agreement:
(i) Any Event of Default under the Omega New Master Lease
that is not cured within any applicable grace or cure
period specified therein;
(ii) The Omega New Master Lessees fail to observe or
perform any term of this Amended and Restated
Security Agreement after the expiration of ten (10)
days following written notice of a monetary default
and thirty (30) days following written notice of a
nonmonetary default; or
(iii) Any representation or warranty contained herein
proves to be untrue when made in any material respect
which materially and adversely affects Secured Party
and is not cured within twenty (20) days of following
written notice.
(b) Whenever an Event of Default under this Amended and
Restated Security Agreement shall have occurred and so long as its continues,
Secured Party may exercise from time to time any rights and remedies, including
the right to immediate possession of the Collateral, available to it under this
Amended and Restated Security Agreement or applicable law. Secured Party shall
have the right to hold any property of Lessees then in or upon any Facility (but
excluding any property belonging to patients, guests or visitors at the
Facilities) at the time of repossession not covered by this Amended and Restated
Security Agreement until return is demanded in writing by Omega New Master
Lessees. Omega New Master Lessees agree, in case of the occurrence of an Event
of Default under this Amended and Restated Security Agreement and upon the
request of Secured Party, to assemble, at their expense, all of the Collateral
at a convenient place acceptable to Secured Party and to pay all costs of
Secured Party of collection of the Obligations, and enforcement of rights
hereunder, including reasonable attorneys' fees and legal expenses, including
participation in bankruptcy proceedings, and the expenses of locating the
Collateral and the expenses of any repairs to any realty or other property to
which any of the Collateral may be affixed or be a part. If the Collateral is
disposed of at a public sale, the parties agree that a public sale with at least
ten (10) calendar days prior notice to Omega New Master Lessees and notice to
the public by one publication in a local newspaper is commercially reasonable.
If any notification of intended
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<PAGE> 10
disposition of any of the Collateral is required by law, such notification, if
mailed, shall be deemed reasonably and properly given if sent at least ten (10)
days before such disposition, by first class mail, postage prepaid, addressed to
the Omega New Master Lessees either at the address set forth in the notice
section hereof, or at any other address of the Omega New Master Lessees
subsequently delivered in writing to Secured Party.
(c) TO THE EXTENT PERMITTED BY LAW, OMEGA NEW MASTER LESSEES
AGREE THAT SECURED PARTY SHALL, UPON THE OCCURRENCE OF ANY AMENDED AND RESTATED
SECURITY AGREEMENT EVENT OF DEFAULT, HAVE THE RIGHT TO PEACEFULLY RETAKE ANY OF
THE COLLATERAL. LESSEES WAIVE ANY RIGHT THEY MAY HAVE, IN SUCH INSTANCE, TO A
JUDICIAL HEARING PRIOR TO SUCH RETAKING.
7. GENERAL
(a) Time shall be deemed of the essence with respect to this
Amended and Restated Security Agreement.
(b) Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in its possession if it
takes such action for that purpose as Omega New Master Lessees request in
writing, but failure of Secured Party to comply with any such request shall not
of itself be deemed a failure to exercise reasonable care. Failure of Secured
Party to preserve or protect any rights with respect to such Collateral against
any prior parties shall not be deemed a failure to exercise reasonable care in
the custody and preservation of the Collateral.
(c) Any delay on the part of Secured Party in exercising any
power, privilege or right under the Omega New Master Lease, this Amended and
Restated Security Agreement or under any other instrument or document executed
by Omega New Master Lessees in connection herewith shall not operate as a waiver
thereof. No single or partial exercise thereof, or the exercise of any other
power, privilege or right shall preclude other or further exercise thereof, or
the exercise of any other power, privilege or right. The waiver by Secured Party
of any default by Omega New Master Lessees shall not constitute a waiver of any
subsequent defaults but shall be restricted to the default so waived.
(d) All rights, remedies and powers of Secured Party hereunder
are irrevocable and cumulative, and not alternative or exclusive, and shall be
in addition to all rights, remedies and powers given by the Omega New Master
Lease or the Commercial Code, or any other applicable laws now existing or
hereafter enacted.
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<PAGE> 11
(e) Whenever the singular is used hereunder, it shall be
deemed to include the plural (and vice-versa), and reference to one gender shall
be construed to include all other genders, including neuter, whenever the
context of this Amended and Restated Security Agreement so requires. Section
captions or headings used in this Amended and Restated Security Agreement are
for convenience and reference only and shall not affect the construction
thereof.
(f) Whenever possible each provision of this Amended and
Restated Security Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Amended
and Restated Security Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Amended and Restated Security Agreement.
(g) This Amended and Restated Security Agreement may be
executed in multiple counterparts, each of which shall be considered an original
but all of which, when taken together, shall constitute one agreement.
(h) The rights and privileges of Secured Party hereunder shall
inure to the benefit of its successors and assigns, and this Amended and
Restated Security Agreement shall be binding on all assigns and successors of
Omega New Master Lessees as may be permitted under the Omega New Master Lease.
(i) In the event of any action to enforce this Amended and
Restated Security Agreement or to protect the security interest of Secured Party
in the Collateral, or to protect, preserve, maintain, process, assemble,
develop, insure, market or sell any Collateral, Omega New Master Lessees agree
to pay the costs owed and expenses thereof, together with reasonable attorneys'
fees (including fees incurred in appeals and post judgment enforcement
proceedings).
(J) THIS AMENDED AND RESTATED SECURITY AGREEMENT SHALL BE
CONSTRUED, AND THE RIGHTS AND OBLIGATIONS OF THE OMEGA NEW MASTER LESSEES AND
SECURED PARTY SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MICHIGAN, EXCEPT THAT THE LAWS OF THE STATE WHERE THE COLLATERAL IS LOCATED
SHALL GOVERN THIS AMENDED AND RESTATED SECURITY AGREEMENT (A) TO THE EXTENT
NECESSARY TO PERFECT AND/OR ENFORCE THE LIENS CREATED BY THIS AMENDED AND
RESTATED SECURITY AGREEMENT AND TO THE EXTENT NECESSARY TO OBTAIN THE BENEFIT OF
THE RIGHTS AND REMEDIES SET FORTH HEREIN WITH RESPECT TO THE COLLATERAL, AND (B)
FOR PROCEDURAL
11
<PAGE> 12
REQUIREMENTS THAT MUST BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED.
(K) OMEGA NEW MASTER LESSEES CONSENT TO IN PERSONAM
JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED AND MICHIGAN AND AGREE THAT ALL DISPUTES CONCERNING THIS
AMENDED AND RESTATED SECURITY AGREEMENT BE HEARD IN THE STATE AND FEDERAL COURTS
LOCATED IN THE STATE IN WHICH THE COLLATERAL IS LOCATED OR IN MICHIGAN. OMEGA
NEW MASTER LESSEES AGREE THAT SERVICE OF PROCESS MAY BE EFFECTED UPON THEM UNDER
ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS
LOCATED OR MICHIGAN, AND OMEGA NEW MASTER LESSEES IRREVOCABLY WAIVE ANY
OBJECTION TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED AND MICHIGAN.
(l) No amendment to this Amended and Restated Security
Agreement shall be effective unless the same shall be in writing and signed by
the parties.
(m) Nothing contained herein shall be construed as in any way
modifying or limiting the effect of terms or conditions set forth in the Omega
New Master Lease, but each and every term and condition hereof shall be in
addition thereto.
(n) All notices required or permitted to be given hereunder
shall be given and deemed effective as provided in the Omega New Master Lease.
The parties hereby agree that a notice sent as specified in this paragraph at
least ten (10) days before the date of any intended public sale or the date
after which any private sale or other intended disposition of the Collateral is
to be made shall be deemed to be reasonable notice of such sale or other
disposition.
[SIGNATURE PAGES FOLLOW]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Security Agreement as of the date first written above.
SECURED PARTY:
OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
OMEGA NEW MASTER LESSEES:
BRITWILL INDIANA PARTNERSHIP, an
Arizona general partnership
By: BritWill Investments-I, Inc., a
Delaware corporation, its General
Partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
BRITWILL INVESTMENTS-II, INC., a
Delaware corporation
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
13
<PAGE> 14
AMBERWOOD COURT, INC., a Colorado
corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
THE ARBORS HEALTH CARE CENTER, INC., an
Arizona corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
BROOKSHIRE HOUSE, INC., a Colorado
corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
CHRISTOPHER NURSING CENTER, INC., a
Colorado corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
LOS ARCOS, INC., a Colorado corporation
By:
------------------------------
Name:
------------------------------
14
<PAGE> 15
Title:
------------------------------
PUEBLO NORTE, INC., a Colorado
corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
RIO VERDE NURSING CENTER, INC., a
Colorado corporation
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
15
<PAGE> 16
EXHIBIT A
WELLINGTON MANOR
Parcel I
- --------
A part of the West Half of the Northeast Quarter of Section 36, Township 16
North, Range 4 East in Marion County, Indiana, being more particularly described
as follows:
Commencing at the Northeast corner of the West half of the Northeast Quarter of
said Section 36; thence South 89(Degree)49'04" West (assumed bearing) along the
North line thereof 372.28 feet to a point on the Westerly right-of-way line of
Wellesley Boulevard extended northerly; thence South 00(Degree)25'43" East along
said Westerly right-of-way line 673.00 feet; thence South 51(Degree)20'50" West
142.84 feet to the Point of Beginning; thence South 27(Degree)32'02" West 97.24
feet; thence South 00(Degree)10'56" East 200.00 feet to a point on the North
line of real estate conveyed to Wellington Village Apartments by a Warranty Deed
recorded December 30, 1975 as Instrument No. 75-72619 in the Office of the
Recorder of Marion County, Indiana; (the following 2 calls being along the
Northern boundary lines of said real estate); (1) thence South 16(Degree)49'04"
West 400.00 feet; thence South 89(Degree)49'04" West parallel with the North
line of said Half-Quarter Section 411.58 feet to a point on the Easterly
right-of-way line of Interstate 465, said point being a non-tangent curve
concave Easterly having a central angle of 13(Degree)21'16" and a radius of
1966.19 feet; thence Northerly along said curve and Easterly right-of-way line
an arc distance of 458.28 feet (said arc being subtended by a chord having a
bearing of North 07(Degree)37'38" West and a length of 457.24 feet); thence
North 08(Degree)52'32" East along said Easterly right-of-way line 156.27 feet;
thence South 90(Degree)00'00" East 529.64 feet; thence North 51(Degree)20'50"
East 100.60 feet to the Point of Beginning.
Parcel II:
- ----------
A non-exclusive easement for ingress and egress appurtenant to Parcel I over and
across the following described real estate:
Part of the Northeast corner of the Northeast Quarter of said Section 36,
Township 16 North, Range 4 East in Marion County, Indiana, more particularly
described as follows:
Commencing at the Northeast corner of the Northeast Quarter of said Section 36;
thence South 89(Degree)49'04" West along the North line of said Quarter Section
a distance of 1709.060 feet; thence South 00(Degree)25'43" East along said
Westerly right-of-way line a distance of 673.00 feet to the Point of Beginning
of the land described herein: thence South 51(Degree)20'50"
<PAGE> 17
West a distance of 142.84 feet; thence South 27(Degree)32'02" West a distance of
97.240 feet; thence South 00(Degree)10'56" East a distance of 13.726 feet;
thence North 51(Degree)20'50" East a distance of 172.705 feet; thence North
83(Degree)06'15" East a distance of 37.544 feet to a point on a curve concave
Northeasterly, having a central angle of 22(Degree)13'29" and a radius of
203.315 feet; thence Northwesterly along the arc of said curve a distance
2
<PAGE> 18
of 78.865 feet (said arc being subtended by a chord having a bearing of North
11(Degree)32'27.5" West and a length of 78.371 feet) to the Point of Beginning.
Commonly known as: Cedar Crest Health Center
1924 Wellesley Boulevard
Indianapolis, Indiana 46202
3
<PAGE> 19
EXHIBIT A
CLOVERLEAF OF KNIGHTSVILLE
A part of the Northeast quarter of the Southeast quarter of Section 32, Township
13 North, Range 6 West, Clay County, Indiana, more particularly described as
follows:
Commencing at the Southeast corner of said Northeast quarter of the Southeast
quarter; thence North 00(Degree)00'00" East (assumed bearing) along the East
line of said Southeast quarter a distance of 146.000 feet to the POINT OF
BEGINNING: Thence North 89(Degree) 52' 36" West a distance of 394.265 feet;
thence North 01(Degree) 27' 33" West a distance of 135.502 feet; thence South
89(Degree) 59' 47" West a distance of 49.320 feet; thence North 00(Degree) 02'
27" East a distance of 172.504 feet to the centerline of Pieske Street; thence
South 89(Degree) 53' 47" East along said centerline a distance of 446.913 feet
to the said East line of the Southeast quarter; thence South 00(Degree) 00' 00"
East along said East line a distance of 308.000 feet to the Point of Beginning.
Commonly known as: Harty Nursing Home
Box "D"
Knightsville, Indiana 47857
<PAGE> 20
EXHIBIT A
KENDALVILLE MANOR
A tract of land located in the Southeast Quarter of Section 34, Township 35
North, Range 11 East, in Noble County, the State of Indiana, more fully
described as follows:
Commencing at a Brass pin situated in the Northeast Corner of said Southeast
Quarter; thence N 89(Degree) 50' 23" W (Grid) for 1321.38 feet along the North
line of said Southeast Quarter to the Northeast Corner of the West Half of said
Southeast Quarter, the true point of beginning; thence S 0(Degree) 15' 14" E for
966.28 feet along the East line of said West Half to the North right-of-way line
of the Conrail Railroad; thence N 66(Degree) 32' 34" W for 540.41 feet along
said North right-of-way line; thence N 0(Degree) 15' 14" W for 752.54 feet along
a line parallel with the East line of said West Half to the North line of said
Southeast Quarter; thence S. 89(Degree) 50' 23" E for 494.80 feet along said
North line to the Point of Beginning.
Commonly known as: KENDALVILLE MANOR HEALTHCARE CENTER
1802 East Dowling Street Extended
P. O. Box 488
Kendalville, Indiana 46755
<PAGE> 21
EXHIBIT A
REUNION PLAZA
Name of Facility: Reunion Plaza
Facility Address: 1401 Hampton Drive
Texarkana, Texas 75503
Purchase Price:
Legal Description:
All that certain tract or parcel of land situated in the A.J. KING HEADRIGHT
SURVEY, A-331 and the WILLIS OLDHAM HEADRIGHT SURVEY, A-458, Bowie County,
Texas, being a portion of a certain 4.983 acre tract of land conveyed by Purvis
S. Cork, Jr. to John V. Rich and wife, Lawanda Rich by deed dated June 18, 1992,
of record in Volume 1787, Page 279, Real Property Records, Bowie County, Texas.
Subject tract also being a portion of a certain 20 acre tract of land conveyed
by W. O. Cork, et us to P. S. Cork by deed of record in Volume 86, Page 591,
Deed Records, Bowie County, Texas and a portion of a certain 60 acre tract of
land conveyed to W. O. Cork on December 16, 1912 and being more particularly
described by metes and bounds as follows:
COMMENCING at a point in a fence line on the East line of said King Headright
Survey, same being the West line of said Oldham Headright Survey, said Point
being S 02(Degree) 05' 35" East, 1974.81 feet from the Northwest corner of said
Oldham Headright Survey; THENCE S 89(Degree) 17' 29" E, with a fence line, same
being the South corner of said 4.983 acre tract, 269.08 feet to an iron pipe for
corner at a fence corner at the Southeast corner of said 4.983 acre tract;
THENCE N 01(Degree) 24' 11" W, with a fence line, same being the East line of
said 4.983 acre tract, 125.00 feet to an 1/2" iron pin set for corner and the
POINT OF BEGINNING for the herein described tract; THENCE N 01(Degree) 24' 11" W
with a fence line, same being the East line of said 4.983 acre tract, 332.40
feet to a 1/2" iron pin set for corner at a fence corner; THENCE N 00(Degree)
44' 20" W, continuing with the East line of said 4.983 acre tract, 189.28 feet
to a creosote post found on the South right-of-way line of a public road known
as Cork Lane; THENCE S 88(Degree) 33' 05" W, with the South right-of-way line of
said Cork Lane. 341.82 feet to a 1/2" iron pin set for corner on the East
right-of-way line of Hampton Road; THENCE S. 01(Degree) 34' 19" E, with the East
right-of-way line to said Hampton Road, 508.93 feet to a 1/2" iron pin set for
corner; THENCE S 89(Degree) 17' 29" E, 338.36 feet to the POINT OF BEGINNING and
containing 4.013 acres (174,827.0091 square feet) of land, more or less.
<PAGE> 22
EXHIBIT A
HERITAGE PLAZA
Name of Facility: Heritage Plaza
Facility Address: 600 West 52nd
Texarkana, Texas 75501
Purchase Price: $3,850,000
Legal Description:
All that certain tract or parcel of land situated in the WILLIS OLDHAM HEADRIGHT
SURVEY, A-458, Bowie County, Texas, being a portion of a certain 16.1 acre tract
of land conveyed to A.E. Wilbur by deed dated November 19, 1930, of record in
Volume 138, Page 17, Deed Records, Bowie County, Texas. Subject tract being a
portion of the same 2.306 acre tract of land conveyed by Jerry M. Holley and
wife, Katherine Y. Holley, to John V. Rich, Jr. and wife, Lawanda J. Rich, by
deed dated March 10, 1989, of record in Volume 1303, Page 336, Real Property
Records, Bowie County, Texas and being more particularly described by metes and
bounds as follows:
BEGINNING at an iron pipe found for corner at the Northwest corner of said 2.306
acre tract, said point being in the South right-of-way line of Interstate
Highway No. 30 and being S 89(Degree) 42' 00" E, 232.39 feet along said I-30
right-of-way line from its intersection with the East right-of-way line of the
Kansas City Southern Railroad; THENCE S 89(Degree) 42' 00" E, with said I-30
right-of-way line, 353.46 feet to an iron pipe found for corner at the Northeast
corner of said 2.306 acre tract; THENCE S 03(Degree) 56' 11" E, with the East
line of said 2.306 acre tract, 277.09 feet to a 1/2" iron pin set for corner in
West 52nd Street, said point being the Southeast corner of said 2.306 acre
tract; THENCE West, with the South line of said 2.306 acre tract, same being
along said West 52nd Street, 376.39 feet to a 1/2" iron pin set for corner at
the Southwest corner of said 2.306 acre tract; THENCE N 00(Degree) 48' 20" E,
with the West line of said 2.306 acre tract, 278.31 feet to the POINT OF
BEGINNING and containing 2.32 acres (101,206.1221 square feet) of land, more or
less.
<PAGE> 23
EXHIBIT A
PINE HAVEN
Name of Facility: Pine Haven
Facility Address: 4808 Elizabeth
Texarkana, Texas 75501
Purchase Price: $2,500,000
Legal Description:
All that certain tract or parcel of land situated in the WILLIS OLDHAM HEADRIGHT
SURVEY, A-458, Bowie County, Texas. Being a portion of Lot No. 6 of the
Subdivision of Block No. 5 & 6 of said Oldham Headright Survey. Subject tract
being the same 2.64 acre tract of land described in a Warranty Deed from Beverly
Enterprises-Texas, Inc. to John V. Rich and wife, Lawanda Rich, and Donald R.
Moore and wife, Virginia Moore, dated July 30, 1990, recorded in Volume 1508,
Page 338, Real Property Records, Bowie County, Texas and being more particularly
described by metes and bounds as follows:
BEGINNING at an iron pipe found for corner at the Southwest corner of said 2.64
acre tract, said point being 10.00 feet East and 215.00 feet North from the
Southwest corner of said Lot No. 6, said point also being 25.00 feet East of the
Center of Elizabeth Street and 215.00 feet North of the center of 48th Street;
THENCE N 00(Degree) 34' 00" E, 25.00 feet East of and parallel to the center of
said Elizabeth Street, same being the West line of the above referenced 2.64
acre tract, 335.00 feet to an iron pipe found for corner at the Northwest corner
of said 2.64 acre tract;
THENCE East with the North line of said 2.64 acre tract, 343.20 feet to an iron
pipe found for corner at the Northeast corner of said 2.64 acre tract;
THENCE S 00(Degree) 34' 00" W, with the East line of said 2.64 acre tract,
335.00 feet to an iron pipe found for corner at the Southeast corner of said
2.64 acre tract;
THENCE West, with the South line of said 2.64 acre tract, 343.20 feet to the
POINT OF BEGINNING and containing 2.640 acres (114,966.3770 square feet) of
land, more or less.
<PAGE> 24
EXHIBIT A
PINE GROVE
BEING 3.432 acres of land, more or less, a part of the Jesse Amason Survey,
Abstract No. 10, Shelby County, Texas; and being a portion of Tract #6 described
and conveyed to Justine Solomon, Consuella Pierce, Bradeline S. Brown and Edna
Lee Brown in Partition Deed, dated the respective dates of the acknowledgments
set out therein, filed for record on May 26, 1978, recorded in Volume 545, Page
710, Deed Records, Shelby County, Texas, out of the Wade Brown Estate; and being
a portion of the 14.4377 acres, more or less, described in Deed from Bradeline
S. Brown, Consuella Pierce, Justine Solomon and Edna Lee Shiloh to Center
Chamber of Commerce, dated May 24, 1983, recorded in Volume 623, Page 43, Deed
Records, Shelby County, Texas; and being the same land described in Deed from
Center Chamber of Commerce, Inc. to T.S.P. Corporation, Inc., dated September
28, 1985, acknowledged on October 29, 1985, filed for record on September 29,
1985 and recorded in Volume 658, Page 477, Deed Records, Shelby County, Texas;
and being described by metes and bounds as follows, to-wit:
BEGINNING at a 3/8 inch iron rod found for a corner, at the most Northwesterly
corner of a .504 acre park, that bears North 72 degrees 24 minutes 47 seconds
West a distance of 526.43 feet from a 1/2 inch iron rod found at the
intersection of the West right-of-way of Loop 500 and the most Northerly line of
said Tract #6 of the Wade Brown Estate;
THENCE South 17 degrees 35 minutes 13 seconds West along the most Westerly
boundary line of said .504 acres park a distance of 160.00 feet to a 1/2 inch
iron rod set for a corner;
THENCE South 62 degrees 35 minutes 11 seconds West along the most Northerly
R.O.W. line of a 40 foot street and utility easement a distance of 115.44 feet
to a 1/2 inch iron rod set for a corner;
THENCE North 72 degrees 24 minutes 47 seconds West along said 40 foot easement a
distance of 550.82 feet to a 1/2 inch iron rod set for a corner;
THENCE North 17 degrees 35 minutes 13 seconds East a distance of 241.63 feet to
a 1/2 inch iron rod set for a corner; THENCE South 72 degrees 24 minutes 47
seconds East along the most Northerly boundary line of said Tract #6 of the Wade
Brown Estate a distance of 632.45 feet to a 3/8 inch iron rod found for a corner
and the POINT OF BEGINNING, containing 3.432 acres of land more or less.
<PAGE> 25
EXHIBIT A
PLEASANT MANOR
Being a part of the John Harris Survey, Abstract 430, Waxahachie, Ellis County,
Texas, and being the same tract described in deed from Pleasant Manor
Corporation to Pleasant Manor Nursing Home, Inc. recorded in Volume 742, Page
498, Deed Records, Ellis County, Texas, and being more particularly described by
its metes and bounds as follows:
BEGINNING at a 1/2 inch steel rod set on the West line of I.H. 35 E and at the
Northeast corner of the above-referenced tract;
THENCE South 34 degrees 52 minutes 00 seconds East, with the West line of said
I.H. 35 E, 477.59 feet to a 1/2 inch pipe, found at the East corner of said
tract;
THENCE South 59 degrees 25 minutes 50 seconds West, with the South line of said
tract, 362.86 feet to a 1/2 inch steel rod, set;
THENCE North 34 degrees 56 minutes 24 seconds West, generally along a fence,
361.51 feet to a 3/8 inch steel rod, found at a fence post at an interior corner
of said tract;
THENCE South 59 degrees 40 minutes 01 seconds West, generally along a fence,
371.18 feet to a 1/2 inch steel rod set of the Southeast line of F.M. Highway
876;
THENCE North 29 degrees 59 minutes 00 seconds East, with the Southeast line of
said Highway 876, 231.70 feet to a 1/2 inch steel rod, found;
THENCE North 59 degrees 23 minutes 31 seconds East, generally along a fence,
524.03 feet to the POINT OF BEGINNING and containing 4.67 acres of land, or
203,482.8 square feet of land.
<PAGE> 26
EXHIBIT A
LOS ARCOS
A portion of the East half of Section 20, and a portion of the West half of
Section 21, both Sections being in Township 21 North, Range 7 East of the Gila
and Salt River Base and Meridian, Coconino County, Arizona, described as
follows:
COMMENCING at the Southwest corner of the Abandonment Plat for Frisco Hills
Subdivision as recorded in Case 1, Map 181, records of Coconino County, Arizona;
THENCE North 01(Degree)32'17" East along the West line of the said Abandonment
Plat, a distance of 60.00 feet to the POINT OF BEGINNING, being a found -1/2
inch rebar with plastic cap marked "LS 11369"; THENCE South 87(Degree)37'05"
West (measured (M) and record (R1) per Warranty Deed Docket 904, page 470,
records of Coconino County, Arizona (Basis of Bearings) along the Westerly
extension of the Northerly right of way of University Avenue as shown on the
said Abandonment Plat and as described in that document recorded in Docket 984,
page 939, records of Coconino County, Arizona, (R3),416. 10 feet (M), 416.05
feet (R1 and R.3), to a 1/2 inch rebar with plastic cap marked "LS 11369", being
a point on the boundary of Woodlands Village Unit One as shown on the plat
thereof recorded in Case 4, Map 62, records of Coconino County, Arizona (R2);
THENCE North 01(Degree)31'16" West (M), North 01(Degree)3 2'17" West (R1), North
01(Degree)39'32" West (R2), along said boundary 416.11 feet (M), 416.05 feet
(R1), 416.01 feet (R.2), to a 1/2 inch rebar with plastic cap marked "LS 11369",
being the Southwest corner of Lot 10 of said Woodlands Village Unit One; THENCE
North 87(Degree)39'24" East (M), North 87(Degree)37'05" East (R1), North
87(Degree)29'22" East (R2), along the South boundary of said Lot 10, 416.00 feet
(M), 416.05 feet (R1), 416.10 feet (R2), to an aluminum cap marked "ARENCO
13010", being the Southeast corner of said Lot 10, being a point on the West
line of the said Abandonment Plat; THENCE South 01(Degree)32'03" East (M), South
01(Degree)32'17" East (R1), along the said West line of the Abandonment Plat
415.82 feet (M), 416.05 feet (R1), to the POINT OF BEGINNING; EXCEPT that
portion of the above described parcel described as follows:
A portion of the East half of Section 20, and a portion of the West half of
Section 21, both Sections being in Township 21 North, Range 7 East of the Gila
and Salt River Base and Meridian, Coconino County, Arizona, described as
follows:
COMMENCING at the Southwest corner of the Abandonment Plat for Frisco Hills
Subdivision as recorded in Case 1, Map 181, records of Coconino County, Arizona;
THENCE North 01(Degree)32'17" East along the West line of the said Abandonment
Plat 60.00 feet to a found 1/2 inch rebar with plastic cap marked "LS 11369";
THENCE South 87(Degree)37'05" West (Measured (M) and Record (R1) per Warranty
Deed Docket 904, page 870, records of Coconino County, Arizona) [Basis of
Bearings] along the Westerly extension of the
B-9-1
<PAGE> 27
Northerly right of way of University Avenue as shown on the said Abandonment
Plant and as described in that document recorded in Docket 984, page 939,
records of Coconino County, Arizona (R3), 416.10 feet (M), 416.05 feet (R1 and
R3), to a 1/2 inch rebar with plastic cap marked "LS 11369", being a point on
the boundary of Woodlands Village Unit One as shown on the plat thereof recorded
in Case 4, Map 62, records of Coconino County, Arizona (R2), being the TRUE
POINT OF BEGINNING; THENCE North 01(Degree)31'16" West (M), North
01(Degree)32'17" West (R1), North 01(Degree)39'32" West (R2), along said
boundary 416.11 feet (M), 416.05 feet (R1), 416.01 feet (R2), to a 1/2 inch
rebar with plastic cap marked "LS 11369", being the Southwest corner of Lot 10
of said Woodlands Village One; THENCE North 87(Degree)39'24" East (M), North
87(Degree)37'05" East (R1), North 87(Degree)29'22" East (R2), along the South
boundary of said Lot 10, a distance of 111.90 feet; THENCE South
01(Degree)31'16" East, a distance of 416.03 feet to the said Westerly extension
of the Northerly right of way of University Avenue; THENCE South
87(Degree)37'05" West (M and R1), a distance of 111.90 feet along said Westerly
extension of the Northerly right of way to the POINT OF BEGINNING.
B-9-2
<PAGE> 28
EXHIBIT A
RIO VERDE
PARCEL 1
All that portion of the Northwest Quarter of the Southwest Quarter of Section
34, Township 16 North, Range 3 East of the Gila and Salt River Base and
Meridian, Yavapai County, Arizona, described as follows:
COMMENCING for reference at the West Quarter corner of said Section 34 from
which the center Quarter corner of said Section bears North 89(Degree)13'11"
East; THENCE North 89(Degree)13'11" East along the East-West midsection line of
said Section 34, a distance of 87.60 feet (record) 87.85 feet (calculated) to a
point; THENCE South 00(Degree)15'00" East (record) South 00(Degree)13'41" East
(calculated), a distance of 48.00 feet to a point on the Southerly right of way
line of East Mingus Avenue, said point also being on the Easterly right of, way
line of South Willard Street; THENCE continuing South 00(Degree)15'00" East
along said Easterly right of way line, a distance of 354.64 feet (record) 354.61
feet (calculated) to the, TRUE POINT OF BEGINNING; THENCE continuing South
00(Degree)15'00" East along said Easterly right of way line, a distance of
340.00 feet (record) South 00(Degree)13'41" East 340.02 feet (measured) and
340.05 feet (measured) to a point from which the Northwest corner of Palatka
Acres, a subdivision as recorded in Book 10 of Maps and Plats, Page 40, records
of Yavapai County, Arizona bears South 00(Degree)15'00" East, a distance of
259.15 feet therefrom; THENCE North 89(Degree)42'40" East parallel to and 259.15
feet Northerly of the Northerly line of the said Palatka Acres, a distance of
344.04 feet (record) North 89(Degree)42'30" East 344.14 feet (measured) and
North 89(Degree)42'00" East, 344.16 feet (measured) to a point; THENCE North
00(Degree)15'00" West, a distance of 340.00 feet (record) North 00(Degree)14'28"
West, 340.06 feet (measured) and North 00(Degree)15'31" West, 340.05 feet
(measured) to a point; THENCE South 89(Degree)42'40" West parallel to and 599.15
feet Northerly of the said Northerly line of Palatka Acres, a distance of 344.04
feet (record) South 89(Degree)42'05" West, 344.06 feet (measured) and South
89(Degree)42'01"West, 344.11 feet (measured) to the TRUE POINT OF BEGINNING.
EXCEPT all oil, minerals, ores and metals of every kind, as reserved in Deed
recorded in Book 187 of Deeds, page 331, records of Yavapai County, Arizona.
B-10-1
<PAGE> 29
PARCEL 2
An easement for ingress, egress and public utilities as created in Book 1536 of
Official Records, Page 685, records of Yavapai County, Arizona, lying 25 feet
North of, adjacent to and parallel with the following described centerline;
COMMENCING for reference at the West Quarter corner of Said Section 34; THENCE
89(Degree)13'11" East, along the East-West midsection line of said Section 34, a
distance of 87.60 feet to a point, said point being on the centerline of East
Mingus Avenue; THENCE South 00(Degree)15'00" East, a distance of 48.00 feet to
the Southerly right of way line of said East Mingus Avenue, said point also
being on the Easterly right of way line of South Willard Street; THENCE
continuing South 00(Degree)15'00" East, along said Easterly right of way line a
distance of 354.64 feet to the TRUE POINT OF BEGINNING; THENCE North
89(Degree)42'40" East, along the North line of the afore described parcel, a
distance of 690.14 feet to the POINT OF TERMINATION of this easement.
B-10-2
<PAGE> 30
EXHIBIT A
THE ARBORS
Following is a description of a parcel of land in Section 31, Township 14 North,
Range 5 East of the Gila and Salt River Base and Meridian, Yavapai County,
Arizona. The parcel described is the same parcel as the parcel described in Book
2310 of Official Records, Page 990 (all Book and Page references refer to the
official records of the Yavapai County Recorder). The parcel is more
particularly described as follows:
FROM the Southeast corner of Section 31; thence North 90(Degree)00'00" West,
along the South line of the Southeast Quarter of Section 31, and along the South
line of the parcel of land described in Book 150, Page 67, 219.00 feet to the
TRUE POINT OF BEGINNING of this description; thence North 90(Degree)00'00" West,
along the South line of the Southeast Quarter of Section 31, and along the South
line of the parcel of land described in Book 150, Page 67, 329.00 feet to the
Southwest corner thereof, and to the Southeast corner of the parcel of land
described in Book 2871, Page 566; thence North 01(Degree)03'06" West, along the
West line of the parcel of land described in Book 150, Page 67, and along the
East line of the parcel of land described in Book 2871, Page 566, 275.76 feet to
the Northeast corner thereof; thence continuing North 01(Degree)03'06" West,
along the West line of the parcel of land described in Book 150, Page 67, 20.24
feet to the Northwest corner thereof; thence North 01(Degree)03'21" East, along
the West line of the parcel of land described in Book 2046, Page 746, 163.14
feet to the Northeast corner thereof, monumented with a 1/2 inch rebar; thence
South 86(Degree)30'46" East, along the Southerly line of Wood Ditch which is
described in Book 56, Page 320, 23.92 feet; thence North 69(Degree)11'00" East,
along the Southerly line of Woods Ditch which is described in Book 56, Page 320,
266.58 feet to the Northwest corner of parcel of land described in Book 3026,
Page 499; thence South 00(Degree)03'00" East, along the West line of the parcel
of land described in Book 3026, Page 499, 106.85 feet to the Southwest corner
thereof; thence North 75(Degree)10'35" East, along the Southerly line of the
parcel of land described in Book 3026, Page 499, 260.73 feet, to the Westerly
right of way line of State Route 260; thence Southerly, along the Westerly right
of way line of State Route 260, along a curve to the left, having a radius of
987.93 feet and a central angle of 08(Degree)52'20", an arc distance of 152.98
feet (chord bearing South 09(Degree)21'19" East, chord length 152.83 feet) to
the East line of the Southeast Quarter of Section 31; thence South
00(Degree)03'40" East, along the east line of the Southeast Quarter of Section
31, and along the East line of the parcel of land described in Book 150, Page
67, 148.42 feet to a point which lies 213.00 feet from the Southeast corner of
Section 31; thence North 90(Degree)00'00" West, parallel with the South line of
the Southeast Quarter of Section 31, 219.00 feet; thence South 00(Degree)03'40"
East, parallel with the East line of the Southeast of Section 31, 213.00 feet,
to the South line of the Southeast Quarter of Section 31, the TRUE POINT OF
BEGINNING of this description.
<PAGE> 31
EXHIBIT A
PUEBLO NORTE
That part of the Southeast quarter of Section 4, Township 9 North, Range 22
East, Gila and Salt River Meridian, Show Low, Navajo County, Arizona, described
as follows:
COMMENCING at the South quarter corner (a found 1" O.I.P.) of said Section 4;
THENCE North 00(Degree)25'02" North along the mid-section line, a distance of
1690.42 feet; THENCE East, a distance of 198.28 feet; THENCE South
88(Degree)05'15" East (record South 88(Degree)03'06" East, 400.00 feet), a
distance of 400.09 feet to the Southeast corner of the parcel of land described
in Docket 843, page 637 being a found 1/2" I.R. w/cap - L.S. #15402 and being
the TRUE POINT OF BEGINNING; THENCE North 00(Degree)27'22" West (record North
00(Degree)24'39" West, 300.91 feet), a distance of 300.87 feet; THENCE North
87(Degree)58'08" West (record North 87(Degree)54'26" West, 373.92 feet), a
distance of 373.91 feet; THENCE along a curve to the left, concave to the
Southeast having a central angle of 92(Degree)28'06" (record central angle
92(Degree)30'13", length 40.36 feet) and a radius of 25.00 feet, a distance of
40.36 feet; THENCE South 00(Degree)26'14" East (record South 00(Degree)24'39"
East, 275.73 feet), a distance of 275.59 feet; THENCE South 88(Degree)05'15"
East (record South 88(Degree)03'06" East, 400.00 feet), a distance of 400.09
feet to the TRUE POINT OF BEGINNING.
<PAGE> 32
[EXHIBIT A]
AMBERWOOD
Lots 13 through 16 inclusive, Douthit-Ordelheide Subdivision,
City and County of Denver,
State of Colorado
<PAGE> 33
EXHIBIT A
BROOKSHIRE
Lots 9, 10, 11 and 12, Douthit-Ordelheide Subdivision,
City and County of Denver,
State of Colorado
<PAGE> 34
EXHIBIT A
CHRISTOPHER HOUSE
The West one-half of the East one-half of the West one-half of the Northeast
one-quarter of the Northwest one-quarter of Section 25, Township 3 South, Range
69 West of the 6th Principal meridian, excepting therefrom the South 792 feet
thereof and the West 100.65 feet of the North 190 feet thereof, and the North 30
feet of the East 65 feet thereof.
County of Jefferson
State of Colorado
<PAGE> 35
EXHIBIT A
COLONIAL PINES
FIRST TRACT: Being a survey of 5.1692 acres of land, being out of and a part of
the T. N. B. Greer Survey, A-122 of San Augustine County, Texas, being out of a
52 acre tract described in a deed conveyed to FRANCES S. BRADBERRY by W. F.
STEPHENSON dated 2-24-1986, recorded in Vol. 251, Page 541 of the Deed Records
of San Augustine County, Texas, said 5.1692 acres being located South of and
adjoins the SBL of HINES 10.00 acre tract, about 0.6 miles West of U.S. #96 and
being about 1.4 miles West of the courthouse in San Augustine, Texas and being
more particularly described by metes and bounds as follows, to-wit:
BEGINNING: At a 1/2" iron rod set for the N.E. corner of this 5.1692 acre
tract, being the S.E. corner of HINES HEALTH CARE CENTER 10.00 acre tract,
being in the EBL of said 52 acre tract, being the in the WBL of VERLYN
MITCHELL'S 20 acre tract on the East side of a dirt road that runs South from
F.M. #1277.
THENCE: N 84 deg. 51' 37" W, 467.69 ft. along the SBL of HINES 10.00 acre tract
to a 1/2" iron rod for its S.W. corner, being the N.W. corner of this 5.1692
acre tract.
THENCE: S 05 deg. 08' 23" W. 481.46 ft. along the WBL of this 5.1692 acre tract
to a 1/2" iron rod set for its S.W. corner, a 12" red oak mkd. "X" brs. S 13
deg. E. 20.0 ft. and a 8" tree mkd. "X" brs. N. 38 deg. W. 14.6 ft.
THENCE: S 84 deg. 51' 37" E. 467.69 ft. along the SBL of this 5.1692 acre tract
to a 1/2" iron rod set for its S.E. corner at an old corner fence post on the
East side of said dirt road, being an interior corner of said 52 acre tract and
the S.W. corner of MITCHELL's 20 acre tract, a 4" pine mkd. "X" brs. N 76 deg.
E. 2.9 ft.
THENCE: N 05 deg. 08' 23" E 481.46 ft. along the East side of said dirt road,
being the EBL of said 52 acre tract and the WBL of Mitchell's 20 acre tract to
the point of beginning containing 5.1692 acres of land.
SECOND TRACT: Being a survey of 10.00 acres of land, being out of and a part of
the T.N.B. GREER SURVEY, A-122 of San Augustine County, Texas, being out of the
N.E. corner of a 52 acre tract described in a Deed conveyed to FRANCES BRADBERRY
by W. F. STEPHENSON dated 2-24-1986, recorded in Vol. 251, Page 541 of the Deed
Records of San Augustine County, Texas, said 10.00 acres being located South of
and adjoins the South R.O.W. line of F.M. #1277 about 0.6 miles West of U.S. #96
and being about 1.4
<PAGE> 36
miles West of the courthouse in San Augustine, Texas and being more particularly
described by metes and bounds as follows to-wit:
BEGINNING at a 3/8" iron rod found for the N.E. corner of said 52 acre tract
being in the South R.O.W. line of F. M. #1277, said corner being on the East
side of a dirt road running South and being 1.2 ft. North of a 8" creosote post
and being the N.W. corner of VERLYN MITCHELL'S 20 acre tract and the N.E. corner
of this 10.00 acre tract.
THENCE: S 76 deg 34' 51" W. 348.61 ft. along the South R.O.W. line of F.M. #1277
to a concrete R.O.W. marker for corner.
THENCE: Along the curving to the right South R.O.W. line of F. M. #1277 with a
degree of 2 deg 04' 31", delta angle = 3 deg 49' 25", radius = 2760.88 ft. arc
distance = 184.25 ft. and with a chord bearing and distance of S. 78 deg. 10'
08" W. 184.22 ft. to a 1/2" iron rod set for the N.W. corner of this 10.00 acre
tract in the South R.O.W. line of F.M. #1277 near a 10" creosote fence corner
post just East of FRANCES BRADBERRY'S house.
THENCE: S 02 deg 41' 40" E. 286.05 ft. along a fence, being East of FRANCES
BRADBERRY'S house to a 1/2" iron rod set for an angle corner at the base of a
10" creosote corner fence post.
THENCE: S 05 deg 08' 23" W. 549.28 ft. to a 1/2" iron rod set for the S.W.
corner of this 10.00 acre tract.
THENCE: S 84 deg 51' 37" E. 467.69 ft. to a 1/2" iron rod set for the S.E.
corner of this 10.00 acre tract on the East side of said dirt road, being the
EBL of said 52 acre tract and the WBL of VERLYN MITCHELL's 20 acre tract.
THENCE: N 05 deg 08' 23" E. 997.39 ft. along the EBL of said 52 acre tract,
being on the East side of said dirt road to the point of beginning containing
10.00 acres of land.
<PAGE> 37
EXHIBIT A
WEST PLACE
All that certain lot, tract, or parcel of land situated in the C.M. Walters
Survey Abstract 800, Henderson County, Texas, being all of a certain called
23.094 acre tract of land described by deed recorded in Volume 1134, Page 123 of
the Deed Records of Henderson County, Texas, and being all of Lots 17 and 18,
Royal Crest Village as shown of record in Cabinet D, Slide 175 of the Plant
Records of said county. Said lot or parcel of land being more fully described by
metes and bounds as follows:
BEGINNING on a found 3/4 inch iron rod for the Northwest corner of this tract
and the original Northwest corner of the above mentioned 23.094 acre tract
located on the South line of State Highway #31;
THENCE; with said South line N 74 deg. 41 min. 31 sec. E. 284.86 feet, N 77 deg.
42 min. 46 sec. E 601.69 feet and N 74 deg. 41 min. 31 sec. E. 310.76 feet to a
point for the Northeast corner of this tract, also being the Northeast corner of
the above mentioned Lot 18 located in the center line of Royal Crest Drive;
Witness: S 74 deg. 41 min. 31 sec. W 15.00 feet, a found 1/2 inch iron rod;
THENCE; with said center line S 15 deg. 15 min. 29 sec. E. 236.00 feet to a
point for an ELL corner of this tract, also being the Southeast corner of the
above mentioned Lot 17; Witness: S 74 deg. 41 min. 31 sec. W 15.00 feet, a found
1/2 inch iron rod;
THENCE; S 74 deg. 41 min. 31 sec. W 140.00 feet to a point for an ell corner of
this tract, also being the Southwest corner of said Lot 17;
THENCE; S 16 deg. 15 min. 29 sec. E. 770.07 feet to a found 3/4" inch rod for
the Southeast corner of this tract;
THENCE S 89 deg. 18 min. 44 sec. W. 1290.49 feet to a found 1/2 inch iron rod
for the Southwest corner of this tract;
THENCE N 01 deg. 27 min. 19 sec. W. 733.24 feet to the place of beginning and
containing 23.849 acres of land.
<PAGE> 38
EXHIBIT A
SOUTH PLACE
All that certain lot, tract, or parcel of land situated in the Daniel Harrison
Survey, Abstract 279, Henderson County, Texas, and being all of a certain called
2.6750 acres tract of land described by Deed recorded in Volume 1298, Page 664,
of the Deed Records of Henderson County, Texas. Said lot or parcel of land being
more fully described by metes and bounds as follows:
BEGINNING on a found 5/8" iron rod for the Northeast corner of this tract and
the above mentioned 2.675 acre tract located in the center line of Gibson Road
and the West R. O. W. Margin of State Highway #19.
THENCE with said West line 60.00 feet and parallel to the center lien of said
State Highway #19 S 27 deg. 38' 41" E 265.64 feet to a found 1/2" iron rod for
the most Easterly Southeast corner of this tract and the Northeast corner of the
Church of God 1.00 acre tract recorded in Volume 554, Page 73.
THENCE with the North line of said 1.00 acre tract S 89 deg 50'32" W 172.31 feet
to an "X" in concrete for an ell corner of this tract and the Northwest corner
of said 1.00 acre tract;
THENCE S 00 DEG. 43'35" E 197.10 feet to set T-Post for the most Southerly
Southeast corner of this tract;
THENCE S 89 deg. 34'00" W 209.21 feet to a found 1/2" iron rod for the
Southwest corner of that tract;
THENCE N 00 deg. 26.00" W 432.76 feet to a found 3/8" iron rod for the Northwest
corner of this tract located in said center line of Gibson Road;
THENCE with said center line N 89 deg. 37'18" E 259.04 feet to the place of
beginning and containing 2.6750 acres of land.
<PAGE> 39
EXHIBIT B
COLLATERAL
The "Collateral" covered by this Financing Statement is all of the
personal property described below relating to the operation of any Facility or
Facilities, wherever located, that Omega New Master Lessees now own or shall
hereafter acquire or create, immediately upon the acquisition or creation
thereof, consisting of the following:
(a) Accounts. To the extent permitted by law, all accounts, accounts
receivable, deposits, prepaid items, documents, chattel paper, instruments,
contract rights, general intangibles, choses in action (as those terms may be
defined in the Commercial Code) relating to the operation of any Facility or
Facilities, including any right to any refund of any taxes paid to any
governmental authority prior to or after the date hereof, any letters of credit,
and drafts under them, given in support of any of the foregoing, and all
ledgers, printouts, papers, data, file materials and information relating to any
account debtors in respect thereof, and/or to the operation of any Facility or
Facilities, and all rights of access to such books, records, ledgers, printouts,
data, file materials and information, and all property in which such books,
records, ledgers, printouts, data, file materials and information are stored
(the "Accounts"); and
(b) Inventory. All property, now owned or hereafter acquired, held at
any Facility or Facilities by or for Omega New Master Lessees for sale, rent, or
lease, or furnished or to be furnished by the Omega New Master Lessees under any
contract of service, or raw materials or work in process and their products, or
materials used or consumed in their operations, including but not limited to all
inventory, goods, raw materials, work in process, finished goods, tangible
property, stock in trade, wares, containers and shelving useful for storing and
merchandise used in, rented, leased or sold in the operation of any Facility or
Facilities; and
(c) Equipment. All equipment, furniture, fixtures and other personal
property used in connection with the operation of a Facility or Facilities,
whether now owned or hereafter acquired by Omega New Master Lessees, wherever
located, together with all accessions, additions, parts, attachments,
accessories, or appurtenances thereto including but not limited to machinery,
furniture, fixtures and movable equipment, leasehold improvements, any tools,
dies, substitutions, replacements and appurtenances to them or intended for use
with them, and all books and records now owned or hereafter acquired pertaining
to any of the above described property, including but not limited to any
computer readable memory and any computer hardware or software necessary to
process such memory, wherever located (the "Equipment"); and
<PAGE> 40
(d) Instruments. Omega New Master Lessees' interest of any kind in any
negotiable instrument, as that term is defined in the Commercial Code, or any
other writing which evidences a right to payment of money and is of a type which
is, in the operation of any Facility or Facilities, transferred by delivery
alone or by delivery with any necessary endorsement or assignment; and
(e) Investment Property. All investment property, as that term is
defined in the Commercial Code, now owned or hereafter acquired pursuant to the
operation of any Facility or Facilities, including all securities, whether
certificated or uncertificated, security entitlements, securities accounts,
commodity contracts and commodity accounts; and
(f) Proceeds. Proceeds from the operation of any Facility or
Facilities, including, without limitation, proceeds of hazard or other insurance
policies and eminent domain or condemnation awards, of all of the Collateral,
together with any and all deposits or other sums at any time credited by or due
from Secured Party to Omega New Master Lessees and any and all instruments,
documents, policies and certificates of insurance, securities, goods, accounts
receivable, choses in action, chattel paper, cash, property and the proceeds
thereof (whether or not the same are Collateral or Proceeds thereof hereunder)
owned by Omega New Master Lessees or in which Omega New Master Lessees have an
interest, including but not limited to stock rights, subscription rights,
dividends, stock dividends, stock splits, or liquidating dividends, and all
cash, accounts, chattel paper and general intangibles arising from the sale,
rent, lease, casualty loss or other disposition of the Collateral, which are now
or at any time hereafter in possession or under the control of Secured Party or
in transit by mail or carrier to or from Secured Party or in the possession of
any third party acting on behalf of Secured Party, without regard to whether
Secured Party received the same in pledge, for safekeeping, as agent for
collection or transmission or otherwise, or whether Secured Party has
conditionally released the same (the "Proceeds"); and
(g)Insurance Rights. All rights under contracts of insurance now owned
or hereafter acquired covering any of the Collateral; and
(h) Other Property. All other tangible and intangible property of Omega
New Master Lessees now or hereinafter acquired by Omega New Master Lessees and
related to the operation of any Facility or Facilities; and
(i) Rights. All rights, remedies, powers and/or privileges of Omega New
Master Lessees with respect to any of the foregoing.
<PAGE> 1
EXHIBIT 10.9
INDIANA RETURNED FACILITIES AGREEMENT
THIS INDIANA RETURNED FACILITIES AGREEMENT ("Agreement") is dated as of
February 1, 1999 and is entered into by OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation, having its principal office at 900 Victors Way, Suite 350,
Ann Arbor, Michigan 48108 ("Lessor"), and BRITWILL INDIANA PARTNERSHIP, an
Arizona general partnership, having its principal office at 15300 North 90th
Street, Suite 100, Scottsdale, Arizona 85200 ("Lessee").
RECITALS
This Agreement is made and entered into with reference to the following
recitals:
A. Lessor and BritWill Investments-I, Inc., a Delaware
corporation ("BritWill-I") entered into a lease dated November
1, 1992 ("Indiana Lease") for nine (9) healthcare facilities
located in the state of Indiana ("Indiana Facilities"). Lessee
is the assignee of the interest of BritWill-I in the Indiana
Lease, and has assumed the obligations and liabilities of
BritWill-I thereunder.
B. Pursuant to a Debtors' First Amended Joint Plan of
Reorganization dated October 15, 1998, as amended, entered in
the United States Bankruptcy Court for the District of Arizona
in the matters of In Re: Unison HealthCare Corporation (Case
Nos. B-98-06583-PHX-GBN through B-98-06612 PHX-GBN) and In Re:
BritWill Investments-l. Inc. (Case Nos. B-98-0173-PHX-GBN
through B-98-1075-PHX-GBN) ("Plan"), Lessor and Lessee have
agreed, among other things, to terminate the Indiana Lease as
to six (6) of the Indiana Facilities, namely, the Land
described on EXHIBITS A-1 THROUGH A-6 together with any and
all Fixtures, Lessor's Improvements, Related Rights and
Lessor's Personal Property constituting the Leased Property
with respect to such Land ("Indiana Returned Facilities"), and
to continue the lease of the remaining Indiana Facilities
under the terms and conditions of the Omega New Master Lease
between Lessor and Lessee, BritWill Investments-II, Inc., a
Delaware corporation and subsidiaries of Signature HealthCare
Corporation dated December 31, 1998 ("Omega New Master
Lease").
C. Capitalized terms used and not otherwise defined herein have
the respective meanings given them in the Omega New Master
Lease.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and
1
<PAGE> 2
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties to this Agreement agree as follows:
I. INDIANA RETURNED FACILITIES LEASE TERMINATION DATE.
The Indiana Returned Facilities Lease Termination Date shall be the
earlier of (a) the last day of the month in which the operation of the Indiana
Returned Facilities may lawfully be transferred to an entity of Lessor's choice
which has been legally licensed to operate the Indiana Returned Facilities, (b)
the date which is ten (10) Business Days after a Notice from Lessee to Lessor in
which Lessee elects to terminate the Omega New Master Lease as to the Indiana
Returned Facilities pursuant to Section 4.k. of the First Amendment to Omega New
Master Lease dated as of February 1, 1999 and (c) September 1, 1999.
2. TERMINATION.
a. Upon the terms and conditions hereinafter set forth, the Omega New
Master Lease shall terminate as to the Indiana Returned Facilities upon the
Indiana Returned Facilities Lease Termination Date.
b. On the Indiana Returned Facilities Lease Termination Date, Lessee
shall convey, assign and transfer to Lessor all its right, title and interest in
the Indiana Returned Facilities, in accordance with the Plan.
c. On or before the Indiana Returned Facilities Lease Termination Date,
Lessee shall execute and deliver to Lessor:
(i) A Termination of Lease, in recordable form, for each
of the Indiana Returned Facilities, in the form
attached hereto as EXHIBIT B ("Termination of
Lease"),
(ii) A quit claim deed in recordable form to each of the
Indiana Returned Facilities, in the form attached
hereto as EXHIBIT C ("Deeds"), and
(iii) A Bill of Sale in the form attached hereto as EXHIBIT
D-1 covering (x) any and all interest Lessee may have
in any of Lessor's Personal Property with respect to
the Indiana Returned Facilities, including without
limitation any of Lessor's Personal Property located
elsewhere but primarily used in connection with such
Facilities, and (y) the Lessee's Personal Property
listed on EXHIBIT D-2 attached hereto.
2
<PAGE> 3
d. Until the Indiana Returned Facilities Lease Termination Indiana
Returned Facilities Lease Termination Date, the Indiana Returned Facilities
shall be operated for and on behalf of Lessor pursuant to the Omega New Master
Lease, as amended.
e. Upon Lessor's reasonable request at any time after the Indiana
Returned Facilities Lease Termination Date, Lessee shall execute such additional
documents or instruments as may further evidence or confirm the termination of
the Omega New Master Lease and Lessee's rights with respect to, and interest in,
the Indiana Returned Facilities.
3. PRORATIONS; COSTS
a. Prorations. Notwithstanding the fact that the Indiana Returned
Facilities Lease Termination Date will not occur until the Indiana Returned
Facilities Lease Termination Date, all revenues (including but not limited to
payments due from the residents or patients of the Indiana Returned Facilities)
and expenses (including but not limited to payroll and employee benefits)
related to the ownership or operation of the Indiana Returned Facilities,
including without limitation Rent, shall be prorated as of January 31, 1999 (the
"Proration Date"), with Lessee entitled to all operating income accrued through
the Proration Date and responsible for all operating expenses arising or
accruing through the Proration Date and Lessor entitled to Gross Revenues
received or accrued and responsible for all operating expenses paid or accrued
after the Proration Date.
b. Recording Charges. Lessor shall pay for the recording of the
Termination of Lease and the Deeds. Lessee shall pay for the recording of any
instruments necessary to remove encumbrances other than the Permitted
Encumbrances.
c. License Transfer Costs. Lessor shall pay all transfer fees and other
expenses related to the transfer of licenses and permits from Lessee to Lessor
or Lessor's nominees, provided, however that any such expenses that arise from
Lessee's breach of the Indiana Lease shall be borne by Lessee.
d. Taxes/Prorations. Real and Personal Property taxes, assessments and
similar charges shall be prorated as of the Proration Date, with Lessee
responsible therefor for the period prior to and including the Proration Date
and with Lessor responsible for the period after the Proration Date.
e. Utilities. Lessee shall pay for all utilities consummed by the
Indiana Returned Facilities through the Proration Date and shall arrange for all
such utilities to be billed in the name of Lessor or its manager after the
Indiana Returned Facilities Lease Termination
3
<PAGE> 4
Indiana Returned Facilities Lease Termination Date. Lessees under the Omega New
Master Lease or the manager of the Indiana Returned Facilities shall pay all
utility charges accrued and due for the period from February 1, 1999 through the
Indiana Returned Facilities Lease Termination Date out of the Indiana Returned
Facilities Returned Facilities Gross Revenues as provided in the Omega New
Master Lease. Lessee hereby assigns to Lessor its right to any deposits which
may have been made with any utility company.
f. Contracts. Subject to the terms of the Management Agreement and at
the written request of Lessor, Lessee shall terminate all contracts for the
providing of goods or services to the Indiana Returned Facilities effective as
of the Indiana Returned Facilities Lease Termination Date. Notwithstanding
anything in this Agreement to the contrary, Lessor assumes no liability for
payables of the Indiana Returned Facilities prior to and including the Proration
Date or after the Proration Date if applicable to goods or services provided to
the Indiana Returned Facilities prior to the Proration Date.
g. Employees; Schedule of Employee Benefits. Within ten (10) days of
the date hereof, Lessee shall deliver to Lessor a schedule (the "Benefits
Schedule") that reflects all accrued and/or vested vacation pay and sick pay due
to and/or coming due to the employees of each of the Indiana Returned Facilities
subsequent to the Proration Date (the "Benefit Pay"). Lessee shall be liable
for, and shall pay, such Benefit Pay to each employee entitled to such pay. Any
benefits under employee benefits plans shall be governed by the applicable plan
document.
h. Accounting Patient Trust Funds and Patient Prepaid Accounts. Within
ten (10) days of the date hereof, Lessee shall provide Lessor with an accounting
of all patient trust funds (the "Patient Trust Funds") being held by Lessee as
of the Proration Date and of all fees and expenses which have been prepaid by
residents/patients and have not been applied as of the Proration Date (the
"Patient Prepaid Funds"). Such accounting shall set forth the names of the
residents/patients or prospective residents/patients for whom such funds are
held, the amounts held on behalf of each resident/patient or prospective
resident/patient and Lessee hereby warrants that the accounting will be true,
correct and complete as of the Proration Date. Lessee shall, by separate check,
deliver to Lessor within ten (10) days of the date hereof such Patient Trust
Funds and Patient Prepaid Funds and, subject to the indemnifications set forth
in Section 3 below, Lessor shall thereafter be responsible for such Patient
Trust Funds and Patient Prepaid Funds, to the extent so transferred by Lessee.
i. Accounts Receivable. Lessee hereby appoints Lessor as Lessee's agent
for the collection of all accounts receivable accrued in connection with the
Lessee's operation of the Indiana Returned Facilities. Lessee shall retain its
right, title and interest in and to all unpaid amounts and accounts receivable
with respect to the Indiana Returned Facilities
4
<PAGE> 5
which relate to any period prior to and including the Proration Date, including,
but not limited to, amounts or accounts receivable arising from rate
adjustments, Medicare or Medicaid or any other third party payor underpayments,
insurance proceeds, rebates or any other monies which relate to the period prior
to and including the Proration Date even if such adjustments or payments occur
after the Proration Date. Lessee shall remain liable for any overpayments made
to Lessee prior to and including the Proration Date for which payment is due to
Medicare, Medicaid or any other third party payor after the Proration Date. If,
following the Proration Date, Lessor receives payment from any federal or state
agency or other third party payor or from any patient or resident, which
represents payment for services rendered by Lessee prior to and including the
Proration Date, then Lessor shall promptly forward such payments to Lessee in
accordance with the following provisions:
(a) If such payments either specifically indicate on the
accompanying remittance advice, or if the parties agree, that they
relate to the period prior to and including the Proration Date, a copy
of the applicable remittance advise and the payment received shall be
forwarded to Lessee by Lessor.
(b) If such payments indicate on the accompanying remittance
advice, or if the parties agree, that they relate to the period after
the Proration Date, they shall be retained by Lessor.
(c) If such payments indicate on the accompanying remittance
advice, or if the parties agree, that they relate to periods both prior
to and after the Proration Date, the portion thereof which relates to
the period after the Proration Date shall be retained by Lessor and the
balance shall be remitted to Lessee.
(d) Any payments received by Lessor which fail to designate
the period to which they relate, will first be applied to any
post-Proration Date balances, with the excess, if any, remitted to
Lessee.
Lessor shall be entitled to receive and collect all accounts
receivable (including, without limitation, any payments received from Medicare
or Medicaid) attributable to the operation of the Indiana Returned Facilities
after the Proration Date. Each payment of accounts receivable received by Lessee
after the Proration Date and attributable to the operation of the Indiana
Returned Facilities after the Proration Date shall be deemed a "Lessor's
Receipt". If Lessee receives any Lessor's Receipt after the Proration Date,
Lessee shall hold Lessor's Receipt in trust and for the benefit of Lessor.
Within ten (10) days following each receipt by Lessee of a Lessor's Receipt,
Lessee shall pay such Lessor's Receipts to Lessor.
5
<PAGE> 6
d. Post-Proration Date Adjustment. If as of the Proration Date the
disposition of Gross Revenues and payment of operating expenses for the period
prior to the Proration Date does not correspond to the proration set forth on
Subsection 3(a), above, or either Lessee or Lessor fails to pay recording
charges or license transfer costs which it is to pay pursuant to this Section 3,
notwithstanding anything in the Omega New Master Lease to the contrary, the
monthly installment first payable by Lessees after the Proration Date under the
Omega New Master Lease (and, if necessary, the next succeeding monthly
installment or installments) shall be deemed increased or decreased as needed in
order to effect such proration and allocation of recording charges and license
transfer costs as soon as possible after the Proration Date.
4. INDEMNIFICATION
a. Lessee, at Lessee's sole cost and expense, hereby agrees to
indemnify, defend and hold harmless Lessor for, from and against the full amount
of any and all "Losses" (as defined below) arising from, asserted against,
resulting from, imposed on, or suffered or incurred by Lessor, directly or
indirectly, in respect of, as a consequence of, or arising out of or in
connection with, Lessee's operation of the Indiana Returned Facilities on or
before the Proration Date, including, without limitation, (i) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any of the Indiana Returned Facilities, including without limitation any
claims of malpractice, (ii) the failure to pay any obligations of Lessee under
the Indiana Lease, (iii) any failure on the part of Lessee to perform or comply
with any of the terms of the Indiana Lease, including without limitation
Lessee's obligations under Article IV ("Impositions"), Section 7.3 ("Certain
Environmental Matters") and Section 23 ("Indemnification"), all of which shall
survive the termination of the Indiana Lease as to the Indiana Returned
Facilities for the greater of five (5) years from the Proration Date or the
period, if any, expressly set forth in the Indiana Lease with respect to such
obligation, (iv) the nonperformance of any contractual obligation, express or
implied, assumed or undertaken by Lessee or any party in privity with Lessee
with respect to the Indiana Returned Facilities or any business or other
activity carried on with respect to the Indiana Returned Facilities during the
Term or thereafter to the extent that any conduct by Lessee or any such person
(or failure of such conduct thereby if the same should have been undertaken
during such time of possession and leads to such damage or loss) causes such
loss or claim, (v) clawbacks of Medicare or Medicaid or any other third party
payor underpayments, insurance proceeds, rebates or any other monies which
relate to the period prior to and including the Proration Date, even if such
adjustments or payments occur after the Proration Date, and (vi) the failure of
Lessee to transfer to Lessor, as provided in Section 3(h), the full amount of
such Patient Trust Funds and Patient Prepaid Funds then or thereafter shown to
have been delivered to Lessee and outstanding as of the Proration Date.
6
<PAGE> 7
"Losses" shall mean any and all liabilities, obligations, losses,
damages (including, without limitation, punitive damages), penalties, fines,
demands, claims, actions or causes of action, suits, assessments, costs,
expenses or disbursements, including, without limitation, all interest,
attorneys' fees, disbursements and expenses, and all other professional or
consultants' fees, disbursements and expenses paid or incurred, including,
without limitation, the costs and expenses of any and all actions, suits,
proceedings, demands, assessments, judgments, settlements and compromises
relating thereto and reasonable attorneys' fees and expenses in connection
therewith.
Immediately upon receipt by any Lessor of notice of a claim upon which
a claim of indemnity hereunder may be made (individually a "Claim" and
collectively the "Claims"), Lessor shall give Lessee notice thereof. Lessee
shall defend Lessor, with attorneys reasonably approved by Lessor, against any
and all actions or proceedings that may be brought against Lessor in connection
with or arising out of any such Claim. Lessor shall have the right, but not the
obligation, to participate in any such proceedings. If Lessor reasonably
believes there to be a conflict of interests between Lessor and Lessee, Lessor
shall have the right to defend itself against such action or proceeding at
Lessee's expense. Lessee shall not enter into a settlement of any Claim without
the prior written consent of Lessor (which consent may not be withheld or
delayed unreasonably), unless such settlement includes an unconditional release
of Lessor from all liability arising out of such Claim.
5. NOTICE
All notices, requests, demands and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been given (a) on the date of personal delivery or
transmission by telegram, cable or facsimile; (b) on the third (3rd) Business
Day following deposit in the United States mail, postage prepaid, by registered
or certified mail, return receipt requested, or (c) on the first (1st) Business
Day after delivery to a nationally recognized overnight courier service, in each
case, addressed as follows, or to such address, person or entity as either
party, shall designate by notice to the other in accordance herewith:
If to Lessee: BritWill Indiana Partnership
c/o Unison HealthCare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Telephone: (602) 607-4000
Fax: (602) 607-4114
Attn: Michael A. Jeffries
7
<PAGE> 8
With a Copy to: BritWill Indiana Partnership
c/o Unison HealthCare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Telephone: (602) 607-4000
Fax: (602) 607-4114
Attn: Nir E. Margalit
If to Lessor: Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, Michigan 48108
Telephone: (734) 887-0200
Fax: (734) 887-0201
With a Copy to: Dykema Gossett
ATTN: Fred J. Fechheimer
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
Tel: (248) 203-0743
Fax: (248) 203-0763
6. FACILITY TRADE NAMES
Lessee hereby assigns to Lessor all of Lessee's rights to the use the
name under which each Indiana Returned Facility has done business during the
Term (the "Facility Trade Name") in the market in which such Facility is
located, and represents and warrants that it has not assigned any rights with
respect to the use of such names to any Affiliate or third party. Neither Lessee
nor any Debtor (as defined in the Plan) shall use any Facility Trade Name in
such market in connection with any business that competes with such Facility.
7. CONTINUING COOPERATION
Lessee shall upon Lessor's reasonable request or requests from time to
time assist and cooperate with Lessor in concluding the transfer of ownership of
the Indiana Returned Facilities as quickly and efficiently as possible,
including, by way of example and not
8
<PAGE> 9
limitation, cooperation in the transfer of licenses and permits, retention of
employees and of vendor relationships if and to the extent desired by Lessor,
and transfer and preservation of patient and other business records.
8. COUNTERPARTS
This Agreement may be executed in separate counterparts, each of which
shall be considered as original when each party has executed and delivered to
the other one or more copies of this Agreement.
9. CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the state of Michigan without regard to Michigan's conflict of
interest rules.
10. ENTIRE AGREEMENT
This Agreement and the Omega New Master Lease as amended constitute the
entire agreement between the parties with respect to the subject matter hereof,
and no representation, understanding, promise or condition concerning the
subject matter hereof shall be binding upon either party unless expressed
therein.
SIGNATURE PAGE FOLLOWS
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Indiana Returned
Facilities Agreement as of the date first written above.
LESSOR:
OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation
By: ___________________________________
Its: _________________________
LESSEE:
BRITWILL INDIANA PARTNERSHIP,
an Arizona general partnership
By: BritWill Investments-I, Inc.,
a Delaware corporation,
its General Partner
By:________________________
Its: President
10
<PAGE> 11
EXHIBIT A
"INDIANA RETURNED FACILITY"
ENGLISH ESTATES
TRACT I:
A PART OF THE EAST HALF OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST, SITUATED
IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS FOLLOWS:
FROM THE NORTHEAST CORNER OF THE SOUTHEAST QUARTER OF THE AFORESAID SECTION 8,
PROCEED THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST (THE BEARING COMPUTED
FROM THE CENTERLINE OF I-65 AS SHOWN ON STATE HIGHWAY PLANS) ALONG THE QUARTER
SECTION LINE, 665.70 FEET TO THE POINT OF BEGINNING. FROM SAID POINT OF
BEGINNING, PROCEED THENCE SOUTH 00 DEGREES 07 MINUTES 46 SECONDS WEST, WITH THE
QUARTER-QUARTER-QUARTER SECTION LINE, 382.55 FEET; THENCE SOUTH 62 DEGREES 30
MINUTES 00 SECONDS WEST, 141.42 FEET; THENCE NORTH 30 DEGREES 37 MINUTES 36
SECONDS WEST, 199.46 FEET; THENCE SOUTH 59 DEGREES 22 MINUTES 24 SECONDS WEST,
WITH AN EXISTING DRIVE, 160.00 FEET, THENCE SOUTH 30 DEGREES 37 MINUTES 36
SECONDS EAST, 190.72 FEET; THENCE SOUTH 53 DEGREES 45 MINUTES 00 SECONDS WEST,
WITH THE CENTERLINE OF PRAIRIE CREEK, 421.76 FEET; THENCE NORTH 40 DEGREES 00
MINUTES 00 SECONDS WEST, WITH THE CENTERLINE OF OLD U.S. #52, 91.59 FEET; THENCE
NORTH 00 DEGREES 08 MINUTES 55 SECONDS EAST, WITH THE QUARTER-QUARTER SECTION
LINE, 692.40 FEET; THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST, WITH THE
QUARTER SECTION LINE, 572.337 FEET; THENCE NORTH 40 DEGREES 52 MINUTES 00
SECONDS WEST, THE CENTERLINE OF OLD U.S. #52, 20.92 FEET; THENCE NORTH 89
DEGREES 15 MINUTES 13 SECONDS EAST, 605.61 FEET; THENCE SOUTH 00 DEGREES 01
MINUTES 21 SECONDS WEST, 16.00 FEET; THENCE NORTH 89 DEGREES 15 MINUTES 13
SECONDS EAST, WITH THE QUARTER SECTION LIEN, 646.16 FEET TO THE POINT OF
BEGINNING.
(REF. ONLY, 8.2472 ACRES, MORE OR LESS)
SUBJECT TO AN EASEMENT FOR INGRESS AND EGRESS TO A CONTIGUOUS TRACT, SAID
EASEMENT BEING MEASURED PERPENDICULARLY 10 FEET LEFT AND 10 FEET RIGHT FROM A
CENTERLINE WHICH IS DESCRIBED AS FOLLOWS:
Exhibit A-1
<PAGE> 12
FROM THE AFORESAID NORTHEAST CORNER OF THE SOUTHEAST QUARTER, PROCEED THENCE
SOUTH 00 DEGREES 06 MINUTES 37 SECONDS WEST, 485.09 FEET; THENCE SOUTH 89
DEGREES 15 MINUTES 13 SECONDS WEST, 1,247.66 FEET TO THE POINT OF BEGINNING.
FROM SAID POINT OF BEGINNING, PROCEED THENCE NORTH 56 DEGREES 18 MINUTES 06
SECONDS EAST, 101,67 FEET; THENCE NORTH 59 DEGREES 22 MINUTES 24 SECONDS EAST,
154.16 FEET TO A PERIMETER CORNER OF THE AFORDSAID TRACT; AND ALSO SUBJECT TO A
10 FOOT EASEMENT MEASURED PERPENDICULARLY 10 FEET LEFT FROM A CENTERLINE
DESCRIBED AS FOLLOWS:
BEGIN AT THE EAST END OF THE PREVIOUSLY DESCRIBED CENTERLINE, BEING A POINT ON
THE PERIMETER DESCRIPTION, AND PROCEED THENCE NORTH 59 DEGREES 22 MINUTES 24
SECONDS EAST, ALONG THE PREVIOUSLY DESCRIBED PERIMETER, 160.00 FEET; AND ALSO
SUBJECT TO THE PRIVILEGE OF USING 10 FOOT EASEMENT ON THE RIGHT SIDE OF THE
PREVIOUSLY DESCRIBED 160 FOOT CENTERLINE; AND ALSO SUBJECT TO A LIMITED ACCESS
RIGHT-OF-WAY ACROSS THE WESTERNMOST TIP AND SOUTHWESTERN TIP, FOR I-65. SUBJECT
TO AN EASEMENT FOR A FRONTAGE ROAD CONTIGUOUS TO THE LIMITED ACCESS
RIGHT-OF-WAY, ALSO SUBJECT TO AN EASEMENT FOR PRAIRIE CREEK LEGAL DRAIN ON AND
ALONG THE ENTIRE SOUTHEASTERN BOUNDARY. ALL DIMENSIONS COMPUTED FROM ELECTRONIC
MEASUREMENTS.
(REF. ONLY, 0.6770 A., M/L, EASEMENT AREA
FRONTAGE ROAD 0.4201 A., M/L)
EXCEPT:
A PART OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST,
SITUATED IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS
FOLLOWS:
FROM THE NORTHEAST CORNER OF THE AFORESAID SOUTHEAST QUARTER, PROCEED THENCE
SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST, 665.70 FEET ALONG THE QUARTER
SECTION LINE; THENCE SOUTH 00 DEGREES 07 MINUTES 46 SECONDS WEST, 194.83 FEET TO
THE POINT OF BEGINNING. FROM SAID POINT OF BEGINNING, CONTINUE THENCE SOUTH 00
DEGREES 07 MINUTES 46 SECONDS WEST, 187.72 FEET; THENCE SOUTH 62 DEGREES 30
MINUTES 00 SECONDS WEST, 141.42 FEET ALONG THE APPROXIMATE CENTERLINE OF PRAIRIE
CREEK; THENCE NORTH 30 DEGREES 37 MINUTES 36 SECONDS WEST, 209.46 FEET; THENCE
NORTH 59 DEGREES 22 MINUTES 24 SECONDS EAST, 15.00 FEET; THENCE CURVE LEFT, WITH
A 107.98 FOOT RADIUS CURVE, 84.20 FEET (THE CHORD BEARING NORTH 37 DEGREES 02
MINUTES 07 SECONDS EAST, 82.08 FEET); THENCE SOUTH 89 DEGREES 52 MINUTES 14
SECONDS EAST, 170.23 FEET TO THE POINT OF BEGINNING.
Exhibit A-2
<PAGE> 13
SUBJECT TO A 25 FOOT DRIVEWAY EASEMENT OF EVEN WIDTH ON AND ALONG THE ENTIRE
NORTHWESTERN BOUNDARY TO PROVIDE INGRESS/EGRESS TO EXISTING TRACTS.
TRACT 2
A PART OF THE NORTHEAST QUARTER OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST,
SITUATED IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS
FOLLOWS
FROM THE SOUTHEAST CORNER OF THE NORTHEAST QUARTER OF THE AFORDSAID SECTION 8,
PROCEED THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST (THE BEARING COMPUTED
FROM THE CENTERLINE OF INTERSTATE #65, AS SHOWN ON STATE HIGHWAY PLAN), 665.70
FEET ALONG THE QUARTER SECTION LINE TO THE POINT OF BEGINNING. FROM SAID POINT
OF BEGINNING, CONTINUE THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST,
646.16 FEET ALONG THE QUARTER SECTION LINE; THENCE NORTH 00 DEGREES 01 MINUTES
21 SECONDS EAST, 16.00 FEET; THENCE SOUTH 89 DEGREES 15 MINUTES 12 SECONDS WEST,
387.41 FEET; THENCE NORTH 40 DEGREES 52 MINUTES 00 SECONDS WEST, 5.23 FEET;
ALONG THE RIGHT-OF-WAY OF AN EXISTING FRONTAGE ROAD; THENCE NORTH 89 DEGREES 15
MINUTES 13 SECONDS EAST, 1037.01 FEET; THENCE SOUTH 00 DEGREES 03 MINUTES 42
SECONDS WEST, 20.00 FEET ALONG THE QUARTER-QUARTER-QUARTER SECTION LINE TO THE
POINT OF BEGINNING.
(REF. ONLY, 0.3324 ACRES, MORE OR LESS)
NOTE: The acreage indicated in this legal description is solely for the purpose
of identifying the said tract and should not be construed as insuring the
quantity of land.
Exhibit A-3
<PAGE> 14
EXHIBIT A
"INDIANA RETURNED FACILITY"
ENGLISH SENIOR LIVING/ENGLISH ASSISTED LIVING
A PART OF THE SOUTHEAST QUARTER OF SECTION 25, TOWNSHIP 19 NORTH, RANGE 1 WEST,
SITUATED IN THE CITY OF LEBANON, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED
AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF NORTH LEBANON STREET (AS
DETERMINED FROM THE PLAT OF FAIRVIEW ADDITION, SHOWN IN PLAT BOOK #3, PAGE 80),
WITH THE SOUTH LINE OF ESSEX STREET (AS DETERMINED FROM THE PLAT OF FAIRGROUNDS
ADDITION, AS SHOWN IN PLAT BOOK #3, PAGE 107), AND PROCEED THENCE SOUTH 89
DEGREES 38 MINUTES 54 SECONDS EAST (AN ASSUMED BEARING, 294.46 FEET (SHOWN IN
OLD DEEDS AS 287.5 FEET); ALONG THE SOUTH LINE OF ESSEX STREET; THENCE SOUTH 41
DEGREES 20 MINUTES 51 SECONDS WEST, 372.30 FEET (SHOWN IN OLD DEEDS AS 365 FEET)
ALONG THE CENTER LINE OF AN EXISTING STREET DESIGNATED AS ULEN DRIVE, THENCE
NORTH 09 DEGREES 47 MINUTES 00 SECONDS WEST, 285.45 FEET (SHOWN AS 281.5 FEET IN
OLD DEEDS), ALONG THE CENTERLINE OF LEBANON STREET, TO THE POINT OF BEGINNING.
Exhibit A-4
<PAGE> 15
EXHIBIT A
"INDIANA RETURNED FACILITY"
CAPITAL CARE HEALTHCARE CENTER
Lots numbered 1, 2 and 3 in Bruce Place, an addition to the City of
Indianapolis, Indiana, as per plat thereof recorded in Plat Book 6, page 122, in
the Office of the Recorder of Marion County, Indiana.
Exhibit A-5
<PAGE> 16
EXHIBIT A
"INDIANA RETURNED FACILITY"
SUNSET MANOR
Situate in the State of Indiana, County of Putnam, City of Greencastle and being
a part of Plummer's Addition to said City of Greencastle, as the same appears of
record on the plat on file in the office of the Recorder of Putnam County,
Indiana, at Plat Book 1, page 268, more particularly described, to wit:
Beginning at a point 20 feet South 0 degrees 07 minutes 56 seconds East from the
Southwest Corner of Lot 18 in the Plummer's Addition to the City of Greencastle:
thence North 0 degrees 07 minutes 56 seconds West 140.55 feet to the Northwest
Corner of Lot 19 in said Addition; thence North 89 degrees 36 minutes 07 seconds
East 49.85 feet with the North line of said Lot 19; thence North 0 degrees 23
minutes 53 seconds West 50.1 feet to the North line of Lot 20 in said Addition;
thence East 246.26 feet to the Northeast Corner of Lot 25 in said Addition;
thence South 0 degrees 29 minutes 58 seconds East 318.87 feet to the South Line
of Section 21, Township 14 North, Range 4 West; thence South 89 degrees 53
minutes 40 seconds West 169.37 feet with said South Line; thence North 0 degrees
57 minutes 47 seconds West 19.8 feet; thence South 89 degrees 20 minutes 10
seconds West 57.97 feet; thence North 0 degrees 51 minutes 18 seconds West
100.05 feet; thence South 89 degrees 08 minutes 42 seconds West 59.0 feet to the
point of beginning.
ALSO, an easement for the purpose of ingress and egress, for the benefit of the
above described real estate, as created by Ingress and Egress Easement in a
certain Warranty Deed, dated October 26, 1965 and recorded October 28, 1965 in
Deed Record 130, page 152, over and across the following real estate in Putnam
County, Indiana: A part of Lots 5 and 6 of Plummer's Addition to the City of
Greencastle, Indiana, and part of previously vacated alley, more particularly
described as follows, to-wit:
Beginning at a point 20 feet North 0 degrees 07 minutes 56 seconds East from
Southwest Corner of Lot 18 of said Addition; thence South 89 degrees 08 minutes
42 seconds West 141 feet to the West line of Lot Number 5 of said Addition to a
point 20 feet North 9 degrees 07 minutes 56 seconds West from the Southwest
Corner thereof; thence South 0 degrees 07 minutes 56 seconds East 40 feet to a
point 20 feet South 0 degrees 07 minutes 56 seconds East from the Northwest
Corner of Lot Number 6 of said Addition; thence North 89 degrees 08 minutes 42
seconds East 141 feet parallel with the North line of said Lot Number 6 to a
point on the West line of said Lot 17 of said Addition, 20 feet South 0 degrees
07 minutes 56 seconds East from the Northwest Corner thereof; thence North 0
degrees 07 minutes 56 seconds West 40 feet to the place of beginning.
Exhibit A-6
<PAGE> 17
EXHIBIT A
"INDIANA RETURNED FACILITY"
LOCKERBIE HEALTHCARE CENTER
Lots numbered 11, 12, 13 and 14 in J.R. Routh's Subdivision of the Southwest
Quarter of Lot 21 in Johnson's Heirs Addition to the City of Indianapolis,
Indiana, as per plat thereof recorded in Plat Book 4, page 219, in the Office of
the Recorder of Marion County, Indiana. Also, 6.5 feet North of Lot 14, being a
part of a vacated alley.
ALSO:
Lots numbered 1, 2 and 3 in Eliza Jane Hoss' and Nelson Hoss' Subdivision of the
Northwest Quarter of Lot 21 in Johnson Heirs Addition to the City of
Indianapolis, Indiana, as per plat thereof recorded in Plat Book 3, page 206, in
the office of the Recorder of Marion County, Indiana. Also a strip of ground 7
feet wide South of the adjoining Lot 1, being a part of a vacated alley.
Exhibit A-7
<PAGE> 18
EXHIBIT A
"INDIANA RETURNED FACILITY"
PARKVIEW MANOR
Part of the West Half of the Southwest Quarter of Section 8, Township 16 North,
Range 4 East, Marion County, Indiana, more particularly described as follows,
to-wit:
Beginning in the South line of said Half Quarter Section at a point 193.31 feet
East of the Southwest corner of said Half Quarter Section; thence North 200 feet
to a point 193.25 feet East of the West line of said Half Quarter Section;
thence East parallel to said South line 182.61 feet to a point; thence South
parallel to said West line 200 feet to a point in said South line; thence West
in and along said South line 182.55 feet to the point of beginning.
Exhibit A-8
<PAGE> 1
EXHIBIT 10.10
INDIANA RETURNED FACILITY NOTE
$3,000,000 Ann Arbor, Michigan
Effective As Of January 31, 1999
1. Promise to Pay. The undersigned, BRITWILL INDIANA PARTNERSHIP, an
Arizona general partnership, having its principal office at 15300 North 90th
Street, Suite 100, Scottsdale, Arizona 85260 (hereinafter, "Borrower"), promises
to pay to OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation, at its
principal office at 900 Victors Way, Suite 350, Ann Arbor, Michigan 48108
(hereinafter "Lender"), or at such other place as Lender may designate in
writing, or to order, in lawful money of the United States of America, the
principal sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000), or such lesser
sum as is indicated on Lender's records, with interest thereon as provided in
Section 3 hereof and all other amounts which may become owing hereunder.
2. Definitions. Capitalized terms used but not otherwise defined in
this Indiana Returned Facility Note (the "Note") shall have the meaning set
forth in the Debtor's First Amended Joint Plan of Reorganization dated October
15, 1998, as amended, entered in the United States Bankruptcy Court for the
District of Arizona in the matters of In Re: Unison HealthCare Corporation (Case
Nos. B-98-06583-PHX-GBN through B-98-06612 PHX-GBN) and In Re: BritWill
Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through B-98-1075-PHX-GBN)
("Plan") and confirmed effective January 31, 1999. For all purposes of this Note
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in this Section have the meanings assigned to them in this
Section and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles as at the time
applicable, and (iii) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
Section or other subsection:
Accrual Rate: An annual rate of interest of seven percent (7%)
per year.
Affiliate: As defined in the New Omega Master Lease.
Default Interest Rate: The interest rate that is three hundred
(300) basis points above the Accrual Rate.
Event of Default: The occurrence of any of the following shall
constitute an Event of Default: (i) Borrower fails to pay when due, whether by
acceleration or otherwise, any amount payable under this Note; or (ii) an Event
of Default under the Omega New Master Lease.
<PAGE> 2
Indiana Returned Facility Note Guarantee: The Indiana Returned
Facility Note Guarantee dated as of January 31, 1999.
Indiana Returned Facility Guarantors: RainTree Healthcare
Corporation (formally known as Unison HealthCare Corporation), a Delaware
corporation, and BritWill HealthCare Company, a Delaware corporation.
LBO Transaction: Any transaction or series of related
transactions whereby, directly or indirectly, the acquisition of a majority or
controlling equity interest in RainTree (or any successor to RainTree by merger,
consolidation or otherwise) is, to any material degree, financed by indebtedness
which is the obligation of (or is secured by any property of) RainTree or any
such successor or any subsidiary of RainTree.
Maturity Date: The earlier of: (a) January 31, 2006, (b) the
date on which the Lender duly exercises its acceleration right under Section 9
hereof, or (c) the effective date of any LBO Transaction. Notwithstanding the
foregoing, clause (c) shall not be the Maturity Date (x) unless the Senior Notes
are fully paid either prior to the LBO Transaction or out of the proceeds
thereof and (y) if the BritWill Acquisition Promissory Notes (which are entered
into pursuant to the Plan) in the aggregate principal amount of $1,530,000, are
not paid out of the proceeds of an LBO Transaction and are paid pursuant to the
Scheduled Maturity Date (as defined in the BritWill Acquisition Promissory
Notes).
Omega Indiana Leasehold Mortgage: The Amended and Restated
Omega Indiana Leasehold Mortgage dated as of February 2, 1999.
Omega Indiana Leasehold Security Agreement: The First
Amendment to Security Agreement dated as of February 2, 1999.
Omega New Master Lease: The Master Lease entered into between
Borrower and certain companies affiliated with Borrower as Lessees and Lender as
Lessor, dated December 31, 1998 as amended by the First Amendment to Omega New
Master Lease dated as of February 1, 1999 and the Second Amendment to Omega New
Master Lease dated as of February 2, 1999, as the same may be further amended
from time to time.
Payment Date: Any due date for the payment of the installments
of principal and interest or any other sums payable under this Note, which
occurs on a Business Day.
Pledge Agreements: The Pledge Agreements dated as of February
2, 1999 between Lender and BritWill HealthCare Company with respect to the stock
of BritWill
2
<PAGE> 3
Investments-I, Inc. and BritWill Investments-II, Inc., and the Pledge Agreement
dated as of February 2, 1999 between Lender and BritWill Investments-I, Inc.
with respect to the stock of Cedar Care, Inc. and Sherwood HealthCare
Corporation.
RainTree: RainTree Healthcare Corporation, a Delaware
corporation, formerly known as Unison Healthcare Corporation.
Security Agreement: The Amended and Restated Security
Agreement dated as of February 2, 1999 between Lender and the Lessees under the
Omega New Master Lease.
Security Deposit Agreement: The Security Deposit Agreement to
be entered into between Lender and the entities which are the Lessees under the
Omega New Master Lease.
Sharing Agreement: The Sharing Agreement of even date herewith
between Lender and Debtors, as defined in the Plan, a copy of which is attached
hereto as EXHIBIT A.
3. Payments of Interest and Principal.
3.1 Accrual of Interest. Interest shall accrue on the
principal amount of this Note at the Accrual Rate calculated on the
basis of a 360-day year for the actual number of days elapsed, until
the Maturity Date.
3.2 Payment of Principal and Interest. Subject to Section 14
hereof, principal and accrued interest shall be paid to Lender as
follows: (a) Accrued interest only shall be payable on March 31, 1999;
(b) commencing June 30, 1999, the balance of principal and interest
shall be paid in twenty-seven (27) successive quarterly installments of
ONE HUNDRED FORTY THOUSAND THREE HUNDRED EIGHTY-FIVE AND 48/100
DOLLARS ($140,385.48) each, or more, on or before the last day of each
calendar quarter.
3.3 Default Interest. Notwithstanding anything to the contrary
contained in this Note, if an Event of Default occurs, interest shall
be due and payable on the outstanding principal balance from the date
of such occurrence until the Event of Default is fully cured at the
Default Interest Rate.
3
<PAGE> 4
4. Method of Payment. All payments to be paid by Borrower to Lender
under this Note shall be paid by wire transfer to such account or accounts as
may be designated by Lender in writing.
5. Usury Not To Be Collected. In no event shall the interest rate in
effect from time to time under this Note exceed the highest rate allowed by law.
If Lender shall reasonably determine that the interest rate under this Note has
been adjudicated to be usurious or is otherwise limited by statute, interest in
excess of the applicable legal rate paid or collected by Lender, shall be deemed
to have been automatically and immediately credited by Lender to the principal
balance under this Note and shall not be charged to interest, it being the
intention of Lender that no interest in excess of the legal rate shall be taken
or received.
6. Payment on Maturity Date. The entire unpaid principal balance hereof
not yet paid, together with all accrued and unpaid interest under Section 3, and
any other amounts owing to Lender under this Note, shall be due and payable on
the Maturity Date.
7. Payments to be Made Without Regard to Setoffs and Counterclaims. All
payments by Borrower shall be paid in full without setoff or counterclaim and
without reduction for and free from any and all taxes, levies, imposts, duties,
fees, charges, deductions or withholdings of any type or nature imposed by any
government or any political subdivision or taxing authority thereof.
8. Prepayment. The amount then owing under this Note, including without
limitation all accrued and unpaid interest under Section 3 hereof, may be paid
in full or in part at any time without premium or penalty.
9. Acceleration Upon Event of Default. Upon the occurrence of any Event
of Default hereunder, the entire principal balance owing under this Note
together with all accrued and unpaid interest, and any other amounts owing under
this Note and any other Loan Document, at Lender's option, will become
immediately due and payable, all without formal demand, presentment or notice of
any kind, all of which are expressly waived.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and Lender's acceptance
of any such partial payment shall not constitute a waiver of Lender's right to
receive the entire amount due. Upon any Event of Default, neither the failure of
the Lender to promptly exercise its right to declare the outstanding principal
and accrued unpaid interest hereunder to be immediately due and payable, nor the
failure of Lender to demand strict performance of any other obligation of
Borrower or any other person who may be liable hereunder, shall
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<PAGE> 5
constitute a waiver of any such rights, nor a waiver of such rights in
connection with any future default on the part of Borrower or any other person
who may be liable hereunder.
10. Application of Payments; Partial Payments. Unless an Event of
Default has occurred and not been fully cured, all payments received by Lender
hereunder shall be applied first against interest which has accrued and not been
paid under Section 3.2 and then to principal, with the balance applied against
any other amounts which may be owing to Lender hereunder. Following the
occurrence of an Event of Default, and until such Event of Default is fully
cured, Lender may apply any payment that it receives, whether directly from
Borrower or as a consequence of realizing upon any security which it holds, in
its sole and absolute discretion, to any amount owing to it under this Note.
11. Security for Note. This Note is secured by: (i) the Security
Agreement, (ii) the Pledge Agreements, (iii) the Omega Indiana Leasehold
Mortgage, (iv) the Omega Indiana Leasehold Security Agreement, and (v) the
Security Deposit made by the entities which are the Lessees under the Omega New
Master Lease as set forth in the Security Deposit Agreement.
12. Choice of Law; Venue; Jurisdiction. This Note shall be deemed to
have been made and delivered by Borrower to Lender at Lender's principal place
of business in Ann Arbor, Michigan, and shall be deemed to have been made
thereat. This Note shall be governed and controlled as to validity, enforcement,
interpretation, construction, effect and in all other respects, including, but
not limited to, the legality of the interest charged hereunder, by the statues,
laws and decisions of the State of Michigan. Borrower, in order to induce Lender
to accept this Note and for other good and valuable consideration, the receipt
and sufficiency of which hereby is acknowledged, agrees that all actions or
proceedings arising directly, indirectly or otherwise in connection with, out
of, related to or from this Note shall be litigated, in Lender's sole discretion
and at Lender's sole election, only in courts having a situs within the County
of Washtenaw, State of Michigan. For the purposes of the foregoing, Borrower
hereby consents and submits to the jurisdiction of any local, state or federal
court located within the County of Washtenaw, State of Michigan. Borrower hereby
waives any right Borrower may have to transfer or change the venue of any
litigation brought against Borrower by Lender in accordance with this paragraph.
13. Miscellaneous Provisions.
13.1 This Note may not be amended or modified, and revision hereto
shall not be effective, except by an instrument in writing executed by both
Borrower and Lender.
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<PAGE> 6
13.2 Notices and other communications hereunder shall be in writing and
personally served, mailed (by registered or certified mail, return receipt
requested and postage prepaid) or delivered by national overnight delivery
service such as Federal Express or D.H.L., or sent by facsimile transmission
addressed to the respective parties, as follows:
(i) if to Borrower:
BritWill Indiana Partnership
13300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
ATTN: Michael A. Jeffries
Tel: (602) 607-4000
Fax: (602) 607-4014
with a copy to:
ATTN: Nir E. Margalit
Tel: (602) 607-4000
Fax: (602) 607-4114
(ii) if to Lender:
Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, MI 48108
ATTN: Essel W. Bailey, Jr.
Tel: (734) 747-9890
Fax: (734) 996-0020
with a copy to:
Dykema Gossett PLLC
1377 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
ATTN: Fred J. Fechheimer
Tel: (248) 203-0743
Fax: (248) 203-0763
6
<PAGE> 7
or to such other address as a party may by notice hereafter designate in
writing. All notices required or permitted to be given hereunder shall be given
and deemed effective as provided in the Omega New Master Lease.
13.3 Nothing contained in this Note shall be deemed or construed as
creating a partnership or joint venture between Borrower and Lender or between
Lender and any other person, or cause the holder hereof to be responsible in any
way for the debts or obligations of Borrower or any other person.
13.4 Borrower hereby waives presentment, protest and demand, notice of
protest, dishonor and nonpayment of this Note, and expressly agrees that,
without in any way affecting the liability of Borrower hereunder, Lender may
extend the time for payment of any amount due hereunder, accept additional
security, release any party liable hereunder and release any security now or
hereafter securing this Note without in any other way affecting the liability
and obligation of Borrower.
13.5 Every provision of this Note is intended to be severable. In the
event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such illegality
or invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
13.6 Headings at the beginning of each numbered Section of this Note
are intended solely for convenience of reference and are not to be deemed or
construed to be a part of this Note.
13.7 Borrower, and any other person who may be liable hereunder in any
capacity, agree(s) to pay all costs of collection, including reasonable attorney
fees, in case the principal of this Note or any payment of interest thereon is
not paid as it becomes due, or in case it becomes necessary to protect the
security for this Note, whether suit is brought or not.
14. Sharing Agreement. This Promissory Note is subject to the terms and
conditions of the Sharing Agreement. In accordance therewith, if principal
payments under this Note are deferred pursuant to the Sharing Agreement, such
deferral shall not constitute an Event of Default hereunder.
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<PAGE> 8
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of
the date first set forth above.
BORROWER:
BRITWILL INDIANA PARTNERSHIP,
AN ARIZONA GENERAL PARTNERSHIP
By: BritWill Investments-I, Inc.,
a Delaware corporation
Its: General Partner
By: ________________________
Name: ________________________
Its: President
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<PAGE> 9
EXHIBIT A
[TO BE ATTACHED]
Exhibit A
<PAGE> 1
EXHIBIT 10.11
INDIANA RETURNED FACILITY NOTE GUARANTEE
This INDIANA RETURNED FACILITY NOTE GUARANTEE ("Guarantee") is given as
of this 31st day of January, 1999, by RAINTREE HEALTHCARE CORPORATION, a
Delaware corporation, and BRITWILL HEALTHCARE COMPANY, a Delaware corporation
(each a "Guarantor" and collectively, "Guarantors"), in favor of OMEGA
HEALTHCARE INVESTORS, INC., a Maryland corporation ("Omega"), with reference to
the following facts:
R E C I T A L S
This is the Indiana Returned Facility Note Guarantee which is given in
accordance with, and on the terms and conditions set forth in, the Debtors'
First Amended Joint Plan of Reorganization dated October 15, 1998, as amended,
entered in the United States Bankruptcy Court for the District of Arizona in the
matters of In Re: Unison HealthCare Corporation (Case Nos. B-98-06583-PHX-GBN
through B-98-06612-PHX-GBN) and In Re: BritWill Investments-I, Inc. (Case Nos.
B-98-0173-PHX-GBN through B-98-1075-PHX-GBN)("Plan").
WHEREFORE, the parties hereby agree as follows:
1. Guarantors hereby jointly and severally, unconditionally and
irrevocably guarantee to Omega the payment when due of all sums payable by
BritWill Indiana Partnership, an Arizona General Partnership ("Debtor"), to
Omega under the Indiana Returned Facility Note dated as of the date hereof and
executed by Debtor and the faithful and prompt performance when due of each and
every one of the terms, conditions and covenants to be kept and performed by
Debtor under the Indiana Returned Facility Note and any and all amendments,
modifications, extensions and renewals thereof ("Obligations"). In the event of
the failure of Debtor to pay such sums, or to render any other performance
required of Debtor under any of the Obligations as and when required, Guarantors
shall forthwith pay such sums and perform such Obligations and pay all damages
that may result from the non-performance thereof to the full extent provided
under the Indiana Returned Facility Note.
2. The Obligations of Guarantors under this Guarantee shall survive and
continue in full force and effect not withstanding; (a) any amendment,
modification, or extension of the Indiana Returned Facility Note; (b) the
release or discharge of Debtor in any receivership, bankruptcy or other
proceeding ("Proceeding"); (c) the impairment, limitation, or modification of
the liability of Debtor or of any remedy for the enforcement of Debtor's
liability under the Indiana Returned Facility Note resulting from any such
Proceeding or the operation of any present or future provision of federal, state
or foreign law; or (d) the rejection or disaffirmation of the Indiana Returned
Facility Note in any Proceeding.
3. The liability of Guarantors shall be primary, direct and immediate,
and Omega may proceed against Guarantors (i) prior to or in lieu of proceeding
against Debtor, and (ii) prior to or in lieu of pursuing any other rights or
remedies available to Omega. All
<PAGE> 2
rights and remedies afforded to Omega by reason of this Guarantee or by law are
separate, independent and cumulative, and the exercise of any one or more of
such rights or remedies shall not in any way limit, restrict or prejudice the
exercise of any other such rights or remedies.
In the event of any Event of Default under the Indiana Returned
Facility Note, a separate action or actions may be brought and prosecuted
against Guarantors whether or not Debtor is joined therein or a separate action
or actions are brought against Debtor. Omega may maintain successive actions for
other defaults. Omega's rights hereunder shall not be exhausted by its exercise
of any of its rights or remedies or by any such action or by any number of
successive actions until and unless all indebtedness and obligations the payment
and performance of which are hereby guaranteed have been paid and fully
performed.
4. In such manner, upon such terms and at such times as Omega in its
sole discretion deems necessary or expedient, and without notice to Guarantors,
Omega may, subject to the terms and conditions of the Indiana Returned Facility
Note, amend, alter, compromise, accelerate, extend or change the time or manner
for the payment or the performance of any Obligations hereby guaranteed, extend,
amend or terminate the Indiana Returned Facility Note, release Debtor or consent
to any assignment (or otherwise) as to all or any portion of the Obligations
hereby guaranteed. No exercise or non-exercise by Omega of any right hereby
given Omega, no dealing by Omega with Guarantors or either Guarantor, Debtor or
any other person, and no change, impairment, release or suspension of any right
or remedy of Omega against any person including Debtor and any other guarantor
shall in any way affect any of the Obligations of Guarantors hereunder or give
Guarantors any recourse or offset against Omega.
5. Guarantors hereby waive and relinquish all rights and remedies
accorded by applicable law to sureties and/or guarantors or any other
accommodation parties, under any statutory provisions, common law or any other
provision of law, custom or practice, and agree not to assert or take advantage
of any such rights or remedies including but not limited to (a) any right to
require Omega to proceed against Debtor or any other person or to proceed
against or exhaust any security held by Omega at any time or to pursue any other
remedy in Omega's power before proceeding against Guarantors; (b) any defense
that may arise by reason of the incapacity or lack of authority of any other
person or persons; (c) notice of the existence, creation or incurring of any new
or additional indebtedness or obligation or of any action or non-action on the
part of Debtor, Omega, any creditor of Debtor or either Guarantor or on the part
of any other person whomsoever under this or any other instrument in connection
with any Obligation or evidence of indebtedness held by Omega or in connection
with any Obligation hereby guaranteed; (d) any defense based upon an election of
remedies by Omega which destroys or otherwise impairs the subrogation rights of
Guarantors or the right of Guarantors to proceed against Debtor for
reimbursement, or both; (e) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (f) any duty
on the part of Omega to
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<PAGE> 3
disclose to Guarantors any facts Omega may now or hereafter know about Debtor,
regardless of whether Omega has reason to believe that any such facts materially
increase the risk beyond that which Guarantors intend to assume or has reason to
believe that such facts are unknown to Guarantors or has a reasonable
opportunity to communicate such facts to Guarantors, it being understood and
agreed that Guarantors are fully responsible for being and keeping informed of
the financial condition of Debtor and of all circumstances bearing on the risk
of non-payment or non-performance of any Obligations or indebtedness hereby
guaranteed; (g) any defense arising because of Omega's election, in any
proceeding instituted under the federal Bankruptcy Code, of the application of
Section 1111(b)(2) of the federal Bankruptcy Code; and (h) any defense based on
any borrowing or grant of a security interest under Section 364 of the federal
Bankruptcy Code.
6. Guarantors warrant that: Guarantors have adequate means of obtaining
from Debtor on a continuing basis financial and other information pertaining to
Debtor's financial condition. Guarantors agree to keep adequately informed by
such means of any facts, events or circumstances which might in any way affect
Guarantors' risks hereunder, and Guarantors further agree that Omega shall have
no obligation to disclose to Guarantors information or material acquired in the
course of Omega's relationship with Debtor.
7. All existing and future obligations or indebtedness of Debtor to
Guarantors is hereby subordinated to all indebtedness and other obligations
hereby guaranteed and in the event of a default under the Indiana Returned
Facility Note, such subordinated indebtedness shall not be paid in whole or in
part nor will Guarantors accept any payment of or on account of any such
indebtedness without the prior written consent of Omega and at Omega's request,
Guarantors shall cause Debtor to pay to Omega all or any part of such
subordinated indebtedness not yet paid to Omega as of the date of default. Any
such payment by Debtor in violation of this Guarantee shall be received by
Guarantors in trust for Omega, and Guarantors shall cause the same to be paid to
Omega immediately on account of the indebtedness of Debtor to Omega. No such
payment shall reduce or affect in any manner the liability of Guarantors under
this Guarantee.
8. Guarantors waive any right to require Omega to: (a) proceed against
any person, including Debtor; (b) proceed against or exhaust any collateral
received from Guarantors, Debtor or any other person; (c) give notice of the
terms, time and place of any public or private sale of personal property
security received from Debtor; (d) pursue any other remedy in Omega's power; or
(e) make any presentments, demands for performance, or give any notices of
nonperformance, protests, notices of protests or notices of dishonor in
connection with any obligations or evidences of indebtedness held by Omega as
security.
Guarantors waive any defense arising by reason of: (a) any
disability or other defense of Debtor or any other person; (b) the cessation
from any cause whatsoever, other than performance in full, of all the
agreements, conditions or covenants of Debtor under the Indiana Returned
Facility Note; (c) any act or omission by Omega which directly
3
<PAGE> 4
or indirectly results in or aids the discharge of Debtor of its Obligations
under the Indiana Returned Facility Note by operation of law or otherwise; or
(d) any modification of the Indiana Returned Facility Note, in any form
whatsoever.
9. With or without notice to Guarantors, Omega, in Omega's sole
discretion and at any time and from time to time and in such manner and upon
such terms as Omega deems appropriate, may (a) apply any or all payments or
recoveries from Debtor or from any guarantor under any other instrument or
realized from any security, in such manner and order of priority as Omega may
determine, to any indebtedness or other Obligations of Debtor with respect to
the Indiana Returned Facility Note, whether or not such indebtedness or other
Obligations are guaranteed hereby or are otherwise secured or are due at the
time of such application, and (b) refund to Debtor any payment received by Omega
under the Indiana Returned Facility Note.
10. (a) As used herein, the term Guarantee Default shall mean one or
more of the following events:
(i) the failure of the Guarantors to pay the amounts required
to be paid hereunder at the times specified herein;
(ii) the failure of the Guarantors to observe and perform any
other covenant, condition or agreement herein on their part to be observed or
performed for a period of thirty (30) days after written notice specifying such
failure and requesting that it be remedied shall have been given to Guarantors
by Omega, unless Omega shall agree in writing to an extension of such time prior
to its expiration.
(b) Upon the occurrence of a Guarantee Default, Omega shall
have the right to bring such actions at law or in equity, including an action
seeking such injunctive relief as it deems appropriate to compel Guarantors'
performance, and including other remedies to recover its attorney's fees in any
proceeding, including any appeal therefrom and any post-judgment proceedings.
11. (a) No term, condition or provision of this Guarantee may be waived
except by an express written instrument to such effect signed by Omega. No such
waiver of any term, condition or provision of this Guarantee shall be deemed a
waiver of any other term, condition or provision, irrespective of similarity, or
shall constitute a continuing waiver of the same term, condition or provision,
unless otherwise expressly provided.
(b) In the event any one or more of the terms, conditions or
provisions herein should be held to be invalid, illegal or unenforceable in any
respect in a final award or judgment rendered by any court of competent
jurisdiction, the validity, legality and enforceability of the remaining terms,
conditions and provisions contained herein shall not in any way be affected or
impaired thereby, and this Guarantee shall be interpreted and construed as if
such term, condition or provision, to the extent the same shall have been held
invalid, illegal, or unenforceable, had never been contained herein.
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<PAGE> 5
(c) This Guarantee shall be governed by, and construed in
accordance with, the laws of the State of Michigan (the "State"),
notwithstanding the fact that one or more counterparts hereof may be executed
outside of the State, or one or more of the obligations of the Guarantor
hereunder are to be performed outside of the State. Guarantor consents to in
personam jurisdiction before the state and federal courts of the State and
agrees that all disputes concerning this Guarantee shall be heard in the state
and federal courts located in the State. Guarantors agree that service of
process may be effected upon it under any method permissible under the laws of
the State and irrevocably waives any objection to venue in the state and federal
courts of the State.
(d) In the event that any party to this Guarantee shall
commence any suit, action, arbitration or other proceeding to interpret this
Guarantee, or determine or enforce any right or obligation created hereby, the
prevailing party in such action shall recover such party's actual costs and
expenses reasonably incurred in connection therewith, including attorneys' fees
and costs of appeal and post-judgment enforcement proceedings, if any. Any
court, arbitrator or panel or arbitrators shall, in entering any judgment or
making any award in any such suit, action, arbitration or other proceeding, in
addition to any and all other relief awarded to such prevailing party, include
in such judgment or award such party's costs and expenses as provided in this
paragraph.
(e) Guarantors represent that they have been represented and
advised by counsel in connection with the execution of this Guarantee.
Guarantors acknowledge receipt of a copy of the Indiana Returned Facility Note,
and further represent that Guarantors have been advised by counsel with respect
thereto. This Guarantee shall be construed and interpreted in accordance with
the plain meaning of its language, and not for or against either party, and as a
whole, giving effect to all of the terms, conditions and provisions hereof.
(f) Except as provided in any other written agreement now or
at any time hereafter in force between Omega and Guarantors, this Guarantee
shall constitute the entire agreement of Guarantors with Omega with respect to
the subject matter hereof, and no representation, understanding, promise or
condition concerning the subject matter hereof shall be binding upon Omega
unless expressed herein.
(g) All capitalized terms used herein and not defined herein
shall have the meaning for such terms set forth in the Indiana Returned Facility
Note.
SIGNATURE PAGES FOLLOW
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Indiana Returned
Facility Note Guarantee as of the date first written above.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
BRITWILL HEALTHCARE COMPANY,
a Delaware corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
6
<PAGE> 1
Exhibit 10.12
INDIANA RETURNED FACILITIES INTERIM MANAGEMENT AGREEMENT
THIS INDIANA RETURNED FACILITIES INTERIM MANAGEMENT AGREEMENT ("Interim
Management Agreement") is made and entered into effective as of this 1st day of
February, 1999 ("Effective Date") by and between Omega Healthcare Investors,
Inc., a Maryland corporation ("Omega"), each of the entities designated a Lessee
on the signature pages hereof (each a "Lessee" and collectively "Lessees") and
RainTree Healthcare Corporation, a Delaware corporation (the "Manager").
RECITALS:
A. Omega and BritWill Investments-I, Inc., a Delaware corporation
("BritWill-I") entered into a Master Lease dated November 1, 1992 ("Indiana
Lease") for nine (9) healthcare facilities located in the state of Indiana
("Indiana Facilities"). BritWill Indiana Partnership, an Arizona general
partnership ("BritWill Indiana") is the assignee of the interest of BritWill-I
in the Indiana Lease, and has assumed the obligations and liabilities of
BritWill-I thereunder.
B. Pursuant to the Debtors' First Amended Joint Plan of Reorganization
dated October 15, 1998 entered in the United States Bankruptcy Court for the
District of Arizona in the matters of In Re: Unison HealthCare Corporation (Case
Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re: BritWill
Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through B-98-1075-PHX-GBN)(the
"Plan"), Omega agreed, among other things, to terminate the Indiana Lease as to
six (6) of the Indiana Facilities, located on Land described on attached
EXHIBITS A, together with any and all Fixtures, Lessor's Improvements, Related
Rights and Lessor's Personal Property related thereto ("Indiana Returned
Facilities") and, in accordance with the Plan, Manager agreed to manage the
Indiana Returned Facilities for a transition period for the account of Omega.
C. Pursuant to the Plan, Omega and the Signature Subsidiaries (which
are identified on the signature pages hereof) entered into that certain Master
Lease dated as of December 31, 1998 (the "Omega New Master Lease"), and Omega,
the Signature Subsidiaries, BritWill Indiana and BritWill Investments II, Inc.
have entered into a First Amendment to Master Lease of even date herewith
amending the Omega New Master Lease ("First Amendment"). The Omega New Master
Lease, as amended by the First Amendment, by its terms constitutes an assumption
(as thereby amended and supplemented) of the Indiana Lease and other Existing
Leases (as therein defined).
C. In order to provide Omega with sufficient time within which to cause
the transfer of the operations of the Indiana Returned Facilities to a licensed
entity or entities selected by Omega, on an interim basis, pending the
completion of such transfer in accordance with applicable laws and regulations,
at Omega's request the Lessees under the Omega New Master Lease have agreed to
the inclusion of the Indiana Returned Facilities among the Facilities (as
defined in the Omega New Master Lease) leased to them
<PAGE> 2
under the Omega New Master Lease, and Manager has agreed to manage the Indiana
Returned Facilities.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Term of Agreement. The term of this Management Agreement shall
commence on the Effective Date. The term of this Management Agreement (and the
Term of the New Omega Master Lease with respect to the Indiana Returned
Facilities) shall end on the Indiana Returned Facilities Lease Termination Date
as defined in the First Amendment.
2. Management Responsibility.
2.1 Appointment of Manager. BritWill Indiana appoints Manager
as the manager of the Indiana Returned Facilities, Manager accepts such
appointment and Manager shall provide management services on the terms and
conditions stated below.
2.2 Authority of Manager. Manager's responsibilities pursuant
to this Management Agreement are subject to the overall supervision and
authority of BritWill Indiana and to all requirements of federal and state
government and third party payors. BritWill Indiana shall remain the responsible
licensee of the Indiana Returned Facilities and such licensee shall retain legal
liability for all the patient care. Manager shall perform its functions and
obligations under this Management Agreement in conformity with the general
operating policies and directives of BritWill Indiana as adopted from time to
time, and in conformity with applicable standards of care.
2.3 Manager's Responsibilities. Commencing on the Effective
Date and continuing hereafter until this Management Agreement is validly
terminated in accordance herewith (hereinafter referred to as the "Interim
Operating Period"), Manager shall have management responsibility for the
operation of the Indiana Returned Facilities, as described herein at no cost to
Manager. Manager shall assume and discharge all responsibilities in connection
with properly operating and maintaining the Indiana Returned Facilities in
accordance with the regulations and standards required of the Indiana Returned
Facilities.
2.4 Manager's Level of Service. Manager shall provide
standards of patient care that materially comply with all applicable laws and
regulations, and shall use its best efforts to avoid receiving any: (a) notice
or finding of deficiency in meeting any applicable licensing, certification or
accreditation requirement whatsoever; or (b) any complaints against the Indiana
Returned Facilities or the licenses, certifications or accreditation by any
governmental authority or patient relating to patient care at, or the operation
and maintenance of, the Indiana Returned Facilities.
2
<PAGE> 3
3. Indemnification.
3.1 Indemnification by Manager. Manager shall indemnify Omega
against, and hold Omega harmless from any and all liabilities, costs, damages,
penalties, awards, liens, judgments, losses, assessments, obligations and claims
of any nature whatsoever as well as any costs or expenses including, but not
limited to reasonable attorney's fees and disbursements (collectively
"Claim(s)") arising out of the willful misconduct or gross negligence of Manager
and its officers, employees and agents with respect to Manager's management of
the Indiana Returned Facilities.
3.2 Indemnification by Omega. Omega shall indemnify Manager
against, and hold it harmless from any and all Claims (as defined in Section
3.1, above) arising out of its management of the Indiana Returned Facilities
except for any such Claims arising out of the willful misconduct or gross
negligence of Manager and its officers, employees and agents.
3.3 Survival of Indemnity. Manager's and Omega's obligations
under this Section 3 shall survive the termination of this Management Agreement
for a period of five years following the Indiana Returned Facilities Lease
Termination Date.
4. Payment of Expenses and Management Compensation. Manager shall be
entitled to receive all revenues generated by the Indiana Returned Facilities
with respect to any patient care or other services during the term hereof, and
shall disburse such revenues plus such additional funds, if any, as Omega shall
provide to Lessees pursuant to the Omega New Master Lease. Manager shall have no
responsibility to furnish any funds in connection with its management of the
Indiana Returned Facilities.
5. Management Fee. Omega shall pay Manager a management fee of five
(5%) of Gross Revenues (as such term is defined in the Omega New Master Lease)
generated by the Indiana Returned Facilities during the Interim Operating Period
("Management Fee"). The Management Fee shall be paid on or before the fifth
(5th) day of each month on the basis of Gross Revenues in the preceding month.
6. Assignment. Neither party shall assign this Management Agreement
without the prior written consent of the other party hereto, which may be
withheld in the absolute discretion of the party whose consent is required.
7. General Provisions.
7.1 Notices. All notices, requests, demands and other
communications required or permitted to be given or made under this Management
Agreement shall be in writing and shall be deemed to have been given (a) on the
date of personal delivery or transmission by telegram, cable or facsimile; (b)
on the third (3rd) business day following deposit in the United States mail,
postage prepaid, by registered or certified mail, return
3
<PAGE> 4
receipt requested, or (c) on the first (1st) business day after delivery to a
nationally recognized overnight courier service, in each case, address as
follows, or to such address, person or entity as either party, shall designate
by notice to the other in accordance herewith:
If to Omega: Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, Michigan 48108
Attn: Essel W. Bailey, Jr.
Telephone: (734) 887-0200
Fax: (734) 887-0201
With a copy to: Dykema Gossett
ATTN: Fred J. Fechheimer
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
Tel: (248) 203-0743
Fax: (248) 203-0763
If to Manager: RainTree Healthcare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Telephone: (602) 607-4000
Fax: (602) 607-4114
Attn: Michael A. Jeffries
With a Copy to: RainTree Healthcare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Telephone: (602) 607-4000
Fax: (602) 607-4114
Attn: Nir E. Margalit
7.3 Governing Law. This Management Agreement shall be
construed and enforced in accordance with, and its performance shall be governed
by, the laws of the State of Michigan, without regard to the conflict of laws
thereof.
7.4 Counterparts. This Management Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4
<PAGE> 5
7.5 Entire Agreement; Modification. There are no oral
agreements or understandings between the parties regarding this Management
Agreement. This Management Agreement shall not be modified or amended except by
a written document executed by both parties hereto.
SIGNATURE PAGES FOLLOW
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Management Agreement
as of the date first written above.
MANAGER:
RAINTREE HEALTHCARE CORPORATION
By:
Name:
Title:
OMEGA:
OMEGA HEALTHCARE INVESTORS, INC.
By:
Name: F. Scott Kellman
Title: Executive Vice President
6
<PAGE> 7
EXHIBIT A
"INDIANA RETURNED FACILITY"
ENGLISH ESTATES
TRACT I:
A PART OF THE EAST HALF OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST, SITUATED
IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS FOLLOWS:
FROM THE NORTHEAST CORNER OF THE SOUTHEAST QUARTER OF THE AFORESAID SECTION 8,
PROCEED THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST (THE BEARING COMPUTED
FROM THE CENTERLINE OF I-65 AS SHOWN ON STATE HIGHWAY PLANS) ALONG THE QUARTER
SECTION LINE, 665.70 FEET TO THE POINT OF BEGINNING. FROM SAID POINT OF
BEGINNING, PROCEED THENCE SOUTH 00 DEGREES 07 MINUTES 46 SECONDS WEST, WITH THE
QUARTER-QUARTER-QUARTER SECTION LINE, 382.55 FEET; THENCE SOUTH 62 DEGREES 30
MINUTES 00 SECONDS WEST, 141.42 FEET; THENCE NORTH 30 DEGREES 37 MINUTES 36
SECONDS WEST, 199.46 FEET; THENCE SOUTH 59 DEGREES 22 MINUTES 24 SECONDS WEST,
WITH AN EXISTING DRIVE, 160.00 FEET, THENCE SOUTH 30 DEGREES 37 MINUTES 36
SECONDS EAST, 190.72 FEET; THENCE SOUTH 53 DEGREES 45 MINUTES 00 SECONDS WEST,
WITH THE CENTERLINE OF PRAIRIE CREEK, 421.76 FEET; THENCE NORTH 40 DEGREES 00
MINUTES 00 SECONDS WEST, WITH THE CENTERLINE OF OLD U.S. #52, 91.59 FEET; THENCE
NORTH 00 DEGREES 08 MINUTES 55 SECONDS EAST, WITH THE QUARTER-QUARTER SECTION
LINE, 692.40 FEET; THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST, WITH THE
QUARTER SECTION LINE, 572.337 FEET; THENCE NORTH 40 DEGREES 52 MINUTES 00
SECONDS WEST, THE CENTERLINE OF OLD U.S. #52, 20.92 FEET; THENCE NORTH 89
DEGREES 15 MINUTES 13 SECONDS EAST, 605.61 FEET; THENCE SOUTH 00 DEGREES 01
MINUTES 21 SECONDS WEST, 16.00 FEET; THENCE NORTH 89 DEGREES 15 MINUTES 13
SECONDS EAST, WITH THE QUARTER SECTION LIEN, 646.16 FEET TO THE POINT OF
BEGINNING.
(REF. ONLY, 8.2472 ACRES, MORE OR LESS)
SUBJECT TO AN EASEMENT FOR INGRESS AND EGRESS TO A CONTIGUOUS TRACT, SAID
EASEMENT BEING MEASURED PERPENDICULARLY 10 FEET LEFT AND 10 FEET RIGHT FROM A
CENTERLINE WHICH IS DESCRIBED AS FOLLOWS:
Exhibit A-1
<PAGE> 8
FROM THE AFORESAID NORTHEAST CORNER OF THE SOUTHEAST QUARTER, PROCEED THENCE
SOUTH 00 DEGREES 06 MINUTES 37 SECONDS WEST, 485.09 FEET; THENCE SOUTH 89
DEGREES 15 MINUTES 13 SECONDS WEST, 1,247.66 FEET TO THE POINT OF BEGINNING.
FROM SAID POINT OF BEGINNING, PROCEED THENCE NORTH 56 DEGREES 18 MINUTES 06
SECONDS EAST, 101,67 FEET; THENCE NORTH 59 DEGREES 22 MINUTES 24 SECONDS EAST,
154.16 FEET TO A PERIMETER CORNER OF THE AFORDSAID TRACT; AND ALSO SUBJECT TO A
10 FOOT EASEMENT MEASURED PERPENDICULARLY 10 FEET LEFT FROM A CENTERLINE
DESCRIBED AS FOLLOWS:
BEGIN AT THE EAST END OF THE PREVIOUSLY DESCRIBED CENTERLINE, BEING A POINT ON
THE PERIMETER DESCRIPTION, AND PROCEED THENCE NORTH 59 DEGREES 22 MINUTES 24
SECONDS EAST, ALONG THE PREVIOUSLY DESCRIBED PERIMETER, 160.00 FEET; AND ALSO
SUBJECT TO THE PRIVILEGE OF USING 10 FOOT EASEMENT ON THE RIGHT SIDE OF THE
PREVIOUSLY DESCRIBED 160 FOOT CENTERLINE; AND ALSO SUBJECT TO A LIMITED ACCESS
RIGHT-OF-WAY ACROSS THE WESTERNMOST TIP AND SOUTHWESTERN TIP, FOR I-65. SUBJECT
TO AN EASEMENT FOR A FRONTAGE ROAD CONTIGUOUS TO THE LIMITED ACCESS
RIGHT-OF-WAY, ALSO SUBJECT TO AN EASEMENT FOR PRAIRIE CREEK LEGAL DRAIN ON AND
ALONG THE ENTIRE SOUTHEASTERN BOUNDARY. ALL DIMENSIONS COMPUTED FROM ELECTRONIC
MEASUREMENTS.
(REF. ONLY, 0.6770 A., M/L, EASEMENT AREA FRONTAGE ROAD
0.4201 A., M/L)
EXCEPT:
A PART OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST,
SITUATED IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS
FOLLOWS:
FROM THE NORTHEAST CORNER OF THE AFORESAID SOUTHEAST QUARTER, PROCEED THENCE
SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST, 665.70 FEET ALONG THE QUARTER
SECTION LINE; THENCE SOUTH 00 DEGREES 07 MINUTES 46 SECONDS WEST, 194.83 FEET TO
THE POINT OF BEGINNING. FROM SAID POINT OF BEGINNING, CONTINUE THENCE SOUTH 00
DEGREES 07 MINUTES 46 SECONDS WEST, 187.72 FEET; THENCE SOUTH 62 DEGREES 30
MINUTES 00 SECONDS WEST, 141.42 FEET ALONG THE APPROXIMATE CENTERLINE OF PRAIRIE
CREEK; THENCE NORTH 30 DEGREES 37 MINUTES 36 SECONDS WEST, 209.46 FEET; THENCE
NORTH 59 DEGREES 22 MINUTES 24 SECONDS EAST, 15.00 FEET; THENCE CURVE LEFT, WITH
A 107.98 FOOT RADIUS CURVE, 84.20 FEET (THE CHORD BEARING NORTH 37 DEGREES 02
MINUTES 07 SECONDS EAST, 82.08 FEET); THENCE SOUTH 89 DEGREES 52 MINUTES 14
SECONDS EAST, 170.23 FEET TO THE POINT OF BEGINNING.
Exhibit A-2
<PAGE> 9
SUBJECT TO A 25 FOOT DRIVEWAY EASEMENT OF EVEN WIDTH ON AND ALONG THE ENTIRE
NORTHWESTERN BOUNDARY TO PROVIDE INGRESS/EGRESS TO EXISTING TRACTS.
TRACT 2
A PART OF THE NORTHEAST QUARTER OF SECTION 8, TOWNSHIP 18 NORTH, RANGE 1 EAST,
SITUATED IN CENTER TOWNSHIP, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED AS
FOLLOWS
FROM THE SOUTHEAST CORNER OF THE NORTHEAST QUARTER OF THE AFORDSAID SECTION 8,
PROCEED THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST (THE BEARING COMPUTED
FROM THE CENTERLINE OF INTERSTATE #65, AS SHOWN ON STATE HIGHWAY PLAN), 665.70
FEET ALONG THE QUARTER SECTION LINE TO THE POINT OF BEGINNING. FROM SAID POINT
OF BEGINNING, CONTINUE THENCE SOUTH 89 DEGREES 15 MINUTES 13 SECONDS WEST,
646.16 FEET ALONG THE QUARTER SECTION LINE; THENCE NORTH 00 DEGREES 01 MINUTES
21 SECONDS EAST, 16.00 FEET; THENCE SOUTH 89 DEGREES 15 MINUTES 12 SECONDS WEST,
387.41 FEET; THENCE NORTH 40 DEGREES 52 MINUTES 00 SECONDS WEST, 5.23 FEET;
ALONG THE RIGHT-OF-WAY OF AN EXISTING FRONTAGE ROAD; THENCE NORTH 89 DEGREES 15
MINUTES 13 SECONDS EAST, 1037.01 FEET; THENCE SOUTH 00 DEGREES 03 MINUTES 42
SECONDS WEST, 20.00 FEET ALONG THE QUARTER-QUARTER-QUARTER SECTION LINE TO THE
POINT OF BEGINNING.
(REF. ONLY, 0.3324 ACRES, MORE OR LESS)
NOTE: The acreage indicated in this legal description is solely for the purpose
of identifying the said tract and should not be construed as insuring the
quantity of land.
Exhibit A-3
<PAGE> 10
EXHIBIT A
"INDIANA RETURNED FACILITY"
ENGLISH SENIOR LIVING/ENGLISH ASSISTED LIVING
A PART OF THE SOUTHEAST QUARTER OF SECTION 25, TOWNSHIP 19 NORTH, RANGE 1 WEST,
SITUATED IN THE CITY OF LEBANON, BOONE COUNTY, INDIANA, PARTICULARLY DESCRIBED
AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE CENTERLINE OF NORTH LEBANON STREET (AS
DETERMINED FROM THE PLAT OF FAIRVIEW ADDITION, SHOWN IN PLAT BOOK #3, PAGE 80),
WITH THE SOUTH LINE OF ESSEX STREET (AS DETERMINED FROM THE PLAT OF FAIRGROUNDS
ADDITION, AS SHOWN IN PLAT BOOK #3, PAGE 107), AND PROCEED THENCE SOUTH 89
DEGREES 38 MINUTES 54 SECONDS EAST (AN ASSUMED BEARING, 294.46 FEET (SHOWN IN
OLD DEEDS AS 287.5 FEET); ALONG THE SOUTH LINE OF ESSEX STREET; THENCE SOUTH 41
DEGREES 20 MINUTES 51 SECONDS WEST, 372.30 FEET (SHOWN IN OLD DEEDS AS 365 FEET)
ALONG THE CENTER LINE OF AN EXISTING STREET DESIGNATED AS ULEN DRIVE, THENCE
NORTH 09 DEGREES 47 MINUTES 00 SECONDS WEST, 285.45 FEET (SHOWN AS 281.5 FEET IN
OLD DEEDS), ALONG THE CENTERLINE OF LEBANON STREET, TO THE POINT OF BEGINNING.
Exhibit A-4
<PAGE> 11
EXHIBIT A
"INDIANA RETURNED FACILITY"
CAPITAL CARE HEALTHCARE CENTER
Lots numbered 1, 2 and 3 in Bruce Place, an addition to the City of
Indianapolis, Indiana, as per plat thereof recorded in Plat Book 6, page 122, in
the Office of the Recorder of Marion County, Indiana.
Exhibit A-5
<PAGE> 12
EXHIBIT A
"INDIANA RETURNED FACILITY"
SUNSET MANOR
Situate in the State of Indiana, County of Putnam, City of Greencastle and being
a part of Plummer's Addition to said City of Greencastle, as the same appears of
record on the plat on file in the office of the Recorder of Putnam County,
Indiana, at Plat Book 1, page 268, more particularly described, to wit:
Beginning at a point 20 feet South 0 degrees 07 minutes 56 seconds East from the
Southwest Corner of Lot 18 in the Plummer's Addition to the City of Greencastle:
thence North 0 degrees 07 minutes 56 seconds West 140.55 feet to the Northwest
Corner of Lot 19 in said Addition; thence North 89 degrees 36 minutes 07 seconds
East 49.85 feet with the North line of said Lot 19; thence North 0 degrees 23
minutes 53 seconds West 50.1 feet to the North line of Lot 20 in said Addition;
thence East 246.26 feet to the Northeast Corner of Lot 25 in said Addition;
thence South 0 degrees 29 minutes 58 seconds East 318.87 feet to the South Line
of Section 21, Township 14 North, Range 4 West; thence South 89 degrees 53
minutes 40 seconds West 169.37 feet with said South Line; thence North 0 degrees
57 minutes 47 seconds West 19.8 feet; thence South 89 degrees 20 minutes 10
seconds West 57.97 feet; thence North 0 degrees 51 minutes 18 seconds West
100.05 feet; thence South 89 degrees 08 minutes 42 seconds West 59.0 feet to the
point of beginning.
ALSO, an easement for the purpose of ingress and egress, for the benefit of the
above described real estate, as created by Ingress and Egress Easement in a
certain Warranty Deed, dated October 26, 1965 and recorded October 28, 1965 in
Deed Record 130, page 152, over and across the following real estate in Putnam
County, Indiana: A part of Lots 5 and 6 of Plummer's Addition to the City of
Greencastle, Indiana, and part of previously vacated alley, more particularly
described as follows, to-wit:
Beginning at a point 20 feet North 0 degrees 07 minutes 56 seconds East from
Southwest Corner of Lot 18 of said Addition; thence South 89 degrees 08 minutes
42 seconds West 141 feet to the West line of Lot Number 5 of said Addition to a
point 20 feet North 9 degrees 07 minutes 56 seconds West from the Southwest
Corner thereof; thence South 0 degrees 07 minutes 56 seconds East 40 feet to a
point 20 feet South 0 degrees 07 minutes 56 seconds East from the Northwest
Corner of Lot Number 6 of said Addition; thence North 89 degrees 08 minutes 42
seconds East 141 feet parallel with the North line of said Lot Number 6 to a
point on the West line of said Lot 17 of said Addition, 20 feet South 0 degrees
07 minutes 56 seconds East from the Northwest Corner thereof; thence North 0
degrees 07 minutes 56 seconds West 40 feet to the place of beginning.
Exhibit A-6
<PAGE> 13
EXHIBIT A
"INDIANA RETURNED FACILITY"
LOCKERBIE HEALTHCARE CENTER
Lots numbered 11, 12, 13 and 14 in J.R. Routh's Subdivision of the Southwest
Quarter of Lot 21 in Johnson's Heirs Addition to the City of Indianapolis,
Indiana, as per plat thereof recorded in Plat Book 4, page 219, in the Office of
the Recorder of Marion County, Indiana. Also, 6.5 feet North of Lot 14, being a
part of a vacated alley.
ALSO:
Lots numbered 1, 2 and 3 in Eliza Jane Hoss' and Nelson Hoss' Subdivision of the
Northwest Quarter of Lot 21 in Johnson Heirs Addition to the City of
Indianapolis, Indiana, as per plat thereof recorded in Plat Book 3, page 206, in
the office of the Recorder of Marion County, Indiana. Also a strip of ground 7
feet wide South of the adjoining Lot 1, being a part of a vacated alley.
Exhibit A-7
<PAGE> 14
EXHIBIT A
"INDIANA RETURNED FACILITY"
PARKVIEW MANOR
Part of the West Half of the Southwest Quarter of Section 8, Township 16 North,
Range 4 East, Marion County, Indiana, more particularly described as follows,
to-wit:
Beginning in the South line of said Half Quarter Section at a point 193.31 feet
East of the Southwest corner of said Half Quarter Section; thence North 200 feet
to a point 193.25 feet East of the West line of said Half Quarter Section;
thence East parallel to said South line 182.61 feet to a point; thence South
parallel to said West line 200 feet to a point in said South line; thence West
in and along said South line 182.55 feet to the point of beginning.
Exhibit A-8
<PAGE> 1
Exhibit 10.13
AMENDED PLEDGE AGREEMENT
STOCK OF BRITWILL INVESTMENTS-I, INC.
This Amended Pledge Agreement (this "AGREEMENT") is made as of February
2, 1999, by and between BRITWILL HEALTHCARE COMPANY, a Delaware corporation
("PLEDGOR"), and OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("PLEDGEE").
STATEMENT OF FACTS
A. Pursuant to Debtors' First Amended Joint Plan of Reorganization
dated October 15, 1998, as amended, entered in the United States Bankruptcy
Court for the District of Arizona in the matters of In Re: Unison HealthCare
Corporation (Case Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re:
BritWill Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through
B-98-1075-PHX-GBN) ("PLAN"), certain Affiliates (as defined in the Omega New
Master Lease) of Pledgor, as Lessees, have entered into a lease with Pledgee, as
Lessor, dated December 31, 1998 and amended by First Amendment to Omega New
Master Lease dated as of February 1, 1999 (such lease as so amended and as the
same may be amended from time to time hereafter) ("OMEGA NEW MASTER LEASE").
B. Pursuant to the Plan, BritWill Indiana Partnership, an Arizona
general partnership of which BritWill Investments-I, Inc., a subsidiary of
Pledgor, is the General Partner, has executed and delivered to Pledgee its
promissory note dated as of January 31, 1999 in the principal amount of Three
Million Dollars ($3,000,000.00), payable to Pledgee (the "INDIANA RETURNED
FACILITY NOTE").
C. Pledgor is the owner of all of the issued and outstanding stock of
BritWill Investments-I, Inc., a Delaware corporation ("BRIT-I"). Pursuant to the
Plan, Pledgor is required to pledge its stock in Brit-I to Pledgee as security
for the Omega New Master Lease and the Indiana Returned Facility Note.
D. Pursuant to a Pledge Agreement, dated as of November 25, 1992
between Pledgor and Pledgee, Pledgor has previously pledged the stock of Brit-I,
as collateral security for the due payment and performance of all rent, charges,
indebtedness and other liabilities and obligations of: (i) Brit-I as Lessee
under a lease between Brit-I and Pledgee dated November 25, 1992 ("November 1992
Master Lease"); (ii) Brit-I and Pledgor under an Agreement of Acquisition and
Lease between Brit-I, BritWill Investments-Indiana, L.P., Pledgor and Pledgee
dated as of November 1, 1992 (the "Acquisition Agreement"); and (iii) Brit-I
under a leasehold mortgage between Pledgee and Pledgor dated as of November 1,
1992 (the "Leasehold Mortgage"). The November 1992 Master Lease has been assumed
(as amended and supplemented) by the Omega New Master Lease.
The parties therefore agree as follows:
1. Pledge; Grant of Security Interest. Pledgor hereby grants to Pledgee
a security interest, on the following terms and subject to the following
conditions, in:
(a) all Pledgor's right, title and interest in the issued and
outstanding shares of the capital stock or other securities
owned by Pledgor or voting trust certificates or other
<PAGE> 2
documents of any kind evidencing any and all ownership or
other interest of Pledgor in Brit-I, as listed on Schedule I
annexed hereto and any supplemental schedule attached hereto
or delivered to Pledgee from time to time ("Pledged Stock");
(b) any equity securities issued by Brit I and any options,
warrants or rights to acquire such securities, owned or
acquired by Pledgor, directly or indirectly, now or at any
time in the future;
(c) any securities or other property issued or distributed to
Pledgor with respect to any securities described in clauses
(a) or (b) above as a dividend or distribution or as a result
of any amendment of the certificate of incorporation or other
charter documents, merger, consolidation, redesignation,
reclassification, purchase or sale of assets, dissolution, or
plan of arrangement, compromise or reorganization of the
issuer thereof;
(d) any rights incidental to the ownership of any of the
securities described in clauses (a), (b) or (c) above such as
voting, conversion and registration rights and rights of
recovery for violations of applicable securities laws; and
(e) the proceeds of the exercise, redemption, sale or exchange of
any of the foregoing or any dividend, interest payment or
other distribution of cash or property in respect thereof.
All of the foregoing may be referred to herein as the "PLEDGED
COLLATERAL".
2. Secured Obligations. The security interest described in Section 1 of
this Agreement is granted for the purpose of securing the prompt and full
payment when due (and not merely the ultimate collectibility) of all principal,
interest, indebtedness and other liabilities payable to Pledgor under the
Indiana Returned Facility Note, and the prompt and full payment of all sums
owing to Pledgor and the performance of all material obligations required of the
Lessees under the Omega New Master Lease (the "SECURED OBLIGATIONS").
3. Delivery. (a) Before the Pledgor has executed and delivered this
Agreement to the Pledgee, Pledgor has delivered to Pledgee all certificates
representing the Pledged Stock, duly endorsed in blank without restriction or
with a fully executed Assignment in Blank (substantially in the form of Exhibit
A hereto) and with all necessary transfer tax stamps affixed.
(b) If, at any time, Pledgor obtains possession of any certificate or
instrument constituting or representing any of the Pledged Collateral (other
than interest and cash dividends), Pledgor shall deliver such certificate or
instrument to Pledgee forthwith duly endorsed in blank without restriction or
with a fully executed Assignment in Blank (substantially in the form of Exhibit
A hereto) and with all necessary transfer tax stamps affixed.
2
<PAGE> 3
(c) If no Event of Default (as defined in Section 10 below) has
occurred and is continuing, Pledgor may retain for its own use and shall not be
required to deliver to Pledgee any interest payments on or any cash dividends or
other cash distributions; if an Event of Default has occurred and is continuing,
then all such interest, dividends and cash distributions shall be delivered to
the Pledgee as provided in paragraph (b) of this Section 3.
(d) If any of the Pledged Collateral is uncertificated securities,
Pledgor shall deliver a fully executed Assignment in Blank (substantially in the
form of Exhibit A hereto) and within twenty-one days of the date new value is
given by Pledgee with respect to such uncertificated securities either:
(i) procure the issuance of security certificates to represent
such Pledged Collateral and endorse and deliver such
certificates as required by paragraph (b) of this Section 3;
or
(ii) file with the Issuer (as that term is defined in Article 8 of
the Uniform Commercial Code) thereof Instructions to Issuer to
Register Pledge (substantially in the form of Exhibit B) and
do such other acts as is necessary to cause the Issuer to
register Pledgee as the holder of a first priority security
interest in the Pledged Collateral; or
(iii) cause the issuer thereof to enter into an agreement, in form
and substance satisfactory to Pledgee, among Pledgee, the
registered owner of such security, and the issuer to the
effect that the issuer will comply with instructions
originated by Pledgee without further consent by the
registered owner.
(e) In addition to the foregoing, Pledgor shall deliver to Pledgee such
financing statements or other instruments as are deemed necessary by Pledgee to
enable it to perfect its security interest in the Pledged Collateral under
applicable law.
4. Voting Rights. If no Event of Default has occurred or is continuing,
the Pledged Collateral will be registered in the name of Pledgor, and Pledgor
may exercise any voting or consensual rights that Pledgor may have as the owner
of the Pledged Collateral for any purpose which is not inconsistent with this
Agreement. Pledgor shall deliver to Pledgee copies of all notices, proxy
statements, proxies and other information or instruments in its possession
concerning such exercise and advise Pledgee of how Pledgor will exercise such
rights at least five (5) days before any meeting or mailing any ballot or
consent and shall not exercise any such right if, in the judgment of Pledgee,
such exercise would have a material adverse effect on the value of the Pledged
Collateral or would result in a violation of any of the terms of the Omega New
Master Lease or the Indiana Returned Facilities Note. If an Event of Default has
occurred and is continuing, Pledgee may exercise all voting or consensual rights
of the owners of any of the Pledged Collateral and Pledgor shall deliver to
Pledgee all notices, proxy statements, proxies and other information and
instruments relating to the exercise of such rights received by Pledgor from the
issuers of any of the Pledged Collateral promptly upon receipt thereof and shall
at the request of Pledgee execute and deliver to Pledgee any
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<PAGE> 4
proxies or other instruments which are, in the reasonable judgment of Pledgee,
necessary for Pledgee to validly exercise such voting and consensual rights.
5. Duty of Pledgee. The duty of the Pledgee with respect to the Pledged
Collateral shall be solely to use reasonable care in the physical custody
thereof, and the Pledgee shall not be under any obligation to take any action
with respect to any of the Pledged Collateral or to preserve rights against
prior parties. The powers conferred on Pledgee hereunder are solely to protect
its interest in the Pledged Collateral and do not impose any duty upon it to
exercise any such powers. Pledgor is not looking to the Pledgee to provide it
with investment advice. Pledgee shall have no duty to ascertain or take any
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters concerning any Pledged Collateral, whether or not Pledgee has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve any rights pertaining to any Pledged Collateral.
6. Subsequent Changes Affecting Pledged Collateral. Pledgor
acknowledges that it has made its own arrangements for keeping informed of
changes or potential changes affecting the Pledged Collateral (including, but
not limited to, conversions, subscriptions, exchanges, reorganizations,
dividends, tender offers, mergers, consolidations and shareholder or other
meetings) and Pledgor agrees that Pledgee has no responsibility to inform
Pledgor of such matters or to take any action with respect thereto even if any
of the Pledged Collateral has been registered in the name of Pledgee or its
agent or nominee.
7. Return of Pledged Collateral. The security interest granted to
Pledgee hereunder shall not terminate and Pledgee shall not be required to
return the Pledged Collateral to Pledgor unless and until (a) the Secured
Obligations have been fully paid or performed, (b) all of Pledgor's obligations
hereunder have been fully paid or performed, and (c) Pledgor has reimbursed
Pledgee for any expenses of returning the Pledged Collateral and filing such
termination statements and other instruments as are required to be filed in
public offices under applicable laws.
8. Representations and Warranties. Pledgor hereby represents and
warrants to Pledgee as follows:
(a) Enforceability. This Agreement has been duly executed and
delivered by Pledgor, constitutes its valid and legally
binding obligation and is enforceable against Pledgor in
accordance with its terms. Pledgor has the authority to enter
into and perform all of its obligations and agreements under
this Agreement. No consent or approval for the entry into and
performance by Pledgor of its obligations and agreements under
this Agreement is necessary.
(b) No Conflict. The execution, delivery and performance of this
Agreement, the grant of the security interest in the Pledged
Collateral hereunder and the consummation of the transactions
contemplated hereby will not, with or without the giving of
notice or the lapse of time, (a) violate any material law
applicable to Pledgor; (b) violate any
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<PAGE> 5
judgment, writ, injunction or order of any court or
governmental body or officer applicable to Pledgor; (c)
violate or result in the breach of any material agreement to
which Pledgor is a party or by which any of its properties,
including the Pledged Collateral, is bound; (d) violate
Pledgor's articles of incorporation or organization, bylaws,
partnership, shareholder or operating agreement; nor (e)
violate any restriction on the transfer of any of the Pledged
Collateral. Pledgor has the full and unrestricted right to
pledge, assign and create a security interest in the Pledged
Collateral as described in and contemplated by this Agreement.
The execution, delivery and performance of this Agreement by
Pledgor will not affect or in any way impair the Pledged
Collateral or Pledgor's or Pledgee's rights or interests
therein.
(c) No Consents. No consent, approval, license, permit or other
authorization of any third party or any governmental body or
officer is required for the valid and lawful execution and
delivery of this Agreement, the valid and lawful creation and
perfection of the Pledgee's security interest in the Pledged
Collateral or the valid and lawful exercise by Pledgee of
remedies available to it under this Agreement or applicable
law or of the voting and other rights granted to it in this
Agreement except as may be required for the offer or sale of
those items of Pledged Collateral which are securities under
applicable securities laws.
(d) Organization. Pledgor is duly organized, validly existing and
in good standing under the laws of the State of Delaware. The
Pledged Stock have been duly authorized and validly issued and
are fully paid and non-assessable. The certificates which
represent the Pledged Stock are valid and genuine and have not
been altered and Pledgor is the appropriate person to endorse
them. Except for this Agreement, Pledgor is not bound by any
certificate of incorporation or organization, bylaw, agreement
or instrument (including options, warrants, and convertible
securities) which relates to the voting of; restricts the
transfer of; requires Pledgor to issue or sell; or creates
rights in any person (other than the record owner) with
respect to; any securities issued by Pledgor.
(e) Security Interest. Pledgor is the sole record and beneficial
owner of the Pledged Stock free and clear of all liens,
encumbrances and adverse claims and Pledgor has the
unrestricted right to grant the security interest provided for
herein to the Pledgee. Pledgor has duly endorsed and delivered
to Pledgee all of the certificates representing the Pledged
Stock and has granted to Pledgee a valid and perfected first
priority security interest in the Pledged Stock, free of all
liens, encumbrances, transfer restrictions and adverse claims.
The certificates, instruments and other writings delivered by
Pledgor to Pledgee pursuant to this Agreement are all of the
certificates, instruments and other writings representing the
Pledged Collateral and all rights and interests with respect
thereto. The security interest granted hereby to Pledgee does
now and shall at all times during the term of this Agreement
continue to constitute a first and prior lien on the Pledged
Collateral, subject only to such
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<PAGE> 6
matters as may be specifically agreed to in writing by
Pledgee. This representation shall be deemed made with respect
to each item of property that becomes Pledged Collateral after
the date hereof.
(f) Information. None of the information, documents, or financial
statements which has been furnished by Pledgor or its
representatives to Pledgee or any of its representatives in
connection with the transactions contemplated by this
Agreement or the Omega New Master Lease or the Indiana
Returned Facilities Note contains any untrue statement of
material fact or omits to state any material fact required to
be stated hereby or thereby to make such statements not
misleading.
(g) Name and Address. Pledgor's principal place of business is
correctly set forth under its signature at the end of this
Agreement.
9. Agreements. So long as this Agreement is in effect, Pledgor shall:
(a) Maintain the Pledged Collateral free from all pledges, liens,
encumbrances and security interests or other claims in favor
of others, other than the security interest in favor of
Pledgee, and Pledgor will defend the Pledged Collateral
against all claims and demands of all persons.
(b) Comply with the requirements of all applicable state, local
and federal laws necessary to grant to Pledgee a valid lien
upon, and a duly perfected security interest in, the Pledged
Collateral in compliance with the requirements of this
Agreement.
(c) Pay all reasonable costs and expenses of whatever kind and
nature that Pledgee may incur, including reasonable attorneys'
fees, in protecting, maintaining, preserving, enforcing or
foreclosing the Pledged Collateral or the security interest
granted to Pledgee hereunder, whether through judicial
proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or relating to any of
the Secured Obligations.
(d) Appear in and defend any action or proceeding arising out of
or connected with this Agreement, and pay all reasonable costs
and expenses of Pledgee (including, without limitation,
reasonable attorneys' fees) in any such action or proceeding
in which Pledgee appears or determines to become involved.
(e) Not, without the prior written consent of Pledgee, sell,
assign, encumber, pledge, hypothecate, transfer or otherwise
dispose of the Pledged Collateral or any part thereof or any
interest therein.
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(f) Provide Pledgee, and Pledgee's agents and attorneys,
reasonable access to the books and records of Pledgor for
inspection purposes and permit Pledgee and Pledgee's agents
and attorneys to make copies hereof.
(g) Notify the Pledgee at least ninety (90) days before Pledgor
changes its name or the address of its principal place of
business.
(h) At Pledgor's expense, do such further acts and execute and
deliver such additional financing statements, continuations,
conveyances, certificates, instruments, legal opinions and
other assurances as Pledgee may at any time reasonably request
or require to protect, assure or enforce its interests, rights
and remedies under this Agreement.
10. Events of Default. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" under this Agreement:
(a) If the Pledgor or Brit-I fails to pay or perform, as the case
may be, any of the Secured Obligations when the same become
due and payable or performable, as the case may be; or
(b) If an uncured event of default occurs under a loan document or
any promissory note, security agreement, loan agreement or
other agreement between Pledgee and Pledgor; or
(c) If any representation or warranty made by Pledgor in this
Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; or
(d) If Pledgor:
(i) makes an assignment for the benefit of, or enters
into any composition or arrangement with, Pledgee; or
(ii) conceals, removes, or permits to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud its Pledgee or any of them,
or makes or suffers a transfer of any of its property
which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(e) The filing of a petition by or against Pledgor seeking relief
under the Federal Bankruptcy Code, 11 U.S.C. Section 101, et
seq., and any amendments thereto, or any similar law or
regulation, whether federal, state or local, not dismissed
within 30 days.
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(f) The commencement of a proceeding by or against Pledgor under
any statute or other law providing for an assignment for the
benefit of Pledgee, the appointment of a receiver, or any
other similar law or regulation, whether federal, state or
local, not dismissed within 30 days.
(g) The garnishment, attachment, levy or other similar action
taken by or on behalf of any Pledgee of the Pledgor, or any of
its properties which could have a negative effect on the
Pledgor.
11. Remedies. (a) Upon and at any time after an Event of Default under
this Agreement, Pledgee shall, at its option and without further notice to
Pledgor (except for such further notices, if any, that may be required by law)
be entitled to exercise any or all rights and remedies provided hereunder or by
law, including without limitation the rights and remedies of a secured party
under the Michigan Uniform Commercial Code. Any requirement under the Michigan
Uniform Commercial Code or otherwise of reasonable notice shall be met if
Pledgee sends Pledgor notice of sale and other notices required by law at least
ten (10) days prior to the date of sale, disposition or other event giving rise
to the required notice. Any sale held pursuant to the exercise of Pledgee's
rights hereunder may be public or private, and at such sale Pledgee shall have
the right, at any time and from time to time, to the extent permitted by law, to
sell, assign and deliver all or any part of the Pledged Collateral, at Pledgee's
office or elsewhere, without demand of performance, advertisement of notice of
intention to sell or of the time or place of sale or adjournment thereof or any
other notice (all of which are hereby waived by Pledgor to the extent permitted
by law), except such notice as is required by applicable law and cannot be
waived, for cash, on credit or for other property, for immediate or future
delivery, without any assumption or credit risk, and, provided that such is not
in violation of applicable law, for such terms as Pledgee in its absolute and
uncontrolled discretion may determine. In furtherance of Pledgee's rights
hereunder, Pledgee shall have the right, for and in the name, place and stead of
Pledgor, to execute endorsements, assignments or other instruments of conveyance
or transfer with respect to all or any of the Pledged Collateral. All amounts
collected by Pledgee as the result of any action taken pursuant to this Section
11, and the liquidation value of any other property received as a result of such
action, shall be applied by Pledgee as follows:
(i) First, to the payment of all fees and costs including, without
limitation, reasonable attorneys' fees, incurred in connection
with the collection of the Secured Obligations or in
connection with the exercise or enforcement of Pledgee's
rights, powers or remedies under this Agreement.
(ii) Second, to the payment and satisfaction of all of the Secured
Obligations.
(b) Pledgee shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Pledgee may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. If, under the Michigan Uniform
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<PAGE> 9
Commercial Code, the Pledgee may purchase any part of the Pledged Collateral, it
may, in payment of any part of the purchase price thereof cancel any part of the
Secured Obligations. If any of the Pledged Collateral is sold on credit or for
future delivery, it need not be retained by Pledgee until the purchase price is
paid and Pledgee shall incur no liability if the purchaser fails to take up or
pay for such collateral. In case of any such failure, such collateral may be
sold again.
(c) Pledgor shall execute and deliver to the purchasers of the Pledged
Collateral all instruments and other documents necessary or proper to sell,
convey, and transfer title to such Pledged Collateral and, if approval of any
sale of Pledged Collateral by any governmental body or officer is required,
Pledgor shall prepare or cooperate fully in the preparation of and cause to be
filed with such governmental body or officer all necessary or proper
applications, reports, and forms and do all other things necessary or proper to
expeditiously obtain such approval.
(d) The remedies provided in this Agreement in favor of Pledgee shall
not be deemed exclusive, but shall be cumulative, and shall be in addition to
all other remedies in favor of Pledgee existing at law or in equity.
12. Appointment of Pledgee as Agent. Pledgor hereby appoints and
constitutes Pledgee, its successors and assigns, as its agent and
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action or executing any instrument that Pledgee
considers necessary or convenient for such purpose, including the power to
endorse and deliver checks, notes and other instruments for the payment of money
in the name of and on behalf of Pledgor, to endorse and deliver in the name of
and on behalf of Pledgor securities certificates and execute and deliver in the
name of and on behalf of Pledgor instructions to the issuers of uncertificated
securities, and to execute and file in the name of and on behalf of Pledgor
financing statements (which may be photocopies of this Agreement) and
continuations and amendments to financing statements in the relevant
jurisdictions and Forms 144 with the United States Securities and Exchange
Commission. This appointment is coupled with an interest and is irrevocable and
will not be affected by the dissolution or bankruptcy of Pledgor nor by the
lapse of time. If Pledgor fails to perform any act required by this Agreement,
Pledgee may perform such act in the name of and on behalf of Pledgor and at its
expense which shall be chargeable to Pledgor under this Agreement. Pledgor
hereby consents and agrees that the issuers of or obligors of the Pledged
Collateral or any registrar or transfer agent or trustee for any of the Pledged
Collateral shall be entitled to accept the provisions hereof as conclusive
evidence of the rights of Pledgee to effect any transfer pursuant to this
Agreement and the authority granted to Pledgee herein, notwithstanding any other
notice or direction to the contrary heretofore or hereafter given by Pledgor, or
any other person, to any of such issuers, obligors, registrars, transfer agents,
or trustees.
13. Impact of Regulations. Pledgor acknowledges that compliance with
the Securities Act of 1933 and the rules and regulations thereunder and any
relevant state securities laws and other applicable laws may impose limitations
on the right of Pledgee to sell or otherwise dispose of securities included in
the Pledged Collateral. For this reason, Pledgor hereby authorizes Pledgee to
sell any securities included in the Pledged Collateral in such manner and to
such persons as would,
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in the judgment of Pledgee, help to ensure that the transfer of such securities
will be given prompt and effective approval by any relevant regulatory
authorities and will not require any of the securities to be registered or
qualified under any applicable securities laws. Pledgor understands that a sale
under the foregoing circumstances may yield a substantially lower price for such
Pledged Collateral than would otherwise be obtainable if the same were
registered and sold in the open market, and Pledgor shall not attempt to hold
Pledgee responsible for selling any of the Pledged Collateral at an inadequate
price even if Pledgee accepts the first offer received or if only one possible
purchaser appears or bids at any such sale. If Pledgee shall sell any securities
included in the Pledged Collateral at such sale, Pledgee shall have the right to
rely upon the advice and opinion of any qualified appraiser or investment banker
as to the commercially reasonable price obtainable on the sale thereof but shall
not be obligated to obtain such advice or opinion. Pledgor hereby assigns to
Pledgee any registration rights or similar rights Pledgor may have from time to
time with respect to any of the Pledged Collateral.
14. Expenses. Pledgor will forthwith upon demand pay to Pledgee:
(i) the amount of any taxes which Pledgee may have been
required to pay by reason of holding the Pledged Collateral or to free
any of the Pledged Collateral from any lien, encumbrance or adverse
claim thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the reasonable fees and disbursements of counsel and of any
brokers, investment brokers, appraisers or other experts, that Pledgee
may incur in connection with (A) the administration or enforcement of
this Agreement, including such expenses as are incurred to preserve the
value of the Pledged Collateral and the validity, perfection, rank and
value of Pledgee's security interest therein, (B) the collection, sale
or other disposition of any of the Pledged Collateral, (C) the exercise
by Pledgee of any of the rights conferred upon it hereunder, or (D) any
action or proceeding to enforce its rights under this Agreement or in
pursuit of any non-judicial remedy hereunder including the sale of the
Pledged Collateral.
15. Indemnity. The Pledgor shall indemnify the Pledgee and its
directors, officers, employees, agents and attorneys against, and hold them
harmless from, any liability, cost or expense, including the reasonable fees and
disbursements of their legal counsel, incurred by any of them under the
corporate or securities laws applicable to holding or selling any of the Pledged
Collateral, except for liability, cost or expense arising out of the
recklessness or willful misconduct of the indemnified parties.
16. Performance by Pledgee. If Pledgor fails to duly and punctually
perform, observe or comply with any condition, term or covenant contained in
this Agreement, Pledgee, without notice to or demand upon Pledgor and without
waiving or releasing any of the Secured Obligations, may at any time thereafter
perform such condition, term or covenant for the account and at the expense of
Pledgor. All sums paid or advanced in connection with the foregoing and all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred in connection therewith shall be
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paid by Pledgor to Pledgee on demand, and shall constitute and become a part of
the Secured Obligations and Pledgor agrees to reimburse Pledgee for any payment
made or any expense incurred (including reasonable attorneys' fees to the extent
permitted by law) by Pledgee pursuant to this Agreement.
17. Registration Rights. In the event Brit-I proposes to register any
securities under the Securities Act of 1933, Pledgor will give the Pledgee
notice of that fact. In addition, and at no cost to Pledgee, Pledgor will
register the Securities so that they may be disposed of by public sale or other
public disposition. Upon the completion of the registration, Pledgor will
deliver certificates without any restrictive legend in exchange for the
unregistered Securities. Pledgor shall indemnify and hold Pledgee harmless
against any loss, claim, damage, or liability arising out of the registration
process, and will reimburse Pledgee for any legal or other expenses incurred by
Pledgee as a result.
18. Waivers. Pledgor hereby waives presentment, demand, protest, notice
of any default under the Omega New Master Lease. Neither the failure of nor any
delay by any party to this Agreement to enforce any right hereunder or to demand
compliance with its terms is a waiver of any right hereunder. No action taken
pursuant to this Agreement on one or more occasions is a waiver of any right
hereunder or constitutes a course of dealing that modifies this Agreement. No
waiver of any right or remedy under this Agreement shall be binding on any party
unless it is in writing and is signed by the party to be charged. No such waiver
of any right or remedy under any term of this Agreement shall in any event be
deemed to apply to any subsequent default under the same or any other term
contained herein.
19. Entire Agreement. This Agreement, the schedules and exhibits hereto
and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties with respect to the
subject matter hereof and supersede and discharge all prior agreements (written
or oral) and negotiations and all contemporaneous oral agreements concerning
such subject matter and negotiations. There are no oral conditions precedent to
the effectiveness of this Agreement.
20. Amendments. No amendment, modification or termination of this
Agreement shall be binding on any party hereto unless it is in writing and is
signed by the party to be charged.
21. Severability. If any term or provision set forth in this Agreement
shall be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms or provisions to persons or circumstances, other than
those to which it is held invalid or unenforceable, shall be construed in all
respects as if such invalid or unenforceable term or provision were omitted.
22. Successors. The terms of this Agreement shall be binding upon the
Pledgor and its corporate successors and shall inure to the benefit of Pledgee,
its corporate successors and any holder, owner or assignee of any rights in the
Pledged Stock and will be enforceable by them as their interest may appear.
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23. Third Parties. Nothing herein expressed or implied is intended or
shall be construed to give any person other than the parties hereto any rights
or remedies under this Agreement.
24. Saturdays, Sundays and Holidays. Where this Agreement authorizes or
requires a payment or performance on a Saturday, Sunday or public holiday, such
payment or performance shall be deemed to be timely if made on the next
succeeding business day.
25. Joint Preparation. This Agreement shall be deemed to have been
prepared jointly by the parties hereto. Any ambiguity herein shall not be
interpreted against any party hereto and shall be interpreted as if each of the
parties hereto had prepared this Agreement.
26. Rules of Construction. In this Agreement, words in the singular
number include the plural, and in the plural include the singular; words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender and the word "or"
is disjunctive but not exclusive. The captions and Section numbers appearing in
this Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.
27. Notices. All notices, demands or requests required or permitted to
be given to either party hereto shall be in writing and shall be deemed given if
delivered personally, sent by reputable overnight courier, with acknowledgment
of receipt requested, or mailed by registered, overnight or certified mail ,
with full postage paid thereon, return receipt requested (such notice to be
effective on the date such receipt is acknowledged), as follows:
Pledgor:
BritWill HealthCare Company
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Attn: Michael A. Jeffries
Nir E. Margalit
Pledgee:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn: Essel W. Bailey, Jr.
or to such place and with such other copies as Pledgor or Pledgee may designate
for itself by written notice to the other.
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28. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
29. Choice of Law; Jurisdiction, Venue, Service of Process. The parties
hereto agree that certain material events, occurrences and transactions relating
to this Agreement bear a reasonable relationship to the State of Michigan. The
validity, terms, performance and enforcement of this Agreement shall be governed
by those laws of the State of Michigan which are applicable to agreements which
are negotiated, executed, delivered and performed solely in the State of
Michigan. The State and Federal District Courts located in the State of Michigan
shall have exclusive jurisdiction and venue of any action or proceeding arising
out of or related to the negotiation, execution, delivery, performance, breach
or enforcement of this Agreement or any other agreement, document or instrument
negotiated, executed, delivered, entered into or performed in connection with
this Agreement or any of the transactions contemplated hereby or thereby; any
waiver, modification, amendment or termination hereof or thereof or any action
taken or omission made by the Pledgor or the Pledgee or any of their respective
directors, officers, employees, agents or attorneys in connection with the
payment, performance, exercise or enforcement of any right, duty or obligation
created or implied hereby or thereby or arising hereunder or thereunder;
regardless of whether any claim, counterclaim or defense in any such action,
suit or proceeding is characterized as arising out of fraud, negligence,
recklessness, intentional misconduct, a breach of contract or fiduciary duty, or
violation of a statute, law, ordinance, rule or regulation. The parties hereto
hereby irrevocably consent to the personal jurisdiction of such courts, to such
venue and to the service of process in the manner provided for the giving of
notices in this Agreement. The parties hereto hereby waive all objections to
such jurisdiction and venue including those which might be based upon
inconvenience or the nature of the forum.
30. Waiver of Jury Trial. The Pledgor hereby voluntarily, knowingly,
irrevocably and unconditionally waives and relinquishes its Right to Trial by
Jury under the Constitution of the United States of America or of the State of
Michigan or any other constitution, statute or law in any civil legal action,
suit or proceeding arising out of or related to the negotiation, execution,
delivery, performance, breach or enforcement of this Agreement or any other
agreement, document or instrument negotiated, executed, delivered, entered into
or performed in connection with this Agreement or any of the transactions
contemplated hereby or thereby; any waiver, modification, amendment or
termination hereof or thereof or any action taken or omission made by the
Pledgor or the Pledgee or any of their respective directors, officers,
employees, agents or attorneys in connection with the payment, performance,
exercise or enforcement of any right, duty or obligation created or implied
hereby or thereby or arising hereunder or thereunder; regardless of whether any
claim, counterclaim or defense in any such action, suit or proceeding is
characterized as arising out of fraud, negligence, recklessness, intentional
misconduct, a breach of contract or fiduciary duty, or violation of a statute,
law, ordinance, rule or regulation.
SIGNATURES ON FOLLOWING PAGES
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as
of the date first above stated.
PLEDGOR:
Address of Principal BRITWILL HEALTHCARE COMPANY,
Place of Business: a Delaware corporation
By:
Its:
PLEDGEE:
OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation
By:
Its:
<PAGE> 15
EXHIBIT A
ASSIGNMENT IN BLANK
(Certificated)
For value received, BRITWILL HEALTHCARE COMPANY, a Delaware corporation
("ASSIGNOR"), sells, assigns and transfers to
______________________________________ ("ASSIGNEE"), a ___% of the Interest in
BritWill Investments-I, Inc., a Delaware corporation (the "COMPANY"),
represented by certificate no. ___________ dated ________________ (the
"INTEREST"), and further irrevocably appoints OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation, as attorney in fact to transfer the Interest on the
books of the Company, with full power of substitution and resubstitution (which
power shall survive the dissolution of Assignor).
BRITWILL HEALTHCARE COMPANY,
a Delaware corporation
Dated: __________, 1999 By: ________________________________
Its: ________________________________
Signature Guaranteed:
By: ___________________________
<PAGE> 16
EXHIBIT B
INSTRUCTION TO ISSUER TO REGISTER PLEDGE
TO: BRITWILL INVESTMENTS-I, INC.
("ISSUER")
FROM: BRITWILL HEALTHCARE COMPANY
("PLEDGOR")
Re: Security Interest granted in ___% of the outstanding
Stock of the Issuer
Ladies & Gentlemen:
BritWill Healthcare Company, a Delaware corporation ("PLEDGOR") has
entered into a Pledge Agreement dated as of ______________, 199_, as amended
(the "PLEDGE AGREEMENT") in favor of OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation ("PLEDGEE"). Pursuant to the Pledge Agreement, Pledgor has
granted a security interest (the "PLEDGE") in the following uncertificated
securities of the Issuer:
____% of the outstanding Stock
(the "PLEDGED STOCK"). Pledgor hereby instructs the Issuer to register this
grant of security interest in the Pledged Stock on its books and records.
Pledgor hereby warrants to Issuer that its tax payer identification number is
_________________________.
Until the due presentment by Pledgee to the Issuer of an
instruction releasing the Pledge, Pledgor hereby irrevocably instructs, directs
and authorizes the Issuer to:
1. Register subject to the Pledge any uncertificated securities
issued in exchange for or distributed with respect to the
Pledged Stock;
2. Delivered to the Pledgee at the address set forth below any
certificated securities issued in exchange for or distributed
with respect to the Pledged Stock;
3. Pay to the Pledgee any monies paid in exchange for or in
redemption of part or all of the Pledged Stock;
4. Upon the due presentment of a transfer instruction from the
Pledgee:
(i) Register the transfer of the Pledged Stock to the new
owner free of the Pledge, if the instruction
specifies a new owner, who may be the Pledgee, and
does not specify a pledgee;
(ii) Register the transfer of the Pledged Stock to the new
owner subject to the interest of the Pledgee, if the
instruction specifies a new owner and the Pledgee; or
<PAGE> 17
(iii) Register the release of the security from the Pledge
and register the pledge of the Pledged Stock to a new
pledgee, if the instruction specifies the existing
owner and a new pledgee.
5. Not allow Pledgor to sell, assign, pledge, exercise any
conversion right or otherwise transfer the Pledged Stock
without the Issuer receiving the prior written or telecopied
signed consent of Pledgee.
If Pledgee informs the Issuer in writing or by telecopy that an Event
of Default has occurred under the Pledge Agreement, the Issuer shall deliver or
transfer, upon the written or telecopy request therefor of Pledgee, any or all
of the Pledged Stock as directed by Pledgee. Any delivery or transfer so made
shall be deemed authorized by the Pledgor and Pledgor shall not assert any claim
or liability against you for so transferring the Pledged Stock or any portion of
it.
Until the Issuer receives written or telecopy notice of the occurrence
of an Event of Default, Pledgor shall be permitted to receive interest, cash
dividends or other cash distributions on the Pledged Stock. If Pledgee informs
the Issuer in writing or by telecopy that an Event of Default has occurred under
the Pledge Agreement, then all interest, cash dividends or other cash
distributions shall be delivered to the Pledgee.
Please acknowledge your registration of the Pledge by delivering a copy
of the accompanying "Acknowledgment of Receipt of Instruction to Issuer to
Register Pledge" to the Pledgee. Please send all notices or deliveries to
Pledgee, to the following address:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Telephone: (734) 887-0200
or to such place as Pledgee may designate for itself by written notice to the
Issuer.
Until you have received the Pledgee's signed written statement that the
security interest of the Pledge Agreement has been released, the terms of this
Instruction may not be amended without the Pledgee's written or telecopied
consent.
B-2
<PAGE> 18
Dated: ______________, ____ PLEDGOR:
BRITWILL HEALTHCARE COMPANY,
a Delaware corporation
By: _______________________________
Its: _______________________________
Signature Guaranteed:
By: _______________________________
<PAGE> 19
ACKNOWLEDGMENT OF RECEIPT
OF INSTRUCTION TO ISSUER TO REGISTER PLEDGE
To: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
BritWill Investments-I, Inc., a Delaware corporation (the "ISSUER")
hereby acknowledges the receipt of the Instructions to Issuer to Register Pledge
dated ___________ __, 1999 (the "INSTRUCTIONS"), and that the pledge of the
following securities of the Issuer (the "PLEDGED STOCK"):
___% of the outstanding Stock
to OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation ("OMEGA"), pursuant
to the Pledge Agreement dated ____________ __, 199_, as amended, between Omega
and BRITWILL HEALTHCARE COMPANY, a Delaware corporation, has been registered on
the books and records of the Issuer. The Issuer has no knowledge of any adverse
claims with respect to the Pledged Stock and agrees to abide the Instructions.
Dated: ___________, ____
BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation
By: _______________________________
Its: _______________________________
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
(STOCK OF CEDAR CARE, INC. AND SHERWOOD HEALTHCARE CORPORATION)
This Second Amended and Restated Pledge Agreement (this "AGREEMENT") is
made and entered into as of February 2, 1999, between BRITWILL INVESTMENTS-I,
INC., a Delaware corporation ("PLEDGOR"), and OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation ("PLEDGEE").
BACKGROUND
1. Pursuant to a Guaranty Secured By Pledge of Stock given to Pledgee
on November 25th, 1992 ("GARTH GUARANTY"), Tyrell L. Garth ("Garth"), the then
owner of 100% of the stock of Cedar Care, Inc., an Indiana corporation ("CEDAR
CARE"), and Sherwood Healthcare Corp., an Indiana corporation ("SHERWOOD"),
guaranteed the payment when due of all Rent and all other sums payable under a
lease between Pledgor and Pledgee of nine (9) licensed nursing facilities in the
state of Indiana (the "NOVEMBER 1992 MASTER LEASE"). The Garth Guaranty was
secured by a Pledge Agreement (Sublessee Stock), dated November 25, 1992,
wherein Garth pledged to Pledgee all his right, title and interest in and to the
stock of Cedar Care and Sherwood as collateral security for the due payment and
performance of all rent, charges, indebtedness and other liabilities and
obligations payable or due to Pledgee under the November 1992 Master Lease.
2. An Amended and Restated Pledge Agreement (Sublessee Stock) was
entered into as of February 14, 1997, by and among Garth, Pledgor and Pledgee,
wherein Pledgor, which acquired all of Garth's right, title and interest in and
to the Pledged Stock pursuant to a certain Assignment and Assumption Agreement,
pledged to Pledgee all of Pledgee's right, title and interest in and to the
Pledged Stock as collateral security for the due payment and performance of all
rent, charges, indebtedness and other liabilities and obligations payable or due
to Pledgee under the November 1992 Master Lease.
3. Pursuant to Debtors' First Amended Joint Plan of Reorganization
dated October 15, 1998 entered in the United States Bankruptcy Court for the
District of Arizona in the matters of In Re: Unison HealthCare Corporation (Case
Nos. B-98-06583-PHX-GBN through B-98-06612-PHX-GBN) and In Re: BritWill
Investments-I, Inc. (Case Nos. B-98-0173-PHX-GBN through
B-98-1075-PHX-GBN)("PLAN"), Pledgor and others have, as Lessees, entered into a
Master Lease with Pledgee as Lessor dated December 31, 1998 (such lease, as
amended by First Amendment to Master Lease dated as of February 1, 1999 and
Second Amendment to Master Lease of even date herewith and as the same may be
amended from time to time hereafter "OMEGA NEW MASTER LEASE"), and the 1992
Master Lease has been assumed, amended, supplemented, restated and superceded)
by the Omega New Master Lease.
4. Pursuant to the Plan, BritWill Indiana Partnership, an Arizona
general partnership of which Pledgor is the General Partner, to which Pledgor
transferred its interest in the 1992 Master Lease, has executed and delivered to
Pledgee its promissory note dated as of January 31, 1999 in the principal amount
of Three Million Dollars ($3,000,000.00), payable to Pledgee (the "INDIANA
RETURNED FACILITY NOTE").
<PAGE> 2
5. Under the Plan, Pledgor is required to pledge the Pledged Stock as
security for the Omega New Master Lease and the Indiana Returned Facility Note.
The parties therefore agree as follows:
1. Pledge; Grant of Security Interest. Pledgor hereby grants to Pledgee
a security interest, on the following terms and subject to the following
conditions, in:
(a) all Pledgor's right, title and interest in the issued and
outstanding shares of the capital stock or other securities
owned by Pledgor or voting trust certificates or other
documents of any kind evidencing any and all ownership or
other interest of Pledgor in Cedar Care and Sherwood, as
listed on Schedule I annexed hereto and any supplemental
schedule attached hereto or delivered to Pledgee from time to
time ("PLEDGED STOCK");
(b) any equity securities issued by either Cedar Care or Sherwood
or both, and any options, warrants or rights to acquire such
securities, owned or acquired by Pledgor, directly or
indirectly, now or at any time in the future;
(c) any securities or other property issued or distributed to
Pledgor with respect to any securities described in clauses
(a) or (b) above as a dividend or distribution or as a result
of any amendment of the certificate of incorporation or other
charter documents, merger, consolidation, redesignation,
reclassification, purchase or sale of assets, dissolution, or
plan of arrangement, compromise or reorganization of the
issuer thereof;
(d) any rights incidental to the ownership of any of the
securities described in clauses (a), (b) or (c) above such as
voting, conversion and registration rights and rights of
recovery for violations of applicable securities laws; and
(e) the proceeds of the exercise, redemption, sale or exchange of
any of the foregoing or any dividend, interest payment or
other distribution of cash or property in respect thereof.
All of the foregoing may be referred to herein as the "PLEDGED
COLLATERAL".
2. Secured Obligations. The security interest described in Section 1 of
this Agreement is granted for the purpose of securing (i) the prompt and full
payment when due (and not merely the ultimate collectibility) of all Rent and
any other amounts payable by the Lessees under the Omega New Master Lease and
the prompt and full performance of all material obligations of the Lessees under
the Omega New Master Lease, and (ii) the prompt and full payment when due (and
not merely the ultimate collectibility) of all principal, interest and any other
amounts payable under the Indiana Returned Facility Note (the "SECURED
OBLIGATIONS").
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<PAGE> 3
3. Delivery. (a) Before Pledgor has executed and delivered this
Agreement to the Pledgee, Pledgor has delivered to Pledgee all certificates
representing the Pledged Stock, duly endorsed in blank without restriction or
with a fully executed Assignment in Blank (substantially in the form of Exhibit
A-1 and Exhibit A-2 hereto) and with all necessary transfer tax stamps affixed.
(b) If, at any time, Pledgor obtains possession of any certificate or
instrument constituting or representing any of the Pledged Collateral (other
than interest and cash dividends), Pledgor shall deliver such certificate or
instrument to Pledgee forthwith duly endorsed in blank without restriction or
with a fully executed Assignment in Blank (substantially in the form of Exhibit
A-1 and Exhibit A-2 hereto) and with all necessary transfer tax stamps affixed.
(c) If no Event of Default (as defined in Section 10 below) has
occurred and is continuing, Pledgor may retain for its own use and shall not be
required to deliver to Pledgee any interest payments on or any cash dividends or
other cash distributions; if an Event of Default has occurred and is continuing,
then all such interest, dividends and cash distributions shall be delivered to
the Pledgee as provided in paragraph (b) of this Section 3.
(d) If any of the Pledged Collateral is uncertificated securities,
Pledgor shall deliver a fully executed Assignment in Blank (substantially in the
form of Exhibit A-1 and Exhibit A-2 hereto) and within twenty-one days of the
date new value is given by Pledgee with respect to such uncertificated
securities either:
(i) procure the issuance of security certificates to represent
such Pledged Collateral and endorse and deliver such
certificates as required by paragraph (b) of this Section 3;
or
(ii) file with the Issuer (as that term is defined in Article 8 of
the Uniform Commercial Code) thereof Instructions to Issuer to
Register Pledge (substantially in the form of Exhibit B-1 or
Exhibit B-2) and do such other acts as is necessary to cause
the Issuer to register Pledgee as the holder of a first
priority security interest in the Pledged Collateral; or
(iii) cause the issuer thereof to enter into an agreement, in form
and substance satisfactory to Pledgee, among Pledgee, the
registered owner of such security, and the issuer to the
effect that the issuer will comply with instructions
originated by Pledgee without further consent by the
registered owner.
(e) In addition to the foregoing, Pledgor shall deliver to Pledgee such
financing statements or other instruments as are deemed necessary by Pledgee to
enable it to perfect its security interest in the Pledged Collateral under
applicable law.
4. Voting Rights. If no Event of Default has occurred or is continuing,
the Pledged Collateral will be registered in the name of Pledgor, and Pledgor
may exercise any voting or consensual rights that Pledgor may have as the owner
of the Pledged Collateral for any purpose which is not inconsistent with this
Agreement. Pledgor shall deliver to Pledgee copies of all notices, proxy
statements, proxies and other information or instruments in its possession
concerning such exercise and advise Pledgee of how Pledgor will exercise such
rights at least five (5) days before any meeting
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<PAGE> 4
or mailing any ballot or consent and shall not exercise any such right if, in
the judgment of Pledgee, such exercise would have a material adverse effect on
the value of the Pledged Collateral or would result in a violation of any of the
terms of the Omega New Master Lease or the Indiana Returned Facility Note. If an
Event of Default has occurred and is continuing, Pledgee may exercise all voting
or consensual rights of the owners of any of the Pledged Collateral and Pledgor
shall deliver to Pledgee all notices, proxy statements, proxies and other
information and instruments relating to the exercise of such rights received by
Pledgor from the issuers of any of the Pledged Collateral promptly upon receipt
thereof and shall at the request of Pledgee execute and deliver to Pledgee any
proxies or other instruments which are, in the reasonable judgment of Pledgee,
necessary for Pledgee to validly exercise such voting and consensual rights.
5. Duty of Pledgee. The duty of the Pledgee with respect to the Pledged
Collateral shall be solely to use reasonable care in the physical custody
thereof, and the Pledgee shall not be under any obligation to take any action
with respect to any of the Pledged Collateral or to preserve rights against
prior parties. The powers conferred on Pledgee hereunder are solely to protect
its interest in the Pledged Collateral and do not impose any duty upon it to
exercise any such powers. Pledgor is not looking to the Pledgee to provide it
with investment advice. Pledgee shall have no duty to ascertain or take any
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters concerning any Pledged Collateral, whether or not Pledgee has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve any rights pertaining to any Pledged Collateral.
6. Subsequent Changes Affecting Pledged Collateral. Pledgor
acknowledges that it has made its own arrangements for keeping informed of
changes or potential changes affecting the Pledged Collateral (including, but
not limited to, conversions, subscriptions, exchanges, reorganizations,
dividends, tender offers, mergers, consolidations and shareholder or other
meetings) and Pledgor agrees that Pledgee has no responsibility to inform
Pledgor of such matters or to take any action with respect thereto even if any
of the Pledged Collateral has been registered in the name of Pledgee or its
agent or nominee.
7. Return of Pledged Collateral. The security interest granted to
Pledgee hereunder shall not terminate and Pledgee shall not be required to
return the Pledged Collateral to Pledgor unless and until (a) the Secured
Obligations have been fully paid or performed, (b) all of Pledgor's obligations
hereunder have been fully paid or performed, and (c) Pledgor has reimbursed
Pledgee for any expenses of returning the Pledged Collateral and filing such
termination statements and other instruments as are required to be filed in
public offices under applicable laws.
8. Representations and Warranties. Pledgor hereby represents and
warrants to Pledgee as follows:
(a) Enforceability. This Agreement has been duly executed and
delivered by Pledgor, constitutes its valid and legally
binding obligation and is enforceable against Pledgor in
accordance with its terms. Pledgor has the authority to enter
into and perform all of its obligations and agreements under
this Agreement. No consent or approval for
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<PAGE> 5
the entry into and performance by Pledgor of its obligations
and agreements under this Agreement is necessary.
(b) No Conflict. The execution, delivery and performance of this
Agreement, the grant of the security interest in the Pledged
Collateral hereunder and the consummation of the transactions
contemplated hereby will not, with or without the giving of
notice or the lapse of time, (a) violate any material law
applicable to Pledgor; (b) violate any judgment, writ,
injunction or order of any court or governmental body or
officer applicable to Pledgor; (c) violate or result in the
breach of any material agreement to which Pledgor is a party
or by which any of its properties, including the Pledged
Collateral, is bound; (d) violate Pledgor's articles of
incorporation or organization, bylaws, partnership,
shareholder or operating agreement; nor (e) violate any
restriction on the transfer of any of the Pledged Collateral.
Pledgor has the full and unrestricted right to pledge, assign
and create a security interest in the Pledged Collateral as
described in and contemplated by this Agreement. The
execution, delivery and performance of this Agreement by
Pledgor will not affect or in any way impair the Pledged
Collateral or Pledgor's or Pledgee's rights or interests
therein.
(c) No Consents. No consent, approval, license, permit or other
authorization of any third party or any governmental body or
officer is required for the valid and lawful execution and
delivery of this Agreement, the valid and lawful creation and
perfection of the Pledgee's security interest in the Pledged
Collateral or the valid and lawful exercise by Pledgee of
remedies available to it under this Agreement or applicable
law or of the voting and other rights granted to it in this
Agreement except as may be required for the offer or sale of
those items of Pledged Collateral which are securities under
applicable securities laws.
(d) Organization. Pledgor is duly organized, validly existing and
in good standing under the laws of the State of Delaware. The
Pledged Stock have been duly authorized and validly issued and
are fully paid and non-assessable. The certificates which
represent the Pledged Stock are valid and genuine and have not
been altered and Pledgor is the appropriate person to endorse
them. Except for this Agreement, Pledgor is not bound by any
certificate of incorporation or organization, bylaw, agreement
or instrument (including options, warrants, and convertible
securities) which relates to the voting of; restricts the
transfer of; requires Pledgor to issue or sell; or creates
rights in any person (other than the record owner) with
respect to; any securities issued by Pledgor.
(e) Security Interest. Pledgor is the sole record and beneficial
owner of the Pledged Stock free and clear of all liens,
encumbrances and adverse claims and Pledgor has the
unrestricted right to grant the security interest provided for
herein to the Pledgee. Pledgor has duly endorsed and delivered
to Pledgee all of the certificates representing the Pledged
Stock and has granted to Pledgee a valid and perfected first
priority security interest in the Pledged Stock, free of all
liens, encumbrances, transfer restrictions and adverse claims.
The certificates, instruments and other writings delivered by
Pledgor to Pledgee pursuant to this Agreement are all of the
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<PAGE> 6
certificates, instruments and other writings representing the
Pledged Collateral and all rights and interests with respect
thereto. The security interest granted hereby to Pledgee does
now and shall at all times during the term of this Agreement
continue to constitute a first and prior lien on the Pledged
Collateral, subject only to such matters as may be
specifically agreed to in writing by Pledgee. This
representation shall be deemed made with respect to each item
of property that becomes Pledged Collateral after the date
hereof.
(f) Information. None of the information, documents, or financial
statements which has been furnished by Pledgor or its
representatives to Pledgee or any of its representatives in
connection with the transactions contemplated by this
Agreement, the Omega New Master Lease or the Indiana Returned
Facility Note contains any untrue statement of material fact
or omits to state any material fact required to be stated
hereby or thereby to make such statements not misleading.
(g) Name and Address. Pledgor's principal place of business is
correctly set forth under its signature at the end of this
Agreement.
9. Agreements. So long as this Agreement is in effect, Pledgor
shall:
(a) Maintain the Pledged Collateral free from all pledges, liens,
encumbrances and security interests or other claims in favor
of others, other than the security interest in favor of
Pledgee, and Pledgor will defend the Pledged Collateral
against all claims and demands of all persons.
(b) Comply with the requirements of all applicable state, local
and federal laws necessary to grant to Pledgee a valid lien
upon, and a duly perfected security interest in, the Pledged
Collateral in compliance with the requirements of this
Agreement.
(c) Pay all reasonable costs and expenses of whatever kind and
nature that Pledgee may incur, including reasonable attorneys'
fees, in protecting, maintaining, preserving, enforcing or
foreclosing the Pledged Collateral or the security interest
granted to Pledgee hereunder, whether through judicial
proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or relating to any of
the Secured Obligations.
(d) Appear in and defend any action or proceeding arising out of
or connected with this Agreement, and pay all reasonable costs
and expenses of Pledgee (including, without limitation,
reasonable attorneys' fees) in any such action or proceeding
in which Pledgee appears or determines to become involved.
(e) Not, without the prior written consent of Pledgee, sell,
assign, encumber, pledge, hypothecate, transfer or otherwise
dispose of the Pledged Collateral or any part thereof or any
interest therein.
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<PAGE> 7
(f) Provide Pledgee, and Pledgee's agents and attorneys,
reasonable access to the books and records of Pledgor for
inspection purposes and permit Pledgee and Pledgee's agents
and attorneys to make copies hereof.
(g) Notify the Pledgee at least ninety (90) days before Pledgor
changes its name or the address of its principal place of
business.
(h) At Pledgor's expense, do such further acts and execute and
deliver such additional financing statements, continuations,
conveyances, certificates, instruments, legal opinions and
other assurances as Pledgee may at any time reasonably request
or require to protect, assure or enforce its interests, rights
and remedies under this Agreement.
10. Events of Default. The occurrence of any of the following
shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) If the Pledgor fails to pay or perform, as the case may be,
any of the Secured Obligations when the same become due and
payable or performable, as the case may be, after the
expiration of any applicable cure or grace periods; or
(b) If an uncured event of default occurs under a loan document or
any promissory note, security agreement, loan agreement or
other agreement between Pledgee and Pledgor; or
(c) If any representation or warranty made by Pledgor in this
Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; or
(d) If Pledgor:
(i) makes an assignment for the benefit of, or enters
into any composition or arrangement with, Pledgee; or
(ii) conceals, removes, or permits to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud its Pledgee or any of them,
or makes or suffers a transfer of any of its property
which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law, or makes any
transfer of its property to or for the benefit of a
Pledgee at a time when other Pledgee similarly
situated have not been paid; or
(e) The filing of a petition by or against Pledgor seeking relief
under the Federal Bankruptcy Code, 11 U.S.C. Section 101, et
seq., and any amendments thereto, or any similar law or
regulation, whether federal, state or local, not dismissed
within 30 days.
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<PAGE> 8
(f) The commencement of a proceeding by or against Pledgor under
any statute or other law providing for an assignment for the
benefit of Pledgee, the appointment of a receiver, or any
other similar law or regulation, whether federal, state or
local, not dismissed within 30 days.
(g) The garnishment, attachment, levy or other similar action
taken by or on behalf of any Pledgee of the Pledgor, or any of
its properties which could have an adverse effect on the
Pledgor.
11. Remedies. (a) Upon and at any time after an Event of Default under
this Agreement, Pledgee shall, at its option and without further notice to
Pledgor (except for such further notices, if any, that may be required by law)
be entitled to exercise any or all rights and remedies provided hereunder or by
law, including without limitation the rights and remedies of a secured party
under the Michigan Uniform Commercial Code. Any requirement under the Michigan
Uniform Commercial Code or otherwise of reasonable notice shall be met if
Pledgee sends Pledgor notice of sale and other notices required by law at least
ten (10) days prior to the date of sale, disposition or other event giving rise
to the required notice. Any sale held pursuant to the exercise of Pledgee's
rights hereunder may be public or private, and at such sale Pledgee shall have
the right, at any time and from time to time, to the extent permitted by law, to
sell, assign and deliver all or any part of the Pledged Collateral, at Pledgee's
office or elsewhere, without demand of performance, advertisement of notice of
intention to sell or of the time or place of sale or adjournment thereof or any
other notice (all of which are hereby waived by Pledgor to the extent permitted
by law), except such notice as is required by applicable law and cannot be
waived, for cash, on credit or for other property, for immediate or future
delivery, without any assumption or credit risk, and, provided that such is not
in violation of applicable law, for such terms as Pledgee in its absolute and
uncontrolled discretion may determine. In furtherance of Pledgee's rights
hereunder, Pledgee shall have the right, for and in the name, place and stead of
Pledgor, to execute endorsements, assignments or other instruments of conveyance
or transfer with respect to all or any of the Pledged Collateral. All amounts
collected by Pledgee as the result of any action taken pursuant to this
Section 11, and the liquidation value of any other property received as a result
of such action, shall be applied by Pledgee as follows:
(i) First, to the payment of all fees and costs including, without
limitation, reasonable attorneys' fees, incurred in connection
with the collection of the Secured Obligations or in
connection with the exercise or enforcement of Pledgee's
rights, powers or remedies under this Agreement.
(ii) Second, to the payment and satisfaction of all of the Secured
Obligations.
(b) Pledgee shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Pledgee may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. If, under the Michigan Uniform
Commercial Code, the Pledgee may purchase any part of the Pledged Collateral, it
may, in payment of any part of the purchase price thereof cancel any part of the
Secured Obligations. If any of the Pledged Collateral is sold on credit or for
future delivery, it need not be retained by Pledgee until
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<PAGE> 9
the purchase price is paid and Pledgee shall incur no liability if the purchaser
fails to take up or pay for such collateral. In case of any such failure, such
collateral may be sold again.
(c) Pledgor shall execute and deliver to the purchasers of the Pledged
Collateral all instruments and other documents necessary or proper to sell,
convey, and transfer title to such Pledged Collateral and, if approval of any
sale of Pledged Collateral by any governmental body or officer is required,
Pledgor shall prepare or cooperate fully in the preparation of and cause to be
filed with such governmental body or officer all necessary or proper
applications, reports, and forms and do all other things necessary or proper to
expeditiously obtain such approval.
(d) The remedies provided in this Agreement in favor of Pledgee shall
not be deemed exclusive, but shall be cumulative, and shall be in addition to
all other remedies in favor of Pledgee existing at law or in equity.
12. Appointment of Pledgee as Agent. Pledgor hereby appoints and
constitutes Pledgee, its successors and assigns, as its agent and
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action or executing any instrument that Pledgee
considers necessary or convenient for such purpose, including the power to
endorse and deliver checks, notes and other instruments for the payment of money
in the name of and on behalf of Pledgor, to endorse and deliver in the name of
and on behalf of Pledgor securities certificates and execute and deliver in the
name of and on behalf of Pledgor instructions to the issuers of uncertificated
securities, and to execute and file in the name of and on behalf of Pledgor
financing statements (which may be photocopies of this Agreement) and
continuations and amendments to financing statements in the relevant
jurisdictions and Forms 144 with the United States Securities and Exchange
Commission. This appointment is coupled with an interest and is irrevocable and
will not be affected by the dissolution or bankruptcy of Pledgor nor by the
lapse of time. If Pledgor fails to perform any act required by this Agreement,
Pledgee may perform such act in the name of and on behalf of Pledgor and at its
expense which shall be chargeable to Pledgor under this Agreement. Pledgor
hereby consents and agrees that the issuers of or obligors of the Pledged
Collateral or any registrar or transfer agent or trustee for any of the Pledged
Collateral shall be entitled to accept the provisions hereof as conclusive
evidence of the rights of Pledgee to effect any transfer pursuant to this
Agreement and the authority granted to Pledgee herein, notwithstanding any other
notice or direction to the contrary heretofore or hereafter given by Pledgor, or
any other person, to any of such issuers, obligors, registrars, transfer agents,
or trustees.
13. Impact of Regulations. Pledgor acknowledges that compliance with
the Securities Act of 1933 and the rules and regulations thereunder and any
relevant state securities laws and other applicable laws may impose limitations
on the right of Pledgee to sell or otherwise dispose of securities included in
the Pledged Collateral. For this reason, Pledgor hereby authorizes Pledgee to
sell any securities included in the Pledged Collateral in such manner and to
such persons as would, in the judgment of Pledgee, help to ensure that the
transfer of such securities will be given prompt and effective approval by any
relevant regulatory authorities and will not require any of the securities to be
registered or qualified under any applicable securities laws. Pledgor
understands that a sale under the foregoing circumstances may yield a
substantially lower price for such Pledged Collateral than would otherwise be
obtainable if the same were registered and sold in the open market, and
9
<PAGE> 10
Pledgor shall not attempt to hold Pledgee responsible for selling any of the
Pledged Collateral at an inadequate price even if Pledgee accepts the first
offer received or if only one possible purchaser appears or bids at any such
sale. If Pledgee shall sell any securities included in the Pledged Collateral at
such sale, Pledgee shall have the right to rely upon the advice and opinion of
any qualified appraiser or investment banker as to the commercially reasonable
price obtainable on the sale thereof but shall not be obligated to obtain such
advice or opinion. Pledgor hereby assigns to Pledgee any registration rights or
similar rights Pledgor may have from time to time with respect to any of the
Pledged Collateral.
14. Expenses. Pledgor will forthwith upon demand pay to Pledgee:
(i) the amount of any taxes which Pledgee may have been
required to pay by reason of holding the Pledged Collateral or to free
any of the Pledged Collateral from any lien, encumbrance or adverse
claim thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the reasonable fees and disbursements of counsel and of any
brokers, investment brokers, appraisers or other experts, that Pledgee
may incur in connection with (A) the administration or enforcement of
this Agreement, including such expenses as are incurred to preserve the
value of the Pledged Collateral and the validity, perfection, rank and
value of Pledgee's security interest therein, (B) the collection, sale
or other disposition of any of the Pledged Collateral, (C) the exercise
by Pledgee of any of the rights conferred upon it hereunder, or (D) any
action or proceeding to enforce its rights under this Agreement or in
pursuit of any non-judicial remedy hereunder including the sale of the
Pledged Collateral.
15. Indemnity. The Pledgor shall indemnify the Pledgee and its
directors, officers, employees, agents and attorneys against, and hold them
harmless from, any liability, cost or expense, including the reasonable fees and
disbursements of their legal counsel, incurred by any of them under the
corporate or securities laws applicable to holding or selling any of the Pledged
Collateral, except for liability, cost or expense arising out of the
recklessness or willful misconduct of the indemnified parties.
16. Performance by Pledgee. If Pledgor fails to duly and punctually
perform, observe or comply with any condition, term or covenant contained in
this Agreement, Pledgee, without notice to or demand upon Pledgor and without
waiving or releasing any of the Secured Obligations, may at any time thereafter
perform such condition, term or covenant for the account and at the expense of
Pledgor. All sums paid or advanced in connection with the foregoing and all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred in connection therewith shall be paid by Pledgor to Pledgee on demand,
and shall constitute and become a part of the Secured Obligations and Pledgor
agrees to reimburse Pledgee for any payment made or any expense incurred
(including reasonable attorneys' fees to the extent permitted by law) by Pledgee
pursuant to this Agreement.
17. Registration Rights. In the event either Cedar Care or Sherwood or
both propose to register any securities under the Securities Act of 1933,
Pledgor will give the Pledgee notice of that
10
<PAGE> 11
fact. In addition, and at no cost to Pledgee, Pledgor will register the
Securities so that they may be disposed of by public sale or other public
disposition. Upon the completion of the registration, Pledgor will deliver
certificates without any restrictive legend in exchange for the unregistered
Securities. Pledgor shall indemnify and hold Pledgee harmless against any loss,
claim, damage, or liability arising out of the registration process, and will
reimburse Pledgee for any legal or other expenses incurred by Pledgee as a
result.
18. Waivers. Pledgor hereby waives presentment, demand, protest, notice
of any default under the Omega New Master Lease. Neither the failure of nor any
delay by any party to this Agreement to enforce any right hereunder or to demand
compliance with its terms is a waiver of any right hereunder. No action taken
pursuant to this Agreement on one or more occasions is a waiver of any right
hereunder or constitutes a course of dealing that modifies this Agreement. No
waiver of any right or remedy under this Agreement shall be binding on any party
unless it is in writing and is signed by the party to be charged. No such waiver
of any right or remedy under any term of this Agreement shall in any event be
deemed to apply to any subsequent default under the same or any other term
contained herein.
19. Entire Agreement. This Agreement, the schedules and exhibits hereto
and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties with respect to the
subject matter hereof and supersede and discharge all prior agreements (written
or oral) and negotiations and all contemporaneous oral agreements concerning
such subject matter and negotiations. There are no oral conditions precedent to
the effectiveness of this Agreement.
20. Amendments. No amendment, modification or termination of this
Agreement shall be binding on any party hereto unless it is in writing and is
signed by the party to be charged.
21. Severability. If any term or provision set forth in this Agreement
shall be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms or provisions to persons or circumstances, other than
those to which it is held invalid or unenforceable, shall be construed in all
respects as if such invalid or unenforceable term or provision were omitted.
22. Successors. The terms of this Agreement shall be binding upon the
Pledgor and its corporate successors and shall inure to the benefit of Pledgee,
its corporate successors and any holder, owner or assignee of any rights in the
Pledged Stock and will be enforceable by them as their interest may appear.
23. Third Parties. Nothing herein expressed or implied is intended or
shall be construed to give any person other than the parties hereto any rights
or remedies under this Agreement.
24. Saturdays, Sundays and Holidays. Where this Agreement authorizes or
requires a payment or performance on a Saturday, Sunday or public holiday, such
payment or performance shall be deemed to be timely if made on the next
succeeding business day.
11
<PAGE> 12
25. Joint Preparation. This Agreement shall be deemed to have been
prepared jointly by the parties hereto. Any ambiguity herein shall not be
interpreted against any party hereto and shall be interpreted as if each of the
parties hereto had prepared this Agreement.
26. Rules of Construction. In this Agreement, words in the singular
number include the plural, and in the plural include the singular; words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender and the word "or"
is disjunctive but not exclusive. The captions and section numbers appearing in
this Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.
27. Notices. All notices, demands or requests required or permitted to
be given to either party hereto shall be in writing and shall be deemed given if
delivered personally, sent by reputable overnight courier, with acknowledgment
of receipt requested, or mailed by registered, overnight or certified mail ,
with full postage paid thereon, return receipt requested (such notice to be
effective on the date such receipt is acknowledged), as follows:
Pledgor:
BritWill Investments-I, Inc.
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Attn: Michael A. Jeffries
Nir E. Margalit
Pledgee:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48106
Attn: Essel W. Bailey, Jr.
or to such place and with such other copies as Pledgor or Pledgee may designate
for itself by written notice to the other.
28. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
29. Choice of Law; Jurisdiction, Venue, Service of Process. The parties
hereto agree that certain material events, occurrences and transactions relating
to this Agreement bear a reasonable relationship to the State of Michigan. The
validity, terms, performance and enforcement of this Agreement shall be governed
by those laws of the State of Michigan which are applicable to agreements which
are negotiated, executed, delivered and performed solely in the State of
Michigan. The State and Federal District Courts located in the State of Michigan
shall have exclusive jurisdiction and venue of any action or proceeding arising
out of or related to the negotiation, execu-
12
<PAGE> 13
tion, delivery, performance, breach or enforcement of this Agreement or any
other agreement, document or instrument negotiated, executed, delivered, entered
into or performed in connection with this Agreement or any of the transactions
contemplated hereby or thereby; any waiver, modification, amendment or
termination hereof or thereof or any action taken or omission made by the
Pledgor or the Pledgee or any of their respective directors, officers,
employees, agents or attorneys in connection with the payment, performance,
exercise or enforcement of any right, duty or obligation created or implied
hereby or thereby or arising hereunder or thereunder; regardless of whether any
claim, counterclaim or defense in any such action, suit or proceeding is
characterized as arising out of fraud, negligence, recklessness, intentional
misconduct, a breach of contract or fiduciary duty, or violation of a statute,
law, ordinance, rule or regulation. The parties hereto hereby irrevocably
consent to the personal jurisdiction of such courts, to such venue and to the
service of process in the manner provided for the giving of notices in this
Agreement. The parties hereto hereby waive all objections to such jurisdiction
and venue including those which might be based upon inconvenience or the nature
of the forum.
30. Waiver of Jury Trial. The Pledgor hereby voluntarily, knowingly,
irrevocably and unconditionally waives and relinquishes its Right to Trial by
Jury under the Constitution of the United States of America or of the State of
Michigan or any other constitution, statute or law in any civil legal action,
suit or proceeding arising out of or related to the negotiation, execution,
delivery, performance, breach or enforcement of this Agreement or any other
agreement, document or instrument negotiated, executed, delivered, entered into
or performed in connection with this Agreement or any of the transactions
contemplated hereby or thereby; any waiver, modification, amendment or
termination hereof or thereof or any action taken or omission made by the
Pledgor or the Pledgee or any of their respective directors, officers,
employees, agents or attorneys in connection with the payment, performance,
exercise or enforcement of any right, duty or obligation created or implied
hereby or thereby or arising hereunder or thereunder; regardless of whether any
claim, counterclaim or defense in any such action, suit or proceeding is
characterized as arising out of fraud, negligence, recklessness, intentional
misconduct, a breach of contract or fiduciary duty, or violation of a statute,
law, ordinance, rule or regulation.
[SIGNATURES ON FOLLOWING PAGES]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as
of the date first above stated.
PLEDGOR:
BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation
By:
Its:
PLEDGEE:
OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation
By:
Its:
14
<PAGE> 15
EXHIBIT A-1
ASSIGNMENT IN BLANK
(Certificated)
For value received, BRITWILL INVESTMENTS-I, INC., a Delaware
corporation ("ASSIGNOR"), sells, assigns and transfers to
______________________________________ ("ASSIGNEE"), a ___% of the Stock in
Cedar Care, Inc., an Indiana corporation (the "COMPANY"), represented by
certificate no. ___________ dated ________________ (the "INTEREST"), and further
irrevocably appoints OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation,
as attorney in fact to transfer the Interest on the books of the Company, with
full power of substitution and resubstitution (which power shall survive the
dissolution of Assignor).
BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation
Dated: __________, _____ By: __________________________
Its: __________________________
Signature Guaranteed:
By: __________________________
<PAGE> 16
EXHIBIT A-2
ASSIGNMENT IN BLANK
(Uncertificated)
For value received, BRITWILL INVESTMENTS-I, INC., a Delaware
corporation ("ASSIGNOR"), sells, assigns and transfers to
______________________________________ ("ASSIGNEE"), a ___% of the Stock in
Sherwood Healthcare Corp., an Indiana corporation (the "COMPANY"), represented
by certificate no. ___________ dated ________________ (the "INTEREST"), and
further irrevocably appoints OMEGA HEALTHCARE INVESTORS, INC., a Maryland
corporation, as attorney in fact to transfer the Interest on the books of the
Company, with full power of substitution and resubstitution (which power shall
survive the dissolution of Assignor).
BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation
Dated: __________, _____ By: ___________________________
Its: ___________________________
Signature Guaranteed:
By: ___________________________
<PAGE> 17
EXHIBIT B-1
INSTRUCTION TO ISSUER TO REGISTER PLEDGE
TO: CEDAR CARE, INC.
("ISSUER")
FROM: BRITWILL INVESTMENTS-I, INC.
("PLEDGOR")
Re: Security Interest granted in ___% of the outstanding
Stock in the Issuer
Ladies & Gentlemen:
BritWill Investments-I, Inc. ("PLEDGOR") has entered into a Pledge
Agreement dated as of ______________, 199_, as amended (the "PLEDGE AGREEMENT")
in favor of OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("PLEDGEE"). Pursuant to the Pledge Agreement, Pledgor has granted a security
interest (the "PLEDGE") in the following uncertificated securities of the
Issuer:
____% of the outstanding Stock
(the "PLEDGED STOCK"). Pledgor hereby instructs the Issuer to register this
grant of security interest in the Pledged Stock on its books and records.
Pledgor hereby warrants to Issuer that its tax payer identification number is
_____________________.
Until the due presentment by Pledgee to the Issuer of an
instruction releasing the Pledge, Pledgor hereby irrevocably instructs, directs
and authorizes the Issuer to:
1. Register subject to the Pledge any uncertificated securities
issued in exchange for or distributed with respect to the
Pledged Stock;
2. Delivered to the Pledgee at the address set forth below any
certificated securities issued in exchange for or distributed
with respect to the Pledged Stock;
3. Pay to the Pledgee any monies paid in exchange for or in
redemption of part or all of the Pledged Stock;
4. Upon the due presentment of a transfer instruction from the
Pledgee:
(i) Register the transfer of the Pledged Stock to the new
owner free of the Pledge, if the instruction
specifies a new owner, who may be the Pledgee, and
does not specify a pledgee;
<PAGE> 18
(ii) Register the transfer of the Pledged Stock to the new
owner subject to the interest of the Pledgee, if the
instruction specifies a new owner and the Pledgee; or
(iii) Register the release of the security from the Pledge
and register the pledge of the Pledged Stock to a new
pledgee, if the instruction specifies the existing
owner and a new pledgee.
5. Not allow Pledgor to sell, assign, pledge, exercise any
conversion right or otherwise transfer the Pledged Stock
without the Issuer receiving the prior written or telecopied
signed consent of Pledgee.
If Pledgee informs the Issuer in writing or by telecopy that an Event
of Default has occurred under the Pledge Agreement, the Issuer shall deliver or
transfer, upon the written or telecopy request therefor of Pledgee, any or all
of the Pledged Stock as directed by Pledgee. Any delivery or transfer so made
shall be deemed authorized by the Pledgor and Pledgor shall not assert any claim
or liability against you for so transferring the Pledged Stock or any portion of
it.
Until the Issuer receives written or telecopy notice of the occurrence
of an Event of Default, Pledgor shall be permitted to receive interest, cash
dividends or other cash distributions on the Pledged Stock. If Pledgee informs
the Issuer in writing or by telecopy that an Event of Default has occurred under
the Pledge Agreement, then all interest, cash dividends or other cash
distributions shall be delivered to the Pledgee.
Please acknowledge your registration of the Pledge by delivering a copy
of the accompanying "Acknowledgment of Receipt of Instruction to Issuer to
Register Pledge" to the Pledgee. Please send all notices or deliveries to
Pledgee, to the following address:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Telephone: (734) 887-0200
or to such place as Pledgee may designate for itself by written notice to the
Issuer.
Until you have received the Pledgee's signed written statement that the
security interest of the Pledge Agreement has been released, the terms of this
Instruction may not be amended without the Pledgee's written or telecopied
consent.
<PAGE> 19
Dated: ______________, ____ PLEDGOR:
BRITWILL INVESTMENTS-I, INC.
By: _____________________________
Its: _____________________________
Signature Guaranteed:
By: _____________________________
<PAGE> 20
EXHIBIT B-2
INSTRUCTION TO ISSUER TO REGISTER PLEDGE
TO: SHERWOOD HEALTHCARE CORP.
("ISSUER")
FROM: BRITWILL INVESTMENTS-I, INC.
("PLEDGOR")
Re: Security Interest granted in ___% of the outstanding
Stock in the Issuer
Ladies & Gentlemen:
BritWill Investments-I, Inc. ("PLEDGOR") has entered into a Pledge
Agreement dated as of ______________, 199_, as amended (the "PLEDGE AGREEMENT")
in favor of OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("PLEDGEE"). Pursuant to the Pledge Agreement, Pledgor has granted a security
interest (the "PLEDGE") in the following uncertificated securities of the
Issuer:
____% of the outstanding Stock
(the "PLEDGED STOCK"). Pledgor hereby instructs the Issuer to register this
grant of security interest in the Pledged Stock on its books and records.
Pledgor hereby warrants to Issuer that its tax payer identification number is
_____________________.
Until the due presentment by Pledgee to the Issuer of an
instruction releasing the Pledge, Pledgor hereby irrevocably instructs, directs
and authorizes the Issuer to:
1. Register subject to the Pledge any uncertificated securities
issued in exchange for or distributed with respect to the
Pledged Stock;
2. Delivered to the Pledgee at the address set forth below any
certificated securities issued in exchange for or distributed
with respect to the Pledged Stock;
3. Pay to the Pledgee any monies paid in exchange for or in
redemption of part or all of the Pledged Stock;
4. Upon the due presentment of a transfer instruction from the Pledgee:
(i) Register the transfer of the Pledged Stock to the new
owner free of the Pledge, if the instruction
specifies a new owner, who may be the Pledgee, and
does not specify a pledgee;
<PAGE> 21
(ii) Register the transfer of the Pledged Stock to the new
owner subject to the interest of the Pledgee, if the
instruction specifies a new owner and the Pledgee; or
(iii) Register the release of the security from the Pledge
and register the pledge of the Pledged Stock to a new
pledgee, if the instruction specifies the existing
owner and a new pledgee.
5. Not allow Pledgor to sell, assign, pledge, exercise any
conversion right or otherwise transfer the Pledged Stock
without the Issuer receiving the prior written or telecopied
signed consent of Pledgee.
If Pledgee informs the Issuer in writing or by telecopy that an Event
of Default has occurred under the Pledge Agreement, the Issuer shall deliver or
transfer, upon the written or telecopy request therefor of Pledgee, any or all
of the Pledged Stock as directed by Pledgee. Any delivery or transfer so made
shall be deemed authorized by the Pledgor and Pledgor shall not assert any claim
or liability against you for so transferring the Pledged Stock or any portion of
it.
Until the Issuer receives written or telecopy notice of the occurrence
of an Event of Default, Pledgor shall be permitted to receive interest, cash
dividends or other cash distributions on the Pledged Stock. If Pledgee informs
the Issuer in writing or by telecopy that an Event of Default has occurred under
the Pledge Agreement, then all interest, cash dividends or other cash
distributions shall be delivered to the Pledgee.
Please acknowledge your registration of the Pledge by delivering a copy
of the accompanying "Acknowledgment of Receipt of Instruction to Issuer to
Register Pledge" to the Pledgee. Please send all notices or deliveries to
Pledgee, to the following address:
Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Telephone: (734) 887-0200
or to such place as Pledgee may designate for itself by written notice to the
Issuer.
Until you have received the Pledgee's signed written statement that the
security interest of the Pledge Agreement has been released, the terms of this
Instruction may not be amended without the Pledgee's written or telecopied
consent.
<PAGE> 22
Dated: ______________, _____ PLEDGOR:
BRITWILL INVESTMENTS-I, INC.
By: _____________________________
Its: _____________________________
Signature Guaranteed:
By: _____________________________
<PAGE> 23
ACKNOWLEDGMENT OF RECEIPT
OF INSTRUCTION TO ISSUER TO REGISTER PLEDGE
To: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Cedar Care, Inc., an Indiana corporation (the "ISSUER") hereby
acknowledges the receipt of the Instructions to Issuer to Register Pledge dated
___________ __, 1999 (the "INSTRUCTIONS"), and that the pledge of the following
securities of the Issuer (the "PLEDGED STOCK"):
___% of the outstanding Stock
to OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation ("OMEGA"), pursuant
to the Pledge Agreement dated ____________ __, 1999, as amended, between Omega
and BRITWILL INVESTMENTS-I, INC., a Delaware corporation, has been registered on
the books and records of the Issuer. The Issuer has no knowledge of any adverse
claims with respect to the Pledged Stock and agrees to abide the Instructions.
Dated: ___________, _____
CEDAR CARE, INC., an Indiana corporation
By: _______________________________
Its: _______________________________
<PAGE> 24
ACKNOWLEDGMENT OF RECEIPT
OF INSTRUCTION TO ISSUER TO REGISTER PLEDGE
To: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Sherwood Healthcare Corp., an Indiana corporation (the "ISSUER") hereby
acknowledges the receipt of the Instructions to Issuer to Register Pledge dated
___________ __, 1999 (the "INSTRUCTIONS"), and that the pledge of the following
securities of the Issuer (the "PLEDGED STOCK"):
___% of the outstanding Stock
to OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation ("OMEGA"), pursuant
to the Pledge Agreement dated ____________ __, 1999, as amended, between Omega
and BRITWILL INVESTMENTS-I, INC., a Delaware corporation, has been registered on
the books and records of the Issuer. The Issuer has no knowledge of any adverse
claims with respect to the Pledged Stock and agrees to abide the Instructions.
Dated: ___________, 199_
SHERWOOD HEALTHCARE CORP.,
an Indiana corporation
By: ______________________________
Its: ______________________________
<PAGE> 1
EXHIBIT 10.15
PROMISSORY NOTE
$1,353,704.00 Phoenix, Arizona
January 31, 1999
FOR VALUE RECEIVED, RAINTREE HEALTHCARE CORPORATION, a
Delaware corporation with a principal place of business at 15300 North 90th
Street, Suite 100, Building A, Scottsdale, Arizona 85269, AMERICAN PROFESSIONAL
HOLDING, INC., a Utah corporation with a principal place of business at 10405 D.
Northwest Hwy. #109, Dallas, Texas 75238, AMPRO MEDICAL SERVICES, INC., a Texas
corporation with a principal place of business at 10405 D. Northwest Hwy. #109,
Dallas, Texas 75238, GAMMA LABORATORIES, INC., a Missouri corporation with a
principal place of business at 1908A Greenwood Drive, Poplar Bluff, Missouri
63901, MEMPHIS CLINICAL LABORATORY, INC., a Tennessee corporation with a
principal place of business at 4088 Barton, Memphis, Tennessee 38116, and QUEST
PHARMACIES, INC., an Arizona corporation with a principal place of business at
470 E. Loop 281, Suite B, Longview, Texas 75605 (herein collectively called the
"Maker"), hereby, jointly and severally, promise to pay to the order of David
Kremser, Bernice Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C. (herein collectively called the "Payee"), at
their office located at 784 Yankee Creek Road, Evergreen, CO 80439, or such
other place as holder may designate in writing from time to time, in lawful
money of the United States of America the principal sum of One Million Three
Hundred Fifty-Three Thousand Seven Hundred Four and No/100 Dollars
($1,353,704.00), together with interest at the rate of nine percent (9.0%) per
annum, payable in full on January 31, 2004 (the "Maturity Date").
Maker shall make quarterly interest payments commencing on
April 1, 1999, and on the first day of each July, October and January thereafter
with a final payment of the outstanding principal balance plus accrued interest
on the Maturity Date. Interest shall be calculated on the basis of a three
hundred and sixty five (365) day year.
Maker may prepay the whole or any part of the principal amount
of this Note from time to time without premium or penalty.
The Maker hereby waives presentment, dishonor, protest and
demand, diligence, notice of protest, demand and of dishonor, and any other
notice otherwise required to be given under the law in connection with the
delivery, acceptance, performance, default, enforcement or collection of this
Note, and expressly agrees that this Note or any payment hereunder may be
extended or subordinated, by forbearance or otherwise, from time to time,
without in any way affecting the liability of the Maker. No consent or waiver by
the holder hereof with respect to any action or failure to act which, without
such consent or waiver, would constitute a breach of any provision of this Note,
shall be valid and binding unless in writing and signed by both the Maker and
the holder hereof.
It shall be an Event of Default under this Note, if any
payment due under this Note
<PAGE> 2
is not paid within fifteen (15) days of the date when due or if an Event of
Default shall occur under any of the Security Documents (as hereinafter
defined). In an Event of Default, the entire unpaid principal balance and any
accrued but unpaid interest may at the Payee's election become immediately due
and payable, and the Maker promises to pay all costs of enforcement and
collection and preparation therefor, including but not limited to, reasonable
attorneys' fees, whether or not any action or proceeding is brought to enforce
the provisions hereof, including, without limitation, all such costs incurred in
connection with any bankruptcy, receivership, or other court proceedings
(whether at the trial or appellate level).
The Maker hereby agrees to pay the contracted rate of
interest, which includes interest at the rate set forth herein and all costs and
fees associated with obtaining this credit accommodation to the extent any such
costs and fees are deemed interest under applicable law. This Note shall be
construed in accordance with and governed by the laws of the State of Arizona,
except to the extent that such laws are superseded by Federal enactments.
This Note is entered into pursuant to that certain Debtors'
First Amended Plan of Reorganization dated October 15, 1998 (as amended and
supplemented), confirmed by a final Order of the United States Bankruptcy Court
for the District of Arizona (Case No. b-98-06583-PHX-GBN) effective January 20,
1999 (the "Plan"), and is secured by those certain Security Agreements and
Pledge Agreements (the "Security Documents"), as applicable, dated as of the
date hereof on the property referenced in Section 6.3.2(a)(ii) of the Plan.
IN WITNESS WHEREOF, the Maker has caused this Note to be
executed by its duly authorized officer as of the day and year first above
written.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:
Name:
Title:
AMERICAN PROFESSIONAL HOLDING, INC.,
a Utah corporation
By:
Name:
Title:
2
<PAGE> 3
AMPRO MEDICAL SERVICES, INC., a
Texas corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
GAMMA LABORATORIES, INC., a
Missouri corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
MEMPHIS CLINICAL LABORATORY,
INC., a Tennessee corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
QUEST PHARMACIES, INC.
an Arizona corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
3
<PAGE> 1
EXHIBIT 10.37
BRITWILL ACQUISITION PROMISSORY NOTE A
Principal Amount:
$1,238,200.00 As of January 31, 1999
1. Promise to Pay. For value received, RAINTREE HEALTHCARE CORPORATION,
fka Unison HealthCare Corporation, a Delaware corporation ("Maker"), with an
address at 15300 North 90th Street, Suite 100, Building A, Scottsdale, Arizona
85260 ("Maker"), promises to pay to the order of BRITWILL INVESTMENTS COMPANY,
LTD., fka Whitehead Family Investments, Ltd., a Texas limited partnership
("Payee"), at 25 Highland Park Village, Suite 100-372, Dallas, Texas 75205,
Attn: Bruce H. Whitehead, or at such other address in the State of Texas as the
holder of this Note at any given time ("Holder") may designate by notice to
Maker, or at the option of Holder by federal funds wire transfers as requested
by Holder by notice to Maker, in lawful money of the United States of America,
the Principal Amount set forth above, together with interest as provided in this
Note.
2. Definitions. As used in this Note the term(s):
(1) "Business Day" means a day which is not a Saturday, Sunday,
federally recognized holiday, or day on which banking institutions are not
required to be open in Arizona or Texas;
(2) "Default Rate" means 9.75% per annum;
(3) "Event of Default" means (i) failure by Maker to pay any
principal or interest pursuant to this Note on or before the day it becomes due
and payable, (ii) failure by Maker to pay when due principal, interest or
premium in an aggregate amount of $5,000,000.00 or more with respect to any
indebtedness of Maker or any Subsidiary, or the acceleration prior to its
express maturity of any such Indebtedness aggregating $5,000,000.00 or more,
(iii) if a court of competent jurisdiction renders a final judgment or judgments
which can no longer be appealed for the payment of money in excess of
$5,000,000.00 (which are not paid or covered by third party insurance by
financially sound insurers that have not disclaimed or threatened to disclaim
coverage) against Maker or any Subsidiary 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, (iv) if an order for relief is entered against
Maker or any Subsidiary after the Effective Date under any chapter of the
federal Bankruptcy Code, (v) if a court of competent jurisdiction enters an
order or decree appointing a receiver, trustee, liquidator or similar official
for all or substantially all of the property of Maker or any Subsidiary, or
orders the liquidation of Maker or any Subsidiary, and in either case the order
or decree remains unstayed and in effect for 60 consecutive days, (vi) if Maker
fails to maintain in existence its corporate existence, except as a result of a
consolidation or merger with or into another entity where the surviving entity
is a corporation organized and existing under the laws of the United States or
any state thereof or the District of Columbia which expressly assumes in writing
Maker's
<PAGE> 2
obligations under this Note at a time when no uncured Event of Default exists
and whereby immediately after giving effect to such transaction on a pro-forma
basis the surviving corporation has a consolidated net worth at least equal to
the consolidated net worth of Maker immediately prior to such transaction, or
(vii) if a court of competent jurisdiction enters an order or decree that a
transfer of property of Maker or any Subsidiary of a value in excess of
$5,000,000.00 constitutes a fraudulent transfer under any applicable state law;
(4) "Effective Date" has the meaning provided by the Plan, i.e.,
the date of this Note;
(5) "Effective Rate" means (i) the Note Rate at all times prior to
the Maturity Date, and (ii) the Default Rate at all times after the Maturity
Date;
(6) "Indiana Returned Facility Note" has the meaning provided by
the Plan;
(7) "LBO Transaction" means any transaction or series of related
transactions whereby, directly or indirectly, the acquisition of a majority or
controlling equity interest in Maker (or any successor to Maker by merger,
consolidation or otherwise) is, to any material degree, financed by indebtedness
which is the obligation of (or is secured by any property of) Maker or any such
successor or any Subsidiary;
(8) "LBO Transaction Date" means the effective date of any LBO
Transaction, provided that, no LBO Transaction Date will occur unless the Senior
Notes are or have then been fully paid (including payment from the proceeds
thereof) if the Indiana Returned Facility Note continues to be paid in
installments pursuant to the terms thereof (and not from such proceeds);
(9) "Maturity Date" means the earliest of (i) the Scheduled
Maturity Date, (ii) any LBO Transaction Date, or (iii) the effective date of any
acceleration pursuant to paragraph (9) of this Note;
(10) "Note Rate" means 9% per annum;
(11) "OPB" means, at any relevant time, the then unpaid principal
balance of the obligation evidenced by this Note;
(12) "Plan" means the Debtors' First Amended Joint Plan of
Reorganization dated October 15, 1998, as further amended pursuant to amendments
dated November 17, 1998, November 20, 1998, and December 8, 1998, and the order
confirming that plan, in Chapter 11 Case No. B-98-06583-PHX GBN et seq., in the
United States Bankruptcy Court for the District of Arizona;
-2-
<PAGE> 3
(13) "Quarter" means each of the four periods of three consecutive
calendar months which together constitute each calendar year;
(14) "Scheduled Maturity Date" means January 31, 2003;
(15) "Senior Notes" has the meaning provided in the Plan; and
(16) "Subsidiary" means, at any relevant time, any corporation,
partnership, limited liability company or other business entity which Maker then
has the direct or indirect power to manage or control as a result of equity
interests owned or controlled by Maker.
3. Interest Accrual and Computation. Subject to the following sentence,
interest will accrue on the OPB from the Effective Date until paid at the
Effective Rate. All past due interest, except for interest on interest accrued
after Scheduled Maturity, will accrue interest at the Default Rate until paid.
All interest will be computed on the basis of actual days elapsed and a 360-day
year of twelve 30-day months.
4. Payment of Interest. Subject to paragraphs (5) and (6) of this Note,
all interest accrued on the OPB during each Quarter shall be paid by Maker to
Holder on or before the first day of the immediately succeeding Quarter.
5. Final Maturity. Subject to paragraph (6), the OPB and all then
accrued and unpaid interest shall be paid by Maker to Holder on the Maturity
Date.
6. Business Days. If any payment is due pursuant to paragraph (4) or
(5) on a date which is not a Business Day, the payment may be made on the next
succeeding Business Day and shall then be deemed timely made for all purposes.
7. Prepayments. Maker may prepay all or any portion of the indebtedness
evidenced by this Note at any time without penalty. Maker shall identify each
optional prepayment of principal as such by notice to Holder at the time of
payment.
8. Application of Payments. Except for optional prepayments of
principal pursuant to paragraph (7) of this Note, all payments on the obligation
evidenced by this Note shall be applied: (a) first, to any fees and/or costs
then payable by Maker to Holder pursuant to paragraph (10) of this Note; (b)
second, to accrued and unpaid interest; and (c) third, to the OPB.
9. Acceleration. Subject to the following two sentences, upon the
occurrence of any Event of Default, Holder may declare the total then unpaid
obligation of Maker then evidenced by this Note to be immediately due and
payable in full, and such total obligation shall thereafter bear interest at the
Default Rate until paid. Holder shall not declare the obligation of Maker then
evidenced by this Note to be immediately due and payable prior to the Scheduled
Maturity Date without first giving Maker notice of such Event of Default and a
period of 15 days in which to cure such Event of Default. Notwithstanding any
conflicting provision of this Note, if
-3-
<PAGE> 4
an Event of Default described in clause (iv), (v), (vi) or (vii) of subparagraph
(2)(c) of this Note occurs the entire obligation of Maker then evidenced by this
Note will become immediately due and payable in full without notice or
opportunity to cure, and such total obligation shall thereafter bear interest at
the Default Rate until paid.
10. Enforcement Costs. In event of any suit or other proceeding to
enforce any obligation of Maker under this Note, the prevailing party shall be
entitled to recover from the other party its reasonable attorneys' fees and
costs incurred therein, to be fixed in the sole discretion of the court.
11. Interest Limit. All interest and other charges and reimbursable
fees and costs that Maker is or may become obligated to pay or reimburse in
connection with the obligation evidenced by this Note, and which constitute
"interest" within the meaning of Arizona Revised Statutes Sections 44-1201 et
seq., constitute items of interest in addition to the Effective Rate of
interest, which Maker hereby contracts in writing to pay. If fulfillment of any
provision of this Note would require Maker to pay any amount of interest in
excess of the maximum amount, if any, lawfully collectible under applicable law,
then the obligations of Maker to be fulfilled shall be automatically reduced to
the maximum amount lawfully collectible.
12. Notices. Any notice pursuant to this Note must be in writing,
specifically reference this Note, and be given by United States certified mail,
postage prepaid and properly addressed, or by telecopy transmission, as follows:
(a) if to Maker, to (i) Maker at its address set forth above, or by telecopy at
602-481-6479, Attn: Treasurer, with a copy to (ii) Squire, Sanders & Dempsey
L.L.P., Two Renaissance Square, 40 North Central Avenue, Suite 2700, Phoenix,
Arizona 85004, Attn: Christopher D. Johnson, Esq. [telecopy 602-253-8129]; or
(b) if to Payee, to (i) Payee at its address set forth above, or by telecopy at
214-521-8846, Attn: Bruce H. Whitehead, with a copy to (ii) Ryley, Carlock &
Applewhite, P.A., 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003,
Attn: James D. O'Neil, Esq. [telecopy 602-257-9582]. Either party may change any
of its or its counsel's addresses or telecopy numbers by at least five Business
Days' prior notice to the other party.
-4-
<PAGE> 5
13. Miscellaneous. This Note is issued in and shall be governed by
and construed in accordance with the laws of the State of Arizona. This Note is
issued pursuant to the Plan, and reflects the Payee's portion of the BritWill
Acquisition Promissory Note pursuant to Article 6.2.2(b)(ii)(3) of the Plan.
This Note is unsecured. Maker waives presentment, dishonor, protest and demand,
diligence, notice of protest, demand and of dishonor, and any other notice
otherwise required to be given under law in connection with the delivery,
acceptance, performance, default, enforcement or collection of this Note, except
as is expressly provided in paragraph (9) of this Note. Time is of the essence
of this Note. No consent or waiver by any Holder with respect to any action or
failure to act which, without such consent or waiver, would constitute a breach
of any provision of this Note, shall be valid or binding unless in writing and
signed by both Maker and Holder.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By
------------------------------
Name
------------------------------
Title
------------------------------
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<PAGE> 1
EXHIBIT 10.38
BRITWILL ACQUISITION PROMISSORY NOTE B
Principal Amount:
$291,800.00 As of January 31, 1999
1. Promise to Pay. For value received, RAINTREE HEALTHCARE CORPORATION,
fka Unison HealthCare Corporation, a Delaware corporation ("Maker"), with an
address at 15300 North 90th Street, Suite 100, Building A, Scottsdale, Arizona
85260 ("Maker"), promises to pay to the order of UNHC REAL ESTATE HOLDINGS,
LTD., fka BritWill Investments-Texas, Ltd., a Texas limited partnership
("Payee"), at 25 Highland Park Village, Suite 100-372, Dallas, Texas 75205,
Attn: Bruce H. Whitehead, or at such other address in the State of Texas as the
holder of this Note at any given time ("Holder") may designate by notice to
Maker, or at the option of Holder by federal funds wire transfers as requested
by Holder by notice to Maker, in lawful money of the United States of America,
the Principal Amount set forth above, together with interest as provided in this
Note.
2. Definitions. As used in this Note the term(s):
(1) "Business Day" means a day which is not a Saturday, Sunday,
federally recognized holiday, or day on which banking institutions are not
required to be open in Arizona or Texas;
(2) "Default Rate" means 9.75% per annum;
(3) "Event of Default" means (i) failure by Maker to pay any
principal or interest pursuant to this Note on or before the day it becomes due
and payable, (ii) failure by Maker to pay when due principal, interest or
premium in an aggregate amount of $5,000,000.00 or more with respect to any
indebtedness of Maker or any Subsidiary, or the acceleration prior to its
express maturity of any such Indebtedness aggregating $5,000,000.00 or more,
(iii) if a court of competent jurisdiction renders a final judgment or judgments
which can no longer be appealed for the payment of money in excess of
$5,000,000.00 (which are not paid or covered by third party insurance by
financially sound insurers that have not disclaimed or threatened to disclaim
coverage) against Maker or any Subsidiary 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, (iv) if an order for relief is entered against
Maker or any Subsidiary after the Effective Date under any chapter of the
federal Bankruptcy Code, (v) if a court of competent jurisdiction enters an
order or decree appointing a receiver, trustee, liquidator or similar official
for all or substantially all of the property of Maker or any Subsidiary, or
orders the liquidation of Maker or any Subsidiary, and in either case the order
or decree remains unstayed and in effect for 60 consecutive days, (vi) if Maker
fails to maintain in existence its corporate existence, except as a result of a
consolidation or merger with or into another entity where the surviving entity
is a corporation organized and existing under the laws of the United States or
any state thereof or the District of Columbia which expressly assumes in writing
Maker's
<PAGE> 2
obligations under this Note at a time when no uncured Event of Default exists
and whereby immediately after giving effect to such transaction on a pro-forma
basis the surviving corporation has a consolidated net worth at least equal to
the consolidated net worth of Maker immediately prior to such transaction, or
(vii) if a court of competent jurisdiction enters an order or decree that a
transfer of property of Maker or any Subsidiary of a value in excess of
$5,000,000.00 constitutes a fraudulent transfer under any applicable state law;
(4) "Effective Date" has the meaning provided by the Plan, i.e.,
the date of this Note;
(5) "Effective Rate" means (i) the Note Rate at all times prior to
the Maturity Date, and (ii) the Default Rate at all times after the Maturity
Date;
(6) "Indiana Returned Facility Note" has the meaning provided by
the Plan;
(7) "LBO Transaction" means any transaction or series of related
transactions whereby, directly or indirectly, the acquisition of a majority or
controlling equity interest in Maker (or any successor to Maker by merger,
consolidation or otherwise) is, to any material degree, financed by indebtedness
which is the obligation of (or is secured by any property of) Maker or any such
successor or any Subsidiary;
(8) "LBO Transaction Date" means the effective date of any LBO
Transaction, provided that, no LBO Transaction Date will occur unless the Senior
Notes are or have then been fully paid (including payment from the proceeds
thereof) if the Indiana Returned Facility Note continues to be paid in
installments pursuant to the terms thereof (and not from such proceeds);
(9) "Maturity Date" means the earliest of (i) the Scheduled
Maturity Date, (ii) any LBO Transaction Date, or (iii) the effective date of any
acceleration pursuant to paragraph (9) of this Note;
(10) "Note Rate" means 9% per annum;
(11) "OPB" means, at any relevant time, the then unpaid principal
balance of the obligation evidenced by this Note;
(12) "Plan" means the Debtors' First Amended Joint Plan of
Reorganization dated October 15, 1998, as further amended pursuant to amendments
dated November 17, 1998, November 20, 1998, and December 8, 1998, and the order
confirming that plan, in Chapter 11 Case No. B-98-06583-PHX GBN et seq., in the
United States Bankruptcy Court for the District of Arizona;
-2-
<PAGE> 3
(13) "Quarter" means each of the four periods of three consecutive
calendar months which together constitute each calendar year;
(14) "Scheduled Maturity Date" means January 31, 2003;
(15) "Senior Notes" has the meaning provided in the Plan; and
(16) "Subsidiary" means, at any relevant time, any corporation,
partnership, limited liability company or other business entity which Maker then
has the direct or indirect power to manage or control as a result of equity
interests owned or controlled by Maker.
3. Interest Accrual and Computation. Subject to the following sentence,
interest will accrue on the OPB from the Effective Date until paid at the
Effective Rate. All past due interest, except for interest on interest accrued
after Scheduled Maturity, will accrue interest at the Default Rate until paid.
All interest will be computed on the basis of actual days elapsed and a 360-day
year of twelve 30-day months.
4. Payment of Interest. Subject to paragraphs (5) and (6) of this Note,
all interest accrued on the OPB during each Quarter shall be paid by Maker to
Holder on or before the first day of the immediately succeeding Quarter.
5. Final Maturity. Subject to paragraph (6), the OPB and all then
accrued and unpaid interest shall be paid by Maker to Holder on the Maturity
Date.
6. Business Days. If any payment is due pursuant to paragraph (4) or
(5) on a date which is not a Business Day, the payment may be made on the next
succeeding Business Day and shall then be deemed timely made for all purposes.
7. Prepayments. Maker may prepay all or any portion of the indebtedness
evidenced by this Note at any time without penalty. Maker shall identify each
optional prepayment of principal as such by notice to Holder at the time of
payment.
8. Application of Payments. Except for optional prepayments of
principal pursuant to paragraph (7) of this Note, all payments on the obligation
evidenced by this Note shall be applied: (a) first, to any fees and/or costs
then payable by Maker to Holder pursuant to paragraph (10) of this Note; (b)
second, to accrued and unpaid interest; and (c) third, to the OPB.
9. Acceleration. Subject to the following two sentences, upon the
occurrence of any Event of Default, Holder may declare the total then unpaid
obligation of Maker then evidenced by this Note to be immediately due and
payable in full, and such total obligation shall thereafter bear interest at the
Default Rate until paid. Holder shall not declare the obligation of Maker then
evidenced by this Note to be immediately due and payable prior to the Scheduled
Maturity Date without first giving Maker notice of such Event of Default and a
period of 15 days in which to cure such Event of Default. Notwithstanding any
conflicting provision of this Note, if
-3-
<PAGE> 4
an Event of Default described in clause (iv), (v), (vi) or (vii) of subparagraph
(2)(c) of this Note occurs the entire obligation of Maker then evidenced by this
Note will become immediately due and payable in full without notice or
opportunity to cure, and such total obligation shall thereafter bear interest at
the Default Rate until paid.
10. Enforcement Costs. In event of any suit or other proceeding to
enforce any obligation of Maker under this Note, the prevailing party shall be
entitled to recover from the other party its reasonable attorneys' fees and
costs incurred therein, to be fixed in the sole discretion of the court.
11. Interest Limit. All interest and other charges and reimbursable
fees and costs that Maker is or may become obligated to pay or reimburse in
connection with the obligation evidenced by this Note, and which constitute
"interest" within the meaning of Arizona Revised Statutes Sections 44-1201 et
seq., constitute items of interest in addition to the Effective Rate of
interest, which Maker hereby contracts in writing to pay. If fulfillment of any
provision of this Note would require Maker to pay any amount of interest in
excess of the maximum amount, if any, lawfully collectible under applicable law,
then the obligations of Maker to be fulfilled shall be automatically reduced to
the maximum amount lawfully collectible.
12. Notices. Any notice pursuant to this Note must be in writing,
specifically reference this Note, and be given by United States certified mail,
postage prepaid and properly addressed, or by telecopy transmission, as follows:
(a) if to Maker, to (i) Maker at its address set forth above, or by telecopy at
602-481-6479, Attn: Treasurer, with a copy to (ii) Squire, Sanders & Dempsey
L.L.P., Two Renaissance Square, 40 North Central Avenue, Suite 2700, Phoenix,
Arizona 85004, Attn: Christopher D. Johnson, Esq. [telecopy 602-253-8129]; or
(b) if to Payee, to (i) Payee at its address set forth above, or by telecopy at
214-521-8846, Attn: Bruce H. Whitehead, with a copy to (ii) Ryley, Carlock &
Applewhite, P.A., 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003,
Attn: James D. O'Neil, Esq. [telecopy 602-257-9582]. Either party may change any
of its or its counsel's addresses or telecopy numbers by at least five Business
Days' prior notice to the other party.
-4-
<PAGE> 5
13. Miscellaneous. This Note is issued in and shall be governed by and
construed in accordance with the laws of the State of Arizona. This Note is
issued pursuant to the Plan, and reflects the Payee's portion of the BritWill
Acquisition Promissory Note pursuant to Article 6.2.2(b)(ii)(3) of the Plan.
This Note is unsecured. Maker waives presentment, dishonor, protest and demand,
diligence, notice of protest, demand and of dishonor, and any other notice
otherwise required to be given under law in connection with the delivery,
acceptance, performance, default, enforcement or collection of this Note, except
as is expressly provided in paragraph (9) of this Note. Time is of the essence
of this Note. No consent or waiver by any Holder with respect to any action or
failure to act which, without such consent or waiver, would constitute a breach
of any provision of this Note, shall be valid or binding unless in writing and
signed by both Maker and Holder.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By
----------------------------------
Name
----------------------------------
Title
----------------------------------
-5-
<PAGE> 1
Exhibit 10.39
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") effective the 31st day of January,
1999, by and among RainTree Healthcare Corporation, a Delaware corporation,
whose address is 15300 North 90th Street, Suite 100, Scottsdale, Arizona 85260
("Pledgor"), and Norwest Bank Minnesota, National Association, whose address is
Sixth & Marquette, Minneapolis, Minnesota 55479-0069 ("Pledgee").
WITNESSETH:
WHEREAS, Pledgor is the issuer of those certain 11% Senior Secured Notes
due 2003 (the "Notes") pursuant to that certain Indenture dated as of January
31, 1999 (the "Indenture"), by and among Pledgor, the Guarantors (as defined in
the Indenture), and Pledgee, as trustee under the Indenture;
WHEREAS, Pledgor, as the owner of (i) 75% of the outstanding capital stock
of Quest Pharmacies, Inc., an Arizona corporation ("Quest"), (ii) an option to
acquire 25% of the outstanding capital stock of Quest (the "Option"), and (iii)
100% of the outstanding capital stock of Sunbelt Therapy Management Services,
Inc., an Arizona corporation ("Sunbelt"), will benefit from the transactions
contemplated by the Indenture and other financial accommodations derived
therefrom and desires to provide the pledge contemplated by this Agreement as
further consideration and inducement to the purchasers of the Notes to enter
into the transactions contemplated by the Indenture.
WHEREAS, it is a requirement under the Indenture and a condition precedent
to the receipt by Pledgor of the financial accommodations thereunder that
Pledgor execute and deliver this Pledge Agreement and perform hereunder.
NOW, THEREFORE, in consideration of the foregoing, and other valuable
consideration, the receipt, legal adequacy and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Pledgee as follows:
1. Definitions. All terms used in this Agreement which are not defined
herein, but are defined in the Indenture shall have the respective meanings
ascribed to such terms therein. The term "Pledged Stock" as used herein shall
mean and include all of the issued and outstanding shares of the capital stock
or other securities in Quest and Sunbelt (i) owned by Pledgor, as listed on
Schedule 1, annexed hereto (and any supplemental schedules attached hereto or
delivered to Pledgee from time to time), (ii) acquired by Pledgor upon exercise
of the Option, or (iii) voting trust certificates or other documents of any kind
evidencing any and all ownership or other interests of Pledgor in Quest and
Sunbelt.
2. Pledge; Rights and Remedies.
(a) As collateral security for the due payment and performance of all
indebtedness and other liabilities and obligations of Pledgor and the
Guarantors, whether now existing or hereafter arising (all hereinafter called
the "Obligations") provided for in the Indenture, the Notes, the Guarantee, the
Collateral Documents and all instruments, agreements and documents
<PAGE> 2
executed, issued, and delivered pursuant thereto (all hereinafter called the
"Financing Documents"), Pledgor hereby pledges, assigns, hypothecates, delivers,
and sets over to Pledgee, on behalf of the holders of the Notes, all of
Pledgor's right, title and interest in and to the Pledged Stock, and hereby
grants to Pledgee a security interest in all of its right, title and interest in
and to the Pledged Stock and in the proceeds thereof.
(b) Upon the exercise of the Option, Pledgor shall deliver to Pledgee any
shares of capital stock of Quest acquired upon such exercise (the "Option
Stock"), with Pledgor's endorsement when necessary, and/or appropriate stock
powers duly executed in blank, to be held by Pledgee, subject to the terms
hereof, as further collateral security for the Obligations. Additionally,
Pledgor shall pledge, assign, hypothecate, deliver, and set over to Pledgee, on
behalf of the holders of the Notes, all of Pledgor's right, title and interest
in and to the Option Stock, and shall grant to Pledgee a security interest in
all of its right, title and interest in and to the Option Stock and in the
proceeds thereof. Upon the exercise of the Option, Pledgor shall also deliver to
Pledgee a supplemental Schedule 1 to this Agreement.
(c) If Pledgor shall become entitled to receive or shall receive any stock
or voting trust certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase, or reduction of capital), option or rights, whether
as an addition to, in substitution of, or in exchange for any Pledged Stock, or
otherwise, Pledgor shall accept any such instruments as Pledgee's agent, shall
hold them in trust for Pledgee, and shall deliver them forthwith to Pledgee in
the exact form received, with Pledgor's endorsement when necessary, and/or
appropriate stock powers duly executed in blank, to be held by Pledgee, subject
to the terms hereof, as further collateral security for the Obligations.
(d) Any or all shares of the Pledged Stock held by Pledgee hereunder may,
at the option of Pledgee, be registered in the name of Pledgee or its nominee as
pledgee, and Pledgee or its nominee may thereafter, without notice, and after
the occurrence of any Event of Default defined or specified in the Financing
Documents, exercise all available voting and corporate rights at any meeting of
Quest or Sunbelt and exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges, or options pertaining to any of
the Pledged Stock as if it were the absolute owner thereof including, without
limitation, the right to receive dividends payable thereon and the right to
exchange, at its discretion, any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization, or other readjustment of any
corporation issuing any of such securities or upon the exercise by any such
issuer of any right, privilege, or option pertaining to any of the Pledged
Stock, and in connection therewith, to deposit and deliver any and all of the
Pledged Stock with any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine, all
without liability except to account for property actually received by it, but
Pledgee shall have no duty to exercise any of the aforesaid rights, privileges,
or options and shall not be responsible for any failure or omission to do so or
delay in so doing.
(e) In the event of the occurrence of any Event of Default defined or
specified in the Financing Documents or other default or breach under the
Obligations, Pledgee shall have the right to require that all cash dividends
payable with respect to any part of the Pledged Stock be
2
<PAGE> 3
paid to Pledgee to be held by Pledgee as additional security hereunder until
applied to the Obligations.
(f) In the event of the occurrence of any Event of Default defined or
specified in the Financing Documents or other default or breach under the
Obligations, Pledgee, without demand of performance or other demand,
advertisement, or notice of any kind (except the notice specified below of the
time and place of public or private sale) to or upon Pledgor or any other person
or entity, including without limitation, any trustee (all and each of which
demands, advertisements and/or notices are, to the extent permitted by law,
hereby expressly waived), may forthwith collect, receive, appropriate, and
realize upon the Pledged Stock, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Pledged Stock, or any part thereof, in one or more
parcels at public or private sale or sales, in whatever order Pledgee may
select, at any exchange, broker's board or at any of Pledgee's offices of
elsewhere at such prices and on such terms (including, without limitation, a
requirement that any purchaser of all or any part of the Pledged Stock shall be
required to purchase the securities constituting the Pledged Stock for
investment and without any intention to make a distribution thereof) as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk, with the right of Pledgee or any purchaser upon any such sale
or sales, whether public or private, to purchase the whole or any part of the
Pledged Stock so sold, free of any right or equity of redemption in Pledgor,
which right or equity is hereby expressly waived and released.
(g) The proceeds of any collection, recovery, receipt, appropriation,
realization, sale or other disposition, shall be applied as follows:
First, to the reasonable costs and expenses of every kind incurred
in connection therewith or incidental to the care, safekeeping, or
otherwise of any and all of the Pledged Stock or in any way relating to
the rights of Pledgee hereunder, including reasonable attorneys' fees and
legal expenses.
Second, to the satisfaction of the Obligations in such order as set
forth in the Indenture.
Third, to the payment of any other amounts required by applicable
law; and
Fourth, to Pledgor, to the extent of the surplus proceeds, if any.
Pledgee shall have no duty to account to Pledgor unless a surplus exists
upon liquidation of the Pledged Stock and any other collateral.
(h) Pledgee need not give more than five (5) business days' notice of the
time and place of any public sale or of the time after which a private sale may
take place and such notice shall be deemed to be reasonable notification of such
matters.
3. Rights of Pledgor. Unless and until an Event of Default as defined in
the Financing Documents or other default or breach under the Obligations shall
have occurred and be continuing, Pledgor shall be entitled:
3
<PAGE> 4
(a) To vote all or any part of the Pledged Stock at any and all
shareholder meetings of Quest and/or Sunbelt, as the case may be, and to execute
consents in respect thereof, and to consent to, ratify, or waive notice of any
or all shareholder meetings of Quest and/or Sunbelt, as the case may be, with
the same force and effect as if this Pledge Agreement had not been made and, if
necessary and upon the receipt of the written request from Pledgor thereof,
Pledgee shall from time to time execute and deliver appropriate proxies for that
purpose, provided that Pledgor covenants and agrees not to vote the Pledged
Stock in a manner which would create an Event of Default or create circumstances
which, with the passage of time and/or the giving of notice, would create an
Event of Default under the Financing Documents, the Obligations or any other
documents related thereto, and
(b) To receive and collect or to have paid overall dividends declared or
paid on the Pledged Stock, except (i) dividends or distributions constituting
stock dividends, (ii) dividends or distributions in kind, or (iii) liquidating
dividends (either partial or complete), provided that any and all such excepted
dividends and distributions shall constitute additional collateral for the
purposes of this Pledge Agreement and shall be delivered and pledged with
Pledgee in accordance with Section 2(c) hereof.
4. Representations. Pledgor represents and warrants that;
(a) Pledgor is, as of the date hereof, the legal and beneficial owner of
all of the Pledged Stock and the legal owner of the Option. The Pledged Stock
represents 75% and 100%, respectively, of all of the outstanding shares of
capital stock of Quest and Sunbelt, and, other than the Option and the Option
Stock, there are no other securities or voting trust certificates or other
documents of any kind evidencing any ownership or other interest in Quest and
Sunbelt. No person or entity other than Pledgor has any subscription, warrant or
other right to acquire or reserve any of the foregoing.
(b) All of the shares of the Pledged Stock have been duly and validly
issued, are fully paid and non-assessable, and are owned by Pledgor free and
clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance, or any
security interest in such shares or the proceeds thereof except for the security
interest granted to Pledgee hereunder.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required to be
obtained or made by Pledgor either (i) for the pledge by Pledgor of the Pledged
Stock pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by Pledgor, or (ii) for the exercise by Pledgee of the voting
or other rights provided for in this Agreement or the remedies in respect of the
Pledged Stock pursuant to this Agreement, subject to applicable state and
federal securities laws.
(d) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of any
material mortgage, security agreement, indenture, evidence of indebtedness, loan
or financing agreement,
4
<PAGE> 5
trust agreement, stockholder agreement, or other agreement or instrument to
which Pledgor is a party or by which it is bound.
(e) Any assignee of all or any portion of the Pledged Stock is entitled to
receive payments with respect thereto without any defense, counterclaim,
set-off, abatement, reduction, recoupment or other claims arising out of the
action of Pledgor.
(f) There are no actions, suits or proceedings (whether or not purportedly
on behalf of Pledgor) pending or, to the knowledge of Pledgor, threatened or
affecting Pledgor that involve the Pledged Stock.
(g) All consents or approvals, if any, required as a condition precedent
to or in connection with the due and valid execution, delivery and performance
by Pledgor of this Agreement have been obtained, subject to applicable state and
federal securities laws.
5. Covenants.
(a) Pledgor hereby covenants that so long as the Obligations shall be
outstanding and unpaid, in whole or in part, Pledgor will not, without the prior
written consent of Pledgee, sell, convey, or otherwise dispose of any shares of
the Pledged Stock, the Option, the Option Stock or any interest herein, nor will
Pledgor create, incur, or permit to exist any pledge, mortgage, lien, charge,
encumbrance, or any security interest whatsoever with respect to any of the
Pledged Stock, the Option, the Option Stock or the proceeds thereof other than
that created or permitted by the Financing Documents or hereby.
(b) Pledgor warrants and will defend Pledgee's right, title, special
property and security interest in and to the Pledged Stock against the claims of
any person, firm, corporation, or other entity.
6. Sale of Pledged Stock. Pledgor recognizes that Pledgee may be unable to
effect a public sale of all or a part of the Pledged Stock, and may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to the seller than if sold at public sales
and agrees that such private sales shall be deemed to have been made in a
commercially reasonable manner, and that Pledgee has no obligation to delay sale
of any such securities for the period of time necessary to permit the issuer of
such securities to register such securities for public sale under the Securities
Act.
7. Cooperation. Pledgor shall at any time and from time to time, upon
request of Pledgee, execute and deliver such further documents and do such
further acts and things as Pledgee may reasonably request in order to effectuate
the purposes of this Pledge Agreement, including, without limitation, delivering
to Pledgee on the date hereof or at any time hereafter irrevocable proxies in
respect of the Pledged Stock in the form of Exhibit A annexed hereto.
5
<PAGE> 6
8. General.
(a) Beyond the exercise of reasonable care to assure the safe custody of
the Pledged Stock while held hereunder, Pledgee shall have no duty or liability
to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it to Pledgor.
(b) No course of dealing between Pledgor and Pledgee, nor any failure to
exercise, nor any delay in exercising, on the part of Pledgee, any right, power,
or privilege, whether now existing or hereafter arising hereunder or under the
Financing Documents or the Obligations, shall operate as a waiver thereof; nor
shall any single or partial exercise or any right, power, or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege.
(c) The rights and remedies herein provided, and provided in the Financing
Documents and in all other agreements, instruments, and documents delivered or
to be delivered pursuant to any of the foregoing or the Obligations, are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law, including without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code.
(d) The provisions of this Pledge Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Pledge Agreement in any jurisdiction.
(e) This Pledge Agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto. Notwithstanding the
foregoing, Pledgor shall not have the right to assign or delegate any of its
rights or obligations hereunder without the prior written consent of Pledgee,
and any purported assignment or delegation in the absence of such consent shall
be void.
(f) This Pledge Agreement shall be governed by and construed in accordance
with the laws of the State of Arizona.
(g) Pledgor recognizes that the Holders of the Notes have relied on the
pledge and security interest granted herein by Pledgor in extending credit and
making the financial accommodations to the Pledgor, and Pledgor agrees that such
reliance by the Holders of the Notes shall be sufficient consideration for this
pledge.
(h) This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
(i) The section headings used herein are for convenience only and shall
not be read or construed as limiting the substance or generality of this
Agreement.
(j) All notices, requests, approvals, consents and other communications
required or permitted to be made hereunder shall, except as otherwise provided,
be in writing and may be
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<PAGE> 7
delivered personally or sent by telegram, telecopy, facsimile, telex, first
class mail or overnight courier, postage prepaid, to the parties addressed as
follows:
To Pledgor: RainTree Healthcare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
With a copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Attn: Christopher D. Johnson, Esq.
To Pledgee:
Norwest Bank Minnesota, National Association
Corporate Trust Services
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Such notices, requests and other communications sent as provided
hereinabove shall be effective when received by the addressee thereof, unless
sent by registered or certified mail, postage prepaid, in which case they shall
be effective exactly three business days after being deposited in the United
States mail. The parties hereto may change their addresses by giving notice
thereof to the other parties hereto in conformity with this section.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be
duly executed and delivered as of the day and first year first written above.
RAINTREE HEALTHCARE CORPORATION
(PLEDGOR)
By: _______________________________________
Name: Clayton Kloehr
Title: Senior Vice President - Finance
and Treasurer
8
<PAGE> 9
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
(PLEDGEE)
By: _____________________________________
Name: _____________________________________
Title:_____________________________________
9
<PAGE> 10
Schedule 1 to Pledge Agreement dated January 31, 1999, from Raintree
Healthcare Corporation to Norwest Bank Minnesota, National Association.
LIST OF PLEDGED STOCK
<TABLE>
<CAPTION>
NAME OF ISSUER CLASS OF SHARES NUMBER OF SHARES
-------------- --------------- ----------------
<S> <C> <C>
Quest Pharmacies, Inc., an Common 7,500 (Cert. No. 1)
Arizona corporation
Sunbelt Therapy Management Common 10,000 (Cert. No. C - 1)
Services, Inc., an Arizona
corporation
</TABLE>
10
<PAGE> 11
Exhibit A
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby make,
constitute and appoint Norwest Bank Minnesota, National Association (the
"Pledgee") and each of Pledgee's officers and employees, its true and lawful
attorneys, for it and in its name, place and stead, to act as its proxy in
respect of all of its shares of capital stock of Quest Pharmacies, Inc., an
Arizona corporation ("Quest"), and Sunbelt Therapy Management Services, Inc., an
Arizona corporation ("Sunbelt") (Quest and Sunbelt are hereinafter referred to
as the "Corporation"), which the undersigned now or hereafter may own or hold,
including, without limitation, the right, on behalf of the undersigned, to
demand the call by any proper officer of the Corporation pursuant to the
provisions of its Articles of incorporation or By-Laws and as permitted by law
of a meeting of its shareholders and at any such meeting of shareholder, annual,
general or special, to vote for the transaction of any and all business that may
come before such meeting, or at any adjournment thereof, including, without
limitation, the right to vote for (i) the consolidation merger or other
consolidation with or into the Corporation, (ii) the sale of all or any part of
the assets of the Corporation and/or (iii) the liquidation and dissolution of
the corporation; giving and granting to its said attorneys full power and
authority to do and perform each and every act and thing whether necessary or
desirable to be done in and about the premises, as fully as the undersigned
might or could do if personally present with full power of substitution,
appointment and revocation, hereby ratifying and confirming all that the
undersigned's said attorneys shall do or cause to be done by virtue hereof.
This Proxy is given to Pledgee and to its officers and employees in
consideration of certain obligations of the Corporation and the undersigned to
Pledgee, and in order to carry out the covenant of the undersigned contained in
a certain Pledge Agreement of even date herewith with Pledgee. This Proxy is
coupled with an interest, shall not be revocable or revoked by the undersigned,
shall be binding upon successors and assigns of the undersigned until the
payment in full of all of the indebtedness, obligations or liabilities to
Pledgee of the Corporation, and may be exercised only after a default in payment
of principal or interest when due of any such indebtedness or the occurrence of
any other Event of Default as defined or specified in the Financing Documents,
or other default or breach under the Obligations, referred to in the Pledge
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this 31st day of January, 1999.
RAINTREE HEALTHCARE CORPORATION
By: _____________________________________
Name: _____________________________________
Title:_____________________________________
11
<PAGE> 1
Exhibit 10.40
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of January 31, 1999, by and among RainTree Healthcare Corporation, a
Delaware corporation (the "Company"), and the undersigned holders ("Holders") of
more than 10% of the outstanding Common Stock, $.001 par value (the "Common
Stock"), as of the date hereof, of the Company.
This Agreement is made pursuant to the terms of the Debtors' First Amended
Joint Plan of Reorganization, dated October 15, 1998, as supplemented and
amended (the "Plan"), which Plan was confirmed by a final order of the United
States Bankruptcy Court for the District of Arizona (Case No.
B-98-06583-PHX-GBN) dated January 29, 1999, which order has become final and
non-appealable.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Common Stock" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Holders" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"Plan" has the meaning ascribed to such term in the second
paragraph of this Agreement.
"Public Offering" shall mean a public offering of equity securities
of the Company pursuant to an effective registration statement under the
Securities Act, including a public offering in which Holders are entitled
to sell shares of Common Stock of the Company pursuant to this Agreement.
"Registrable Securities" means the Common Stock acquired by the
Holders pursuant to the Plan and upon the Effective Date (as defined in
the Plan).
<PAGE> 2
"Registration Expenses" shall mean the expenses described in Section
5 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses described in Section 6 of
this Agreement.
2. Required Registration.
(a) At any time following the date which is six months after any
registration statement covering a Public Offering of securities of the Company
under the Securities Act shall have become effective, the Holders of Registrable
Securities constituting at least 25% of the total shares of Registrable
Securities then outstanding may request the Company to register under the
Securities Act all or any portion of the shares of Registrable Securities held
by such requesting Holder or Holders for sale in the manner specified in such
notice. Notwithstanding anything to the contrary contained herein, no request
may be made under this Section 2 within 180 days after the effective date of a
registration statement filed by the Company covering a firm commitment
underwritten Public Offering in which the Holders of Registrable Securities
shall be entitled to join pursuant to Sections 2, 3 or 4 and in which there
shall have been effectively registered all shares of Registrable Securities as
to which registration shall have been requested.
(b) Following receipt of any notice under this Section 2, the
Company shall promptly notify all Holders of Registrable Securities from whom
notice has not been received and shall use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting Holders, the number of shares of
Registrable Securities specified in such notice (and in all notices received by
the Company from such other Holders within 30 days after the giving of such
notice by the Company). If such method of disposition shall be an underwritten
Public Offering, the Holders of a majority of the shares of Registrable
Securities to be sold in such offering may designate the managing underwriter of
such offering, subject to the approval of the Company. If such method of
disposition is an underwritten Public Offering and in the opinion of the
managing underwriter inclusion of all shares of Registrable Securities for which
registration has been requested would adversely affect the marketing of the
shares to be sold, the number of shares of Registrable Securities to be included
may be reduced pro rata among requesting Holders based on the number of shares
of Registrable Securities, owned by such Holders. The Company shall be obligated
to register Registrable Securities pursuant to this Section 2 on one occasion
only.
(c) The Company and any other Holders of Common Stock shall be
entitled to include in any registration statement referred to in this Section 2,
for sale in accordance with the method of disposition specified by the
requesting Holders, shares of Common Stock to be sold by the Company or such
other Holders for their own accounts, except as and to the extent that, in the
opinion of the managing underwriter (if such method of disposition shall be an
underwritten Public Offering), such inclusion would adversely affect the
marketing of the Registrable Securities to be
2
<PAGE> 3
sold. Except for registration statements on Form S-4, S-8 or any successor
thereto and except as provided in Section 9(g), the Company will not file with
the Commission any other registration statement with respect to its Common
Stock, whether for its own account or that of other stockholders, from the date
of receipt of a notice from requesting Holders pursuant to this Section 2 until
the completion of the period of distribution of the registration contemplated
thereby.
3. Incidental Registration. If the Company at any time (other than
pursuant to Section 2 or 4) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public), the Company will give written
notice to all Holders of outstanding Registrable Securities of its intention so
to do. Upon the written request of any such Holder, received by the Company
within 20 days after the giving of any such notice by the Company, to register
any of its Registrable Securities, the Company will use its best efforts to
cause the Registrable Securities as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company. In the event that any
registration pursuant to this Section 3 shall be, in whole or in part, an
underwritten Public Offering of Common Stock, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced
(pro rata among the requesting Holders based upon the number of shares of
Registrable Securities owned by such Holders) if and to the extent that the
managing underwriter is of the opinion that such inclusion would adversely
affect the marketing of the securities to be sold by the Company therein.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 3 without thereby incurring
any liability to the Holders of Registrable Securities.
4. Shelf Registration. The Company shall use its reasonable best efforts
to cause to be filed as soon as practicable, but in no event later than 120 days
following the date hereof, a shelf registration statement (the "Shelf
Registration") pursuant to Rule 415 under the Securities Act relating to all
Registrable Securities. Notwithstanding the foregoing, the Company shall not be
required to include Registrable Securities of any Holder that has not provided
to the Company all information reasonably requested by the Company for use
therein. The Company shall use its reasonable best efforts to cause such
registration statement to become effective within 180 days of the date hereof
and to keep such registration statement continuously effective, supplemented and
amended to the extent necessary to ensure that it is available for sales of
Registrable Securities by the Holders thereof, and to ensure that it complies
with the requirements of the Securities Act and the policies, rules and
regulations of the Commission until such time as all Registrable Securities
registered thereunder have been sold pursuant to such registration statement or
otherwise. The Shelf Registration shall describe a plan of distribution that
will include one or more methods of sale selected by the Holders, including a
firm commitment underwriting.
5. Registration Procedures. If and whenever the Company is required by the
provisions of Sections 2, 3 or 4 to use its best efforts to effect the
registration of any shares of Registrable Securities under the Securities Act,
the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain
3
<PAGE> 4
effective for the period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten Public Offering, the managing underwriter reasonably
shall request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify each seller of Registrable Securities and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
For purposes of this Agreement, the period of distribution with respect to
the Shelf Registration shall end when all Registrable Securities have been sold.
The period of distribution with respect to a registration pursuant to Section 2
or Section 3 shall end, in the case of a firm commitment underwriting, when each
underwriter has completed its distribution of all securities purchased by it,
or, in all other cases, upon the earlier of (i) 120 days after the effective
date thereof or (ii) the sale of all Registrable Securities covered thereby.
In connection with each registration hereunder, the sellers of Registrable
Securities will furnish to the Company in writing such information with respect
to themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
4
<PAGE> 5
If the Company has delivered preliminary or final prospectuses to the
sellers of Registrable Securities and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, the Company shall
promptly notify such sellers and, if requested, such sellers shall immediately
cease making offers of Registrable Securities and return all prospectuses to the
Company. The Company shall promptly provide the sellers with revised
prospectuses and, following receipt of the revised prospectuses, the sellers
shall be free to resume making offers of the Registrable Securities.
In connection with each registration pursuant to Sections 2, 3 or 4
covering an underwritten Public Offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
6. Expenses. All expenses incurred by the Company in complying with
Sections 2, 3 or 4, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars and costs of insurance, but excluding any
Selling Expenses, are called "Registration Expenses." All underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and
fees and disbursements of counsel to the Holders are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 2, 3 or 4; provided, however, that if a
requested registration under Section 2 is withdrawn by Holders of Registrable
Securities requesting such registration (other than solely as a result of
material information concerning the business or financial condition of the
Company which is made known to such Holders after the date on which such
registration was requested) and if such requesting Holders elect not to have
such registration counted as a registration required under Section 2, the
requesting Holders shall pay the Registration Expenses of such withdrawn
registration pro rata in accordance with the number of shares of Registrable
Securities of each such Holder included in such registration. All Selling
Expenses in connection with each registration statement under Sections 2, 3 or 4
shall be borne by the participating sellers in proportion to the number of
shares sold by each, or by such participating sellers other than the Company
(except to the extent the Company shall be a seller) as they may agree.
7. Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 2, 3 or 4, the Company
will indemnify and hold harmless each seller of such Registrable Securities
thereunder, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
5
<PAGE> 6
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act pursuant to
Sections 2, 3 or 4, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 2, 3 or 4, each seller
of such Registrable Securities thereunder, severally and not jointly, will, to
the extent permitted by law, indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
Registrable under the Securities Act pursuant to Sections 2, 3 or 4, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability (or action
in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of each seller hereunder shall be limited to the proceeds received by
such seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the
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indemnifying party is prejudiced by such omission. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party or if the indemnified party is advised
by counsel that the interests of the indemnified party reasonably may be deemed
to conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. The
indemnifying party shall not, however, in connection with any action or related
action in the same jurisdiction be liable for the fees and expenses of more than
one separate law firm at any one time for all such indemnified parties. No
indemnifying party shall be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 7 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 7; then, and in each such case, the Company and such
Holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such Holder is responsible for the portion represented by the percentage
that the Public Offering price of its Registrable Securities or offered by the
registration statement bears to the Public Offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the Public Offering price
of all such Registrable Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
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<PAGE> 8
8. Changes in Common Stock . If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
9. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the successors and assigns of the Company. This Agreement may not be assigned by
any Holder without the prior written consent of the Company; provided, however,
that each Holder may assign, and the immediate assignee to whom such Holder
transferred (i) its Registrable Securities it holds on the date hereof and (ii)
this Agreement (the "First Assignee"), may assign this Agreement to any holder
who owns more than 10% of the Common Stock. Any Holder or any First Assignee
shall provide the Company with written notice of any such assignment within two
(2) business days of such assignment.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
if to the Company or any other party hereto, at the address of
such party set forth in Schedule I hereto;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a Holder) or to the Holders of
Registrable Securities (in the case of the Company) in accordance with the
provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Arizona.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the Holders
of at least a majority of the outstanding shares of Registrable Securities.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Registrable
Securities under Sections 2, 3 and 4 shall terminate on the tenth anniversary of
the date of this Agreement.
(g) Notwithstanding the provisions of Sections 2 and 4, the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended (i)
for a period not to exceed 120 days in any 12-month period if there exists at
the time material non-public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed or (ii) if at the
time of a request to register
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<PAGE> 9
securities pursuant to Section 2 or an obligation to register securities
pursuant to Section 4, the Company is engaged or has fixed plans to engage,
within 30 days of the time of the request or the time the Shelf Registration is
to be filed, in a firm commitment underwritten Public Offering as to which
Holders of Registrable Securities may include shares pursuant to Section 3.
(h) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(i) Each party covenants, warrants and agrees not to claim or assert
that the validity or enforceability of this Agreement is subject to a defense or
claim based on recharacterization, unconscionability or public policy. If any
provision of this Agreement or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof or thereof, or the
application of such provision to persons or circumstances or in jurisdictions
other than those as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby or thereby, as the case may be, is not affected
in any manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
RAINTREE HEALTHCARE CORPORATION
By: ____________________________________
Name: Clayton Kloehr
Its: Senior Vice President - Finance
and Treasurer
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<PAGE> 10
AGREED TO AND ACCEPTED as of the
date first above written.
Holders:
Morgan Stanley Dean Witter High Yield Securities, Inc.
Morgan Stanley Dean Witter Diversified Income Fund
Morgan Stanley Dean Witter Variable Investment Series - High Yield Portfolio
High Income Advantage Trust II
High Income Advantage Trust
High Income Advantage Trust III
Morgan Stanley Dean Witter Select Dimensions Investment
Series - The Diversified Income Portfolio
By:________________________________
Peter M. Avelar
Their Vice President
CAPITAL RESEARCH AND MANAGEMENT COMPANY
By: _______________________________
Name: Robert J. Martorelli
Its: Senior Vice President
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Schedule I
Holder and Holder's Address
Holders: Morgan Stanley Dean Witter High Yield Securities, Inc.
Morgan Stanley Dean Witter Diversified Income Fund
Morgan Stanley Dean Witter Variable Investment Series - High
Yield Portfolio
High Income Advantage Trust II
High Income Advantage Trust
High Income Advantage Trust III
Morgan Stanley Dean Witter Select Dimensions Investment Series -
The Diversified Income Portfolio
c/o Morgan Stanley Dean Witter Advisors, Inc.
2 World Trade Center
72nd Floor
New York, NY 10048
Attn: Peter M. Avelar
Fax (212) 392-0094
with a copy to
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036-1510
Attn: Irving H. Picard, Esq.
Fax (212) 626-0799
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<PAGE> 1
Exhibit 10.41
SECURITY AGREEMENT
This Security Agreement is made and entered into effective the 31st day
of January, 1999, between Quest Pharmacies, Inc., an Arizona corporation
("QUEST"), Sunbelt Therapy Management Services, Inc., an Arizona corporation
("SUNBELT THERAPY (ARIZONA)"), Decatur Sports Fit & Wellness Center, Inc., an
Alabama corporation ("SPORTS"), Therapy Health Systems, Inc., a Mississippi
corporation ("THERAPY"), Henderson & Associates Rehabilitation, Inc., an Alabama
corporation ("HENDERSON"), Sunbelt Therapy Management Services, Inc., an Alabama
corporation ("SUNBELT ALABAMA") (collectively, Quest, Sunbelt Therapy (Arizona),
Sports, Therapy, Henderson and Sunbelt Alabama are referred to collectively as
"DEBTORS"), on the one hand, and, on the other hand, Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"), under that certain Indenture,
dated as of January 31, 1999, by and among RainTree Healthcare Corporation, a
Delaware corporation, and the parent entity of the Debtors (the "COMPANY"), the
Guarantors (as defined in the Indenture) and the Trustee (the "INDENTURE").
RECITALS
A. NOTES. The Company is the issuer and the Debtors are six of the
Guarantors of those certain 11% Senior Secured Notes due 2003 (the "NOTES")
pursuant to that Indenture.
B. PURPOSE. As a material inducement to purchasers of the Notes to
purchase the Notes, the Debtors have agreed to execute this Security Agreement
in favor of Trustee, on behalf of the holders of the Notes (in such capacity,
"SECURED PARTY"), and to pledge all their right, title and interest in the
property described herein to Secured Party. Capitalized terms used herein but
not otherwise defined shall have the meanings ascribed to such terms in the
Indenture.
AGREEMENT
Now therefore, in consideration of the above recitals and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. CREATION OF SECURITY INTEREST. Each Debtor hereby assigns, pledges
and grants to Secured Party, on behalf of the holders of the Notes, a security
interest in each Debtor's right, title and interest in and to the collateral
described in Section 2 hereinbelow (the "COLLATERAL") in each case whether now
owned or hereafter acquired by such Debtor in order to secure the payment and
performance of the obligations of such Debtor and the Guarantors as described in
Section 3 hereinbelow.
2. COLLATERAL. The Collateral under this Security Agreement is:
(a) all of the personal property, goods, machinery, equipment,
supplies, fixtures, furniture, building and other materials of every nature
whatsoever and all personal property of each Debtor (all of the foregoing
property and similar or after-acquired property included as Collateral under
Section 2(g) below being hereinafter referred to as "EQUIPMENT").
<PAGE> 2
(b) all of Debtors' accounts and accounts receivable, including,
without limitation, all rights to payment for goods sold or leased or for
services rendered which are not evidenced by an instrument or chattel paper, all
other present or future rights for money due or to become due, all of the
chattel paper, instruments, promissory notes, and general intangibles evidenced
by an instrument or chattel paper, all other present or future rights for money
due or to become due, all of the chattel paper, instruments, promissory notes,
and general intangibles for money due or to become due of any kind, in each case
whether now existing or hereafter arising and whenever arising and whether or
not earned by performance (collectively, the "RECEIVABLES"), other general
intangibles, documents of title, warehouse receipts, leases, deposit accounts,
money, tax refund claims, partnership interests, indemnification and other
similar claims and contract rights: including, without limitation, franchises,
certificates, stock, and all rights in, to and under all security agreements,
mortgages, deeds of trust, guarantees, leases and other agreements or contracts
securing or otherwise relating to any of the foregoing (all of the foregoing
property, including, without limitation, the Receivables, and similar or
after-acquired property included as Collateral under Section 2(f) below being
hereinafter referred to as "INTANGIBLES");
(c) all inventory in all of its forms, wherever located now or
hereafter existing including, but not limited to, (i) all goods held by any
Debtor for sale or lease or to be furnished under contracts of service or so
leased or furnished, (ii) all raw materials, work in process, finished goods,
and materials used or consumed in the manufacture, packing, shipping,
advertising, selling, leasing, furnishing or production of such inventory or
otherwise used or consumed in any Debtor's business, (iii) goods in which any
Debtor has an interest in mass or a joint or other interest or right of any
kind, (iv) goods which are returned to or repossessed by any Debtor and (v) all
additions and accessions thereto and replacements thereof (all such inventory,
accessions and products being the "Inventory");
(d) all of the trademarks and service marks now held or hereafter
acquired by any Debtor, which are registered in the United States Patent and
Trademark Office or in any similar office or agency of the United States or any
state thereof or any political subdivision thereof and any application for such
trademarks and service marks, as well as any unregistered marks used by any
Debtor in the United States and trade dress including logos, designs, trade
names, business names, fictitious business names and other business identifiers
in connection with which any of these registered or unregistered marks are used
in the United States ("MARKS") together with the registration and right to
renewals thereof, and the goodwill of the business of each Debtor symbolized by
the Marks and all licenses associated therewith;
(e) all United States copyrights which any Debtor now or hereafter
has registered with the United States Copyright Office, as well as any
application for a United States copyright registration now or hereafter made
with the United States Copyright Office by any Debtor ("COPYRIGHTS") or United
States patent to which any Debtor now or hereafter has title and any divisions
or continuations thereof, as well as any application for a United States patent
now or hereafter made by any Debtor, and all reissues, renewals or extension
thereof;
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<PAGE> 3
(f) all books, records, and computer information, software records
and data of each Debtor and all other proprietary information of each Debtor,
including, but not limited to, trade secrets; and
(g) the Collateral includes all items described in this Section 2,
whether now owned or hereafter at any time acquired by any Debtor and wherever
located, and includes all replacements, additions, parts, appurtenances,
accessions, substitutions, repairs, proceeds, products, offspring, rents and
profits, relating thereto or therefrom, and all documents, records, ledger
sheets and files of any Debtor relating thereto. Proceeds hereunder include (i)
whatever is now or hereafter receivable or received by any Debtor upon the sale,
exchange, collection or other disposition of any item of Collateral, whether
voluntary or involuntary, whether such proceeds constitute Equipment,
Intangibles, or other assets; (ii) any such items which are now or hereafter
acquired by any Debtor with any proceeds of Collateral hereunder; and (iii) any
insurance or payments under any indemnity, warranty or guaranty now or hereafter
payable by reason of loss or damage or otherwise with respect to any item of
Collateral or any proceeds thereof.
3. SECURED OBLIGATIONS OF DEBTORS. The Collateral secures and shall
hereafter secure (a) the payment by the Company, the Guarantors and the Debtors
of all indebtedness and other liabilities and obligations now or hereafter owed
by the Company, the Guarantors or the Debtors, whether at stated maturity, by
acceleration or otherwise, under or arising out of the Indenture, the Notes, the
Guarantee, or the Collateral Documents (as defined in the Indenture), together
with any interest thereon, payments for early termination, fees, expenses,
increased costs, indemnification or otherwise, in connection therewith and
extensions, modifications and renewals thereof, (b) the performance by the
Company, each Guarantor and each Debtor of all other obligations and the
discharge of all other liabilities of the Company, each Guarantor and each
Debtor of every kind and character arising from the Indenture, the Notes, the
Guarantee or the Collateral Documents, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, joint,
several and joint and several, and whether created under this Security Agreement
or any other agreement to which the Company or any Guarantor or Debtor and
Secured Party are parties, (c) any and all sums advanced by Secured Party in
order to preserve the Collateral or preserve Secured Party's security interest
in the Collateral (or the priority thereof) and (d) the expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, of any proceeding for the collection or enforcement
of any indebtedness, obligations or liabilities of Secured Party referred to
above, or of any exercise by Secured Party of its rights hereunder, together
with reasonable attorneys' fees and disbursements and court costs (collectively,
the "SECURED OBLIGATIONS"). All payments and performance by the Company and the
Guarantors with respect to any Secured Obligations shall be in accordance with
the terms under which said indebtedness, obligations and liabilities were or are
hereafter incurred or created.
4. DEBTORS' REPRESENTATIONS AND WARRANTIES. Each Debtor represents and
warrants that:
(a) each Debtor is (or, to the extent that the Collateral is
acquired after the date hereof, will be) the sole legal and beneficial owner of
their respective Collateral and has exclusive possession and control thereof,
except with respect to cash; there are no security
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<PAGE> 4
interests in, liens, charges or encumbrances on, or adverse claims of title to,
or any other interest whatsoever in, such Collateral or any portion thereof
except Permitted Liens (as defined in the Indenture and that are created by this
Security Agreement); and that no financing statement, notice of lien, mortgage,
deed of trust or instrument similar in effect covering the Collateral or any
portion thereof or any proceeds thereof ("LIEN NOTICE") exists or is on file in
any public office, except as relates to Permitted Liens and except as may have
been filed in favor of Secured Party relating to this Security Agreement or
related agreements, or for which duly executed termination statements have been
delivered to Secured Party for filing;
(b) each Debtor has full right, power and authority to execute,
deliver and perform this Security Agreement;
(c) the Collateral has not been and will not be used or bought by
any Debtor for personal, family or household purposes. In addition, the
Collateral does not include crops, timber, farm products, minerals or the like
or accounts resulting from the sale of such minerals at the wellhead or
minehead;
(d) each Debtor's chief executive office is located at 15300 North
90th Street, Suite 100, Scottsdale, Arizona 85260, Debtors have places of
business at such address as set forth on Exhibit "A" hereto and the Collateral
is now and will at all times hereafter be located at such places of business or
as Debtors may otherwise notify Secured Party in writing;
(e) Debtors do not maintain any deposit accounts other than those
set forth in Exhibit "A" hereto;
(f) Debtors have not purchased any Collateral, other than for cash,
within 21 days prior to the date hereof; and
(g) all originals of all promissory notes, other instruments or
chattel paper which evidence Receivables (other than checks received by Debtors
in the ordinary course of business) have been delivered to Secured Party (with
all necessary or appropriate endorsements).
5. COVENANTS OF DEBTORS. Each Debtor covenants and agrees that:
(a) Debtors will not move or permit to be moved the Collateral or
any portion thereof to any location other than that set forth in Section 4(d)
hereof without the prior written consent of the Secured Party and the prior
filing of a financing statement with the proper office and in the proper form to
perfect or continue the perfection (without loss of priority) of the security
interests created herein, which filing shall be satisfactory in form, substance
and location to Secured Party prior to such filing;
(b) Debtors will promptly, and in no event later than 21 days after
a request by Secured Party, procure or execute and deliver all further
instruments and documents (including, without limitation, notices, legal
opinions, financing statements, mortgagee waivers, landlord disclaimers and
subordination agreements) necessary or appropriate to and take any other actions
which are necessary or, in the judgment of Secured Party, desirable or
appropriate to perfect or to continue the perfection, priority and
enforceability of Secured Party's security interests in the Collateral, to
enable Secured Party to exercise and enforce its rights and remedies
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<PAGE> 5
hereunder with respect to any Collateral, to protect the Collateral against the
rights, claims or interests of third persons, or to effect or to assure further
the purposes and provisions of this Security Agreement, and will pay all
reasonable costs incurred in connection therewith;
(c) without the prior written consent of Secured Party, Debtors will
not sell, transfer, assign (by operation of law or otherwise), exchange or
otherwise dispose of all or any portion of the Collateral or any interest
therein, except as permitted by the Indenture and except that the Debtors may
sell worn-out or obsolete equipment. If the proceeds of any such prohibited sale
are notes, instruments, documents of title, letters of credit or chattel paper,
such proceeds shall be promptly delivered to Secured Party to be held as
Collateral hereunder (with all necessary or appropriate endorsements). If the
Collateral, or any part thereof or interest therein, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation of these provisions,
the security interest of Secured Party shall continue in such Collateral or part
thereof notwithstanding such sale, transfer, assignment, exchange or other
disposition, and Debtors will hold the proceeds thereof in a separate account
for Secured Party's benefit. Debtors will, at Secured Party's request, transfer
such proceeds to Secured Party in kind;
(d) Secured Party is hereby authorized (but not required) to file
one or more financing statements or fixture filings, and continuations thereof
and amendments thereto, relative to all or any party of the Collateral, without
the signature of Debtors where permitted by law;
(e) Except as expressly permitted by the Indenture, each Debtor will
pay and discharge all taxes, assessments and governmental charges or levies
against the Collateral prior to delinquency thereof and will keep the Collateral
free of all unpaid claims and charges (including claims for labor, materials and
supplies) whatsoever;
(f) Debtors will keep and maintain the Collateral in good condition,
working order and repair and from time to time will make or cause to be made all
repairs, replacements and other improvements in connection therewith that are
necessary or desirable toward such end. Debtors will not misuse or abuse the
Collateral, or waste or allow it to deteriorate except for the ordinary wear and
tear of its normal and expected use in Debtors' business in accordance with
Debtors' policies as then in effect (provided that no changes are made to
Debtors' policies as in effect on the date hereof that would be materially
adverse to the interests of the Secured Party), and will comply with all laws,
statutes and regulations pertaining to the use or ownership of the Collateral.
Debtors will promptly notify Secured Party regarding any material loss or damage
to any material Collateral or portion thereof;
(g) Each Debtor will take all actions consistent with reasonable
business judgment or, upon the occurrence of an Event of Default, as directed by
Secured Party in Secured Party's sole and absolute discretion, to create,
preserve and enforce any liens or guaranties available to secure or guaranty
payments due such Debtor under any contracts or other agreements with third
parties, will not voluntary permit any such payments to become more than 30 days
delinquent and will in a timely manner record and assign to Secured Party, to
the extent and at the earliest time permitted by law, any such liens and rights
to under such guaranties. Debtors will give Secured Party written notice of any
payments due Debtors within five days after any such payments become 30 days
delinquent;
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<PAGE> 6
(h) Secured Party shall have at all times, with or without notice,
the right to enter into and upon any premises where any of the Collateral or
records with respect thereto are located for the purpose of inspecting the same,
performing any audit, making copies of records, observing the use of any part of
the Collateral, or otherwise protecting its security interest in the Collateral;
(i) Secured Party shall have the right at any time, but shall not be
obligated, to make any payments and do any other acts Secured Party may deem
necessary or desirable to protect its security interest in the Collateral,
including, without limitation, the right to pay, purchase, contest or compromise
any encumbrance, charge or lien (excluding any Permitted Liens) applicable or
purported to be applicable to any Collateral hereunder, and appear in and defend
any action or proceeding purporting to affect its security interest in and/or
the value of any Collateral, and in exercising any such powers or authority, the
right to pay all expenses incurred in connection therewith, including attorneys'
fees. Each Debtor hereby agrees that it shall be bound by any such payment made
or incurred or act taken by Secured Party hereunder and shall reimburse Secured
Party for all reasonable payments made and expenses incurred under this Security
Agreement, which amounts shall be secured under this Security Agreement. Secured
Party shall have no obligation to make any of the foregoing payments or perform
any of the foregoing acts;
(j) if any Debtor shall become entitled to receive or shall receive
any certificate, instrument, option or rights, whether as an addition to, in
substitution of, or in exchange for any or all of the Collateral or any part
thereof, or otherwise, such Debtor shall accept any such instruments as Secured
Party's agent, shall hold them in trust for Secured Party, and shall deliver
them forthwith to Secured Party in the exact form received, with such Debtors'
endorsement when necessary or appropriate, or accompanied by duly executed
instruments of transfer or assignment in blank or, if requested by Secured
Party, an additional pledge agreement or security agreement executed and
delivered by such Debtor, all in form and substance satisfactory to Secured
Party, to be held by Secured Party, subject to the terms hereof, as additional
Collateral to secure the obligations hereunder;
(k) Secured Party is hereby authorized to pay all reasonable costs
and expenses incurred in the exercise or enforcement of its rights hereunder,
including attorneys' fees, and to apply any Collateral or proceeds thereof
against such amounts, and then to credit or use any further proceeds of the
Collateral in accordance herewith; and
(l) Secured Party may take any actions permitted hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters.
6. DEFAULTS AND REMEDIES. The occurrence of any "Event of Default"
listed in Section 6.1 of the Indenture shall constitute an Event of Default
under this Security Agreement. Upon the occurrence and continuation of an Event
of Default hereunder, each Debtor expressly covenants and agrees that Secured
Party may, at its option, in addition to other rights and remedies provided
herein or otherwise available to it, without notice to or demand upon Debtors
(except as otherwise required herein), exercise any one or more of the rights as
set forth as follows:
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(a) declare all advances made by Secured Party to any Debtor
hereunder, all other indebtedness owed by any Debtor to Secured Party and all
Secured Obligations to be immediately due and payable, whereupon all unpaid
principal and interest on said advances and other indebtedness and Secured
Obligations shall become and be immediately due and payable;
(b) immediately take possession of any of the Collateral wherever it
may be found or require each Debtor to assemble the Collateral or any part
thereof and make it available at one or more places as Secured Party may
designate, and to deliver possession of the Collateral or any part thereof to
Secured Party, who shall have full right to enter upon any or all of such
Debtors' places of business, premises and property to exercise Secured Party's
rights hereunder;
(c) exercise any or all of the rights and remedies provided for by
the Arizona Uniform Commercial Code, specifically including, without limitation,
the right to recover the attorneys' fees and other expenses incurred by Secured
Party in the enforcement of this Security Agreement or in connection with each
Debtor's redemption of the Collateral. Secured Party may exercise its rights
under this Security Agreement independently of any other collateral or guaranty
that Debtors may have granted or provided to Secured Party in order to secure
payment and performance of the Secured Obligations, and Secured Party shall be
under no obligation or duty to foreclose or levy upon any other collateral given
by Debtors to secure any Secured Obligation or to proceed against any guarantor
before enforcing its rights under this Security Agreement;
(d) use, manage, operate and control the Collateral and Debtors'
business and property to preserve the Collateral or its value, or to pay the
indebtedness secured hereunder, including, without limitation, the rights to
take possession of all of Debtors' premises and property, to exclude Debtors and
any third parties, whether or not claiming under any Debtor, from such premises
and property, to make repairs, replacements, alterations, additions and
improvements to the Collateral and to dispose of all or any portion of the
Collateral in the ordinary course of Debtors' business;
(e) without notice (except as specified below), sell the Collateral
or any part thereof in one or more parcels at one or more public or private
sales, at any of Secured Party's offices or elsewhere, at such time or times,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as shall be commercially reasonable. Each Debtor acknowledges
and agrees that, to the extent notice of sale shall be required by law, at least
ten days' written notice to Debtors of the time and place of any public sale or
of the date on or after which any private sale is to be made shall constitute
reasonable notification. Any public sale shall be held at such time or times
during ordinary business hours and at such place or places as Secured party may
fix in the notice of such sale. Notwithstanding the foregoing, Secured Party
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Secured Party may, without notice or publication,
adjourn any public or private sale, or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale or, with respect to
a private sale, after which such sale may take place, and any such sale may,
without further notice, be made at the time and place to which it was so
adjourned or, with respect to a private sale, after which such sale may take
place. Each purchaser at any such sale shall hold the property sold free from
any claim or right on the part of Debtors, and each Debtor hereby waives, to the
full extent permitted by law, all rights of stay and/or appraisal which such
7
<PAGE> 8
Debtor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Each Debtor also hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. The parties hereto agree that the notice provisions, method, manner
and terms of any sale, transfer or disposition of any Collateral in compliance
with the terms set forth herein or any other provision of this Security
Agreement are commercially reasonable;
(f) proceed by an action or actions at law or in equity to recover
the indebtedness secured hereunder or to foreclose this Security Agreement and
sell the Collateral, or any portion thereof, pursuant to a judgment or decree of
a court or courts of competent jurisdiction in any manner permitted by law, or
provided for herein;
(g) in the event Secured Party recovers possession of all or any
part of the Collateral pursuant to a writ of possession or other judicial
process, whether prejudgment or otherwise, Secured Party may retain, sell or
otherwise dispose of such Collateral in accordance with this Security Agreement
or the Arizona Uniform Commercial Code, and following such retention, sale or
other disposition, Secured Party may voluntarily dismiss without prejudice the
judicial action in which such writ of possession or other judicial process was
issued. Each Debtor hereby consents to the voluntary dismissal without prejudice
by Secured Party of such judicial action, and each Debtor further consents to
the exoneration of any bond which Secured Party files in such action;
(h) with respect to the sale of securities constituting Collateral,
to the extent Secured Party deems it advisable to do so, in its sole discretion
or as may be required by applicable law, restrict the prospective bidders or
purchasers to persons who in Secured Party's sole judgment are sufficiently
sophisticated and who will represent and agree that they are purchasing the
securities constituting Collateral then being sold for their own account and not
with a view to the distribution or resale thereof, and upon consummation of any
such sale, Secured Party shall have the right to assign, transfer and deliver to
the purchaser or purchasers thereof the securities constituting Collateral so
sold;
(i) Secured Party, in its sole discretion, if permitted by law, may
bid (which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for and purchase for its account the whole or any part of the
Collateral at any public sale or sale on any securities exchange or other
recognized market;
(j) to the full extent provided by law, have a court having
jurisdiction appoint a receiver, which receiver shall take charge and possession
of and protect, preserve, replace and repair the Collateral or any part thereof,
and manage and operate the same, and receive and collect all rents, income,
receipts, royalties, revenues, issues and profits therefrom. Each Debtor shall
irrevocably consent and shall be deemed to have hereby irrevocably consented to
the appointment thereof, and upon such appointment, each Debtor shall
immediately deliver possession of such Collateral to the receiver. Each Debtor
also irrevocably consents to the entry of an order authorizing such receiver to
invest upon interest any funds held or received by the receiver in connection
with such receivership. Secured Party shall be entitled to such
8
<PAGE> 9
appointment as a matter of right, if it shall so elect, without the giving of
notice to any other party and without regard to the adequacy of the security of
the Collateral;
(k) enforce one or more remedies hereunder, successively or
concurrently, and such action shall not operate to estop or prevent Secured
Party from pursuing any other or further remedy which it may have hereunder or
by law, and any repossession or retaking or sale of the Collateral pursuant to
the terms hereof shall not operate to release Debtors until full and final
payment of any deficiency has been made in cash. Each Debtor shall reimburse
Secured Party upon demand for, or Secured Party may apply any proceeds of
Collateral to, the reasonable costs and expenses (including attorneys' fees,
transfer taxes and any other charges) incurred by Secured Party in connection
with any sale, disposition, repair, replacement, alteration, addition,
improvement or retention of any Collateral hereunder;
(l) upon the occurrence of an Event of Default hereunder, any cash
held by Secured Party as Collateral and all cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Secured Party, be held
by Secured Party as collateral for and/or then or at any time thereafter applied
(including application to the payment of any reasonable costs, expenses,
indemnification and other amounts payable to Secured Party hereunder, which
amounts may be paid in whole or in part prior to the other obligations secured
hereby) in whole or in part by Secured Party against all or any part of the
obligations secured hereby in such order as Secured Party shall elect. Any
surplus of such cash or cash proceeds held by Secured Party and remaining after
payment in full of all the obligations secured hereby shall be paid over to
Debtors or to whomever may be lawfully entitled to receive such surplus or as a
court of competent jurisdiction may direct; provided, however, that in the event
that all of the conditions to termination of this Security Agreement have not
been fulfilled, such balance shall be held as additional Collateral hereunder
and applied from time to time to Secured Party costs and expenses and as
otherwise provided hereunder until all such conditions shall have been
fulfilled; and
(m) effect an absolute assignment of all such Debtors' right, title
and interest in and to each Mark (and the goodwill of the business of such
Debtor associated therewith), patent and Copyright.
7. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, requests, approvals, consents and other
communications required or permitted to be made hereunder shall, except as
otherwise provided, be in writing and may be delivered personally or sent by
telegram, telecopy, facsimile, telex, first class mail or overnight courier,
postage prepaid, to the parties addressed as follows:
9
<PAGE> 10
To Debtors: RainTree Healthcare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
With a copy to:
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Attn: Christopher D. Johnson, Esq.
To Secured Party:
Norwest Bank Minnesota, National Association
Corporate Trust Services
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Such notices, requests and other communications sent as provided hereinabove
shall be effective when received by the addressee thereof, unless sent by
registered or certified mail, postage prepaid, in which case they shall be
effective exactly three business days after being deposited in the United States
mail. The parties hereto may change their addresses by giving notice thereof to
the other parties hereto in conformity with this section.
(b) Headings. The various headings in this Security Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provision hereof.
(c) Amendment. This Security Agreement or any provision hereof may
be changed, waived, or terminated only by a statement in writing signed by the
party against which such change, waiver or termination is sought to be enforced,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(d) No Waiver. No failure on the part of Secured Party to exercise,
and no delay in exercising, and no course of dealing with respect to, any power,
privilege or right under this Security Agreement or any related agreement shall
operate as a waiver thereof nor shall any single or partial exercise by Secured
Party of any power, privilege or right under this Security Agreement or any
related agreement preclude any other or further exercise thereof or the exercise
of any other power, privilege or right. The powers, privileges and rights in
this Security Agreement are cumulative and are not exclusive of any other
remedies provided by law. No waiver by Secured Party of any default hereunder
shall be effective unless in writing, nor shall any waiver operate as a waiver
of any other default or of the same default on a future occasion.
10
<PAGE> 11
(e) Binding Agreement. All rights of Secured Party hereunder shall
inure to the benefit of its successors and assigns. Debtors shall not assign any
of their respective interests under this Security Agreement without the prior
written consent of Secured Party. Any purported assignment inconsistent with
this provision shall, at the option of Secured Party, be null and void.
(f) Entire Agreement. This Security Agreement, together with any
other agreement executed in connection herewith, including the Indenture, is
intended by the parties as a final expression of their agreement and is intended
as a complete and exclusive statement of the terms and conditions thereof.
Acceptance of or acquiescence in a course of performance rendered under this
Security Agreement shall not be relevant to determine the meaning of this
Security Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
(g) Severability. If any provision or obligation of this Security
Agreement should be found to be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions and obligations or any other agreement executed in connection
herewith, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby and shall nonetheless remain in
full force and effect to the maximum extent permitted by law.
(h) Survival of Provisions. All representations, warranties and
covenants of Debtors contained herein shall survive the execution and delivery
of this Security Agreement, and shall terminate only upon the termination of
this Security Agreement pursuant to Subsection 7(k) hereof.
(i) Power of Attorney. Each Debtor hereby irrevocably appoints
Secured Party its attorney-in-fact, which appointment is coupled with an
interest, with full authority in the place and stead of Debtors and in the name
of Debtors, Secured Party or otherwise, from time to time in Secured Party's
discretion (a) to execute and file financing and continuation statements (and
amendments thereto and modifications thereof) on behalf and in the name of each
Debtor with respect to the security interests granted or purported to be granted
hereby, (b) to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to exercise its rights under Section 6
hereunder, and (c) upon the occurrence and during the continuance of an Event of
Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Security
Agreement, including, without limitation:
(i) to obtain and adjust insurance required to be paid to
Secured Party pursuant hereto;
(ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(iii) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses (i) and
(ii) above;
11
<PAGE> 12
(iv) to sell, convey or otherwise transfer any item of
Collateral to any purchaser thereof; and
(v) to file any claims or take any action or institute any
proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral.
(j) Counterparts. This Security Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which shall together constitute one and the same agreement.
(k) Termination of Agreement. This Security Agreement and the
security interest hereunder shall not terminate until full and final payment and
performance of all indebtedness and obligations secured hereunder. At such time,
Secured Party shall reassign and redeliver to Debtors all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by Secured
Party in accordance with the terms hereof, and execute and deliver to Debtors
such documents as Debtor may reasonably request to evidence such termination.
Such reassignment and redelivery shall be without warranty by or recourse to
Secured Party, and shall be at the expense of Debtors; provided, however, that
this Security Agreement (including all representations, warranties and covenants
contained herein) shall continue to be effective or be reinstated, as the case
may be, if at any time any amount received by Secured Party or any other person
in respect of the indebtedness and obligations secured hereunder is rescinded or
must otherwise be restored or returned by Secured Party or such other person
upon or in connection with the insolvency, bankruptcy, dissolution, liquidation
or reorganization of Debtors or any other person or upon or in connection with
the appointment of any intervenor or conservator of, or trustee or similar
official for, Debtors or any other person or any substantial part of its assets,
or otherwise, all as though such payments had not been made.
(l) Successors and Assigns. This Security Agreement shall inure to
the benefit of Secured Party, its successors and assigns, including the
assignees of any Secured Obligation or of the benefit of any Secured Obligation
and shall bind the heirs, executors, administrators, successors and assigns of
each Debtor. This Security Agreement is assignable by Secured Party with respect
to all or any portion of the Secured Obligations, and when so assigned, each
Debtor shall be liable to the assignees under this Security Agreement without in
any manner affecting the liability of Debtors hereunder with respect to any of
the Secured Obligations retained by Secured Party. Each reference herein to
powers or rights of Secured Party shall also be deemed a reference to the same
power or right of such assignees, to the extent of the interest assigned to
them.
(m) Interaction with Financing Documents.
(vi) INCORPORATION BY REFERENCE. All terms, covenants,
conditions, provisions and requirements of the Indenture are incorporated by
reference in this Security Agreement. Any capitalized term used in this Security
Agreement without definition, but defined in the Indenture, shall have the same
meaning here as in the Indenture.
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<PAGE> 13
(vii) CONFLICTS WITH INDENTURE. Notwithstanding any other
provision of this Security Agreement, the terms and provisions of this Security
Agreement shall be subject and subordinate to the terms of the Indenture. To the
extent that the Indenture provides Debtors with a particular cure or notice
period, or establishes any limitations or conditions on Secured Party's actions
with regard to a particular set of facts, Debtors shall be entitled to the same
cure periods and notice periods, and Secured Party shall be subject to the same
limitations and conditions in place of the cure periods, notice periods,
limitations and conditions provided for under this Security Agreement; provided,
however, that such cure periods, notice periods, limitations and conditions
shall not be cumulative as between the Indenture and this Security Agreement. In
the event of any conflict or inconsistency between the provisions of this
Security Agreement and those of the Indenture, including, without limitation,
any conflicts or inconsistencies in any definitions herein or therein, the
provisions or definitions of the Indenture shall govern.
(n) Governing Law. This Agreement shall be governed by and construed
in accordance with Arizona law, without giving effect to the principles of
conflict of laws thereof.
[Signature page follows]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their respective undersigned duly
authorized officers as of the date first above written.
COMPANY:
RAINTREE HEALTHCARE CORPORATION, a
Delaware corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Senior Vice President - Finance
and Treasurer
DEBTORS:
SUNBELT THERAPY MANAGEMENT
SERVICES, INC., an Arizona corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
14
<PAGE> 15
QUEST PHARMACIES, INC., an Arizona
corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
DECATUR SPORTS FIT & WELLNESS
CENTER, INC., an Alabama corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
THERAPY HEALTH SYSTEMS, INC., a
Mississippi corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
HENDERSON & ASSOCIATES
REHABILITATION, INC., an Alabama
corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
15
<PAGE> 16
SUNBELT THERAPY MANAGEMENT
SERVICES, INC., an Alabama corporation
By:____________________________________________
Name: Clayton Kloehr
Title: Chief Financial Officer, Vice President
and Treasurer
SECURED PARTY:
Norwest Bank Minnesota, National Association
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
16
<PAGE> 17
EXHIBIT A
PLACE OF BUSINESS
The additional places of business of Sunbelt Therapy Management Services, Inc.,
an Arizona corporation, are:
3635A Bienville Blvd., Ocean Springs, MS
39564 5420 Highway 90 West, Tillman's Corner, Mobile, AL 36619
40 Lee Street NE, #401, Decatur, AL 35601
630C S. Jefferson St., Athens, AL 35612
110 Main St., Biloxi, MS 39530
107 Village East Shopping Center, Haleyville, AL 35565
1530 6th Ave., Decatur, AL 35601
145 Hardy Ct. Shopping Center, Gulfport, MS 39507
2810 Rainbow Drive, Rainbow City, AL 35902
425 Main St., Leakesville, MS 39541 Magnolia Park, Unit B and C,
Mill Street Extension, Lucedale, MS
The additional places of business of Quest Pharmacies, Inc., an Arizona
corporation, are:
305 Howe St., Bloomington, IN 47402
470 E. Loop 281, Suite B, Longview, TX 75605
BANK ACCOUNTS
<TABLE>
<S> <C> <C>
BANK ONE, TEXAS, N.A. ABA# 111000614 SUNBELT THERAPY MANAGEMENT SERVICES, INC.
1717 Main St, 3rd Floor ACC# 1559691553 Concentration Account
Dallas, TX 75201 ACC# 9320016075 Accounts Payable
ACC# 9320016034 Payroll
QUEST PHARMACIES, INC.
ACC# 1559691546 Concentration Account
ACC# 9320016018 Operating Account
WELLS FARGO BANK OF AZ ABA# 121000248 QUEST PHARMACIES, INC.
114 W. Adams ACC# 4801904681 Depository Account
P.O. Box 53456
Phoenix, AZ 85072-3456
GILMER NATIONAL BANK QUEST PHARMACIES, INC.
P.O. Box 460 ACC# 5420520 Operating Account -- Being left open to allow checks
Gilmer, TX 75544 to clear
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C> <C>
BLOOMFIELD STATE BANK QUEST PHARMACIES, INC.
P.O. Box 407 dba Indiana Prescription Lab
Bloomfield, IN 47424 ACC#852902 Operating Account
WELLS FARGO BANK OF AZ ABA# 121000248 SUNBELT THERAPY MANAGEMENT SERVICES, INC.
114 W. Adams ACC# 4801904673 Depository Account
P.O. Box 53456
Phoenix, AZ 85072-3456
COLONIAL BANK OF AL SUNBELT THERAPY MANAGEMENT SERVICES, INC.
1425 Beltline Rd. S.W. ACC# 9501 Direct Deposit Payroll Account
Decatur, AL
COLONIAL BANK OF AL SUNBELT THERAPY MANAGEMENT SERVICES, INC.
1425 Beltline Rd. S.W. ACC# 7645 Concentration Account for deposits from corporate
Decatur, AL ACC# and local clinics
COLONIAL BANK OF AL SUNBELT THERAPY MANAGEMENT SERVICES, INC.
1425 Beltline Rd. S.W. ACC# 7561 Old Accounts Payable Account being left open to
Decatur, AL allow checks to clear
UNION PLANNERS BANK SUNBELT THERAPY MANAGEMENT SERVICES, INC.
11283 Hwy 63 South ACC# 8100657001 Local Account used by Biloxi, Gulfport, Lucedale,
Lucedale, MS 39452 Mobile and Ocean Springs clinics to deposit revenue
FIRST STATE BANK SUNBELT THERAPY MANAGEMENT SERVICES, INC.
P.O. Box 506 ACC# 6458434 Local Account used by Leakesville clinic to deposit
Waynesboro, MS 39367 revenue
TRADERS & FARMERS BANK SUNBELT THERAPY MANAGEMENT SERVICES, INC.
820 Downtown Mall ACC# 0102048345 Local Account used by Haleyville clinic to deposit
Haleyville, AL 35565 revenue
</TABLE>
18
<PAGE> 1
Exhibit 10.42
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of the
31st day of January, 1999, by and between AMERICAN PROFESSIONAL HOLDING, INC., a
Utah corporation ("Debtor"), and David Kremser, Bernice Kremser, Holly Kremser,
Michael Kremser, Stanley Kremser and ELK MEADOWS INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as amended and supplemented), confirmed by a final Order
of the United States Bankruptcy Court effective January 20, 1999 (the "Plan"),
Secured Party is obligated to loan to Debtor certain funds in accordance with
the terms and conditions thereof (the "Loan"), evidenced by the Promissory Note
dated of even date herewith executed and delivered to Secured Party under the
Plan (the "Note"), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the Note,
Debtor grants to Secured Party a security interest in all of Debtor's right,
title and interest in the property and property rights more fully described on
Schedule A attached hereto and incorporated herein by reference (collectively,
the "Collateral"). Such security interest shall be superior and prior to all
other liens, except prior liens permitted by Secured Party.
<PAGE> 2
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the Collateral,
except the portion thereof consisting of after-acquired property, and
Debtor will be the owner of such after-acquired property, free from any
lien, except liens permitted by Secured Party.
(b) Chief Place of Business. There is listed in Schedule B hereto
the location of the chief place of business of Debtor and, if different,
the location where the major tangible collateral and the books and records
of Debtor are kept. Debtor shall not (i) change any such location; or (ii)
change its company name without, in each case, giving to Secured Party 30
days' prior written notice of any such change.
(c) Maintenance of Collateral. Debtor will at all times keep the
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all material laws and insurance policies
applicable thereto, and pay promptly when due all taxes, insurance
premiums and other governmental charges upon or relating to any of the
property, income or receipts of Debtor, unless Debtor reasonably disputes
such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to (i)
maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except liens permitted
by Secured Party, and (iv) pay when due all taxes, levies and assessments on or
in respect of the Collateral, unless Debtor reasonably disputes such taxes,
levies or assessments, Secured Party, at its option, may (but shall not be
required to) procure and pay for such insurance, place the Collateral in good
repair and operating condition, or otherwise make good any other aforesaid
failure of Debtor and all sums advanced by Secured Party, with interest thereon
at the interest rate set forth in the Note shall be part of Debtor's obligations
to Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with the
execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note or if
Borrower shall fail to perform any covenant or condition of this Security
Agreement within thirty (30) days after written notice of such non-
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<PAGE> 3
compliance, or if any covenant, condition, agreement, representation or warranty
made by Debtor to Secured Party in this Agreement proves untrue in any material
respect or is breached and is not cured upon thirty (30) days written notice by
the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default and
the acceleration of Debtor's obligations, Secured Party shall have all the
rights and remedies of a Secured Party under the Arizona Uniform Commercial Code
and all other rights and remedies accorded to Secured Party in equity or law.
Upon the request of Secured Party, Debtor shall assemble and make the Collateral
available to Secured Party at a place designated by Secured Party. Any notice of
sale or other disposition of the Collateral given not less than ten days prior
to such proposed action shall constitute reasonable and fair notice of such
action. Debtor shall be liable for any deficiency. Debtor expressly waives any
right to have the collateral marshalled on any foreclosure, sale or other
enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Such notices, requests, demands and consents, if sent by mail shall be
deemed given 2 (two) Business Days after deposit in the United States mail, and
if delivered by hand, shall be deemed given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the payment
in full of Debtor's obligations to Secured Party as set forth in the Note.
-3-
<PAGE> 4
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
AMERICAN PROFESSIONAL HOLDING, INC., a
Utah corporation
By:_______________________________________
Name:____________________________________
Title:___________________________________
Address:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
"DEBTOR"
ELK MEADOWS INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
David Kremser, Managing Member
___________________________________________
David Kremser
___________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
___________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
-4-
<PAGE> 5
___________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
___________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
Address:
c/o David Kremser
784 Yankee Creek Road
Evergreen, CO 80439
"SECURED PARTY"
-5-
<PAGE> 6
SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but not
limited to all present and future debt instruments, chattel papers, accounts,
loans and obligations receivable, and tax refunds, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property by Debtor, out of a
rendering of services by Debtor, out of a loan by Debtor, out of the overpayment
of taxes or other liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and security interests)
which Debtor may at any time have by law or agreement against any account debtor
or other obligor obligated to make any such payment or against any of the
property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
<PAGE> 7
SCHEDULE B
Chief Place of Business of Debtor:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
Location of major Collateral and Books and Records of Debtor:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
<PAGE> 1
Exhibit 10.43
STOCK PLEDGE AGREEMENT
(American Professional Holding, Inc.)
DATE: January 31, 1999
PARTIES:
Pledgor: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
15300 North 90th Street
Suite 100
Scottsdale, AZ 85260
Secured Party: David Kremser, Bernice Kremser,
Holly Kremser, Michael Kremser,
Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C.
784 Yankee Creek Road
Evergreen, CO 80439
RECITALS:
A. In accordance with the terms of the Debtors' First Amended Joint Plan
of Reorganization dated October 15, 1998 (as amended and supplemented),
confirmed by a final Order of the United States Bankruptcy Court effective
January 20, 1999 (the "Plan"), Pledgor desires to borrow, and Secured Party
desires to lend, the sum of One Million Three Hundred Fifty-Three Thousand Seven
Hundred Four Dollars ($1,353,704) (the "Loan") to Pledgor pursuant to a
promissory note of even date herewith (the "Note"). All documents evidencing and
or securing the Loan may be hereinafter referred to as the "Loan Documents."
B. Pledgor owns one hundred percent (100%) of the issued and outstanding
capital stock of AMERICAN PROFESSIONAL HOLDING, INC., a Utah corporation
("APHI"), consisting of 100 shares represented by Certificate(s) No. 3679 (the
"Shares").
C. In order to induce Secured Party to make the Loan to Pledgor, Pledgor
desires to grant a security interest in, and, pledge, sign and transfer, all of
Pledgor's right, title and interest in and to the Shares, to Secured Party.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Pledge. Pledgor hereby grants to Secured Party a security interest in
the Shares together with all rights thereof or arising therefrom, all additions
thereto, dividends, options,
<PAGE> 2
warrants and payments arising thereunder, all proceeds from the sale or other
disposition thereof, and all substitutions therefor (collectively the
"Collateral"), as security for all of the Pledgor's obligations to Secured Party
under the Note and any and all of the Loan Documents. Upon execution of this
Agreement, Pledgor shall deliver to Secured Party stock power(s) and
assignment(s) separate from certificate for the certificates representing the
Shares endorsed in blank. The books of the issuer of such Shares shall contain a
legend to reflect such pledge of the Shares hereunder.
2. Covenants and Representations. Pledgor agrees not to knowingly take
any action which would adversely affect the value of the Collateral or which
would encumber, dilute or cloud Pledgor's title or interest therein. Pledgor
makes the following representations, warranties, and covenants:
(a) Pledgor is and will continue to be the owner of the Collateral,
free of any liens, security interests or assignments other than the
security interest created by this Agreement;
(b) Pledgor shall deliver to Secured Party and Secured Party shall
retain physical possession of all stock certificates and other instruments
and documents representing or evidencing any of the Collateral, which
stock certificates shall be duly endorsed in blank;
(c) Pledgor will not modify or amend the instruments or documents
constituting the Collateral, except as required by law, court order, or
regulation, or make any compromise, adjustment, settlement or termination
in connection therewith;
(d) Pledgor will at all times defend the Collateral against any and
all claims of any person, adverse to the claims of Secured Party upon
Secured Party's request;
(e) upon the occurrence of an Event of Default (as defined in
paragraph 5 hereof and which is continuing) Pledgor will accept no
payments, distributions or dividends on the Collateral and shall remit to
Secured Party any payment or distribution received;
(f) Pledgor has the full power and authority to enter into this
Agreement, and the persons executing this Agreement on behalf of Pledgor
have been duly authorized to act on behalf of Pledgor in the execution
hereof;
(g) other than Pledgor, there are no parties who assert any type of
ownership interest whatsoever in the Shares;
(h) other than this Agreement, there are no agreements which impose
any conditions or restrictions on the Shares;
2
<PAGE> 3
(i) all of the Shares have been duly authorized, validly issued and
are fully paid and non-assessable;
(j) Pledgor, as stockholder, shall not vote for, ratify, accept,
accede to, or approve any proposed transaction concerning the Collateral
which would have a material adverse effect on the rights of Secured Party
hereunder; and
(k) The Shares represent one hundred percent (100%) of the issued
and outstanding stock of APHI, and there are no agreements in effect which
require or obligate APHI to issue any additional shares of stock of APHI
and there are no outstanding options to purchase any shares of stock of
APHI. There will be no agreements in effect which require or obligate APHI
to issue any additional shares of stock of APHI and there will be no
outstanding options to purchase any shares of stock of APHI.
3. Delivery of Instruments; Adjustments. Pledgor has delivered to Secured
Party, all stock certificates and all documents evidencing any ownership of the
Collateral or which are necessary or convenient for Secured Party to exercise
any of Secured Party's rights hereunder. If, during the term of this Agreement,
any stock dividends, reclassification, readjustments or other changes are
declared or made in the capital structure of any corporation represented by the
Collateral, or if any subscription or other options are exercisable with respect
to the Collateral, all such new, substitute or additional shares or other
securities, rights or interests issued shall be delivered to and held by Secured
Party subject to this Agreement in the same manner as the Collateral.
4. Voting. So long as Pledgor is not in default hereunder, any Collateral
may be voted by the Pledgor at all meetings of stockholders, subject to the
restrictions of Paragraph 2(j).
5. Events of Default. Any one or more of the following will constitute an
event of default ("Event of Default") under this Agreement:
(a) any event occurs which constitutes an Event of Default
under any of the Loan Documents;
(b) if Pledgor fails to pay or perform any of its material
obligations contained in paragraphs 2, 7 and 8 of this Agreement and which
failure is not cured upon 30 days written notice by Secured Party to
Pledgor;
(c) any covenant, condition, agreement, representation or warranty
made by Pledgor to Secured Party in this Agreement is materially breached
or proves untrue in any material respect and is not cured upon 30 days
written notice by Secured Party to Pledgor.
6. Remedies on Default. Upon the occurrence and during the continuance of
an Event of Default, Secured Party may exercise any or all of the rights and
remedies provided (a) by this Agreement, and/or (b) by any other applicable law.
Without limiting the generality of the foregoing,
3
<PAGE> 4
upon the occurrence and continuance of an Event of Default, Secured Party may
(i) instruct the secretary of APHI to pay all dividends to Secured Party, and
(ii) sell the Collateral or any part thereof, without recourse to judicial
proceedings, with the right to bid for and buy, free from any right of
redemption, upon ten (10) days' notice (which notice is agreed to be reasonable
notice for the purposes hereof) to the Pledgor, of the time and place of sale,
for cash, upon credit or for future delivery, at Secured Party's option and in
Secured Party's complete discretion:
(a) at a public sale, including a sale at any broker's board or
exchange;
(b) at private sale in any commercially reasonable manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other law or regulation.
Secured Party is also hereby authorized, but not obligated, to take such
actions, give such notices, obtain such consents, and do such other things
as it may deem required or appropriate in the event of sale or disposition
of any of the Collateral.
In connection with the sale of any of the Collateral, Secured Party is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Secured Party to render such sale exempt from
the registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, and any sale of the Collateral so made in good
faith by Secured Party shall be deemed to be commercially reasonable. In
connection with any such sale or other disposition in accordance with the
provision hereof, Secured Party shall be authorized to deliver the Stock to or
upon the order of Secured Party.
7. Taxes. Pledgor shall pay promptly, when due, any and all property
taxes, excise taxes (however called) and other taxes, assessments, duties and
other charges, which, if unpaid, might by law or otherwise become a lien or
charge upon the Collateral (including any and all interest, penalties and
related provisional fees) imposed, levied or assessed against the Collateral, or
upon or measured by the use, ownership, possession or operation thereof, or in
respect to this Agreement or the security interest in the Collateral granted and
conveyed herein.
8. Pledgor's Failure to Pay Taxes and Other Items. If Pledgor fails to
make any payment or do any act required of it under this Agreement, then Secured
Party shall have the right, but not the obligation, upon three (3) days notice
to Pledgor, and without releasing Pledgor from any obligation under this
Agreement, to make or do the same, and to pay, purchase, contest or compromise
any lien which in Secured Party's judgment places its security interest in the
Collateral or Pledgor's title to the Collateral in jeopardy, and in exercising
any such rights, to expend whatever reasonable amounts of Secured Party in its
sole discretion may deem necessary therefor. Any amounts expended by Secured
Party pursuant to this Section 8 shall be a demand obligation owing by Pledgor,
which shall bear interest at the default rate (as defined in the Loan Documents)
from the date Secured Party expends such amount until repaid.
4
<PAGE> 5
9. Indemnification. Pledgor agrees to indemnify Secured Party from and
against all losses, claims, demands and liabilities of every kind and nature
arising by reason of the assignment and security interest granted and the
Collateral, excluding any of the same arising from the negligence or wilful
misconduct of the Secured Party, and agrees to pay all expenses, including,
without limitation, expert witness fees and attorneys fees, incurred by Secured
Party in the preservation, realization, enforcement or exercise of any of its
rights, powers or remedies hereunder.
10. Unregistered Securities. Pledgor acknowledges that the Shares
constitute unregistered securities subject to legal restrictions upon the
transfer thereof which will render a public sale of the Shares unavailable. If,
upon an Event of Default, Secured Party exercises its right to sell the shares,
Pledgor waives all rights to public sale and agrees to the private placement of
the Shares to any qualified third-party buyer at a commercially reasonable price
therefor. Pledgor further acknowledges that the legal restrictions upon transfer
of the Shares adversely affect the marketability of the Shares and any
commercially reasonable price for the shares will include a discount from the
proportionate part of the net asset value of the issuer represented by the
Shares to reflect those restrictions upon marketability.
11. Irrevocable Proxy. Pledgor does hereby irrevocably constitute and
appoint Secured Party and Secured Party's successors and assigns as its proxy,
with full power, in the same manner, to the same extent, and with the same
effect as if they were to do the same:
(a) to attend any and all meetings of the shareholders of APHI held
from the date hereof, and to vote the Collateral at any such meeting in
such manner as Secured Party shall, in its sole discretion, deem
appropriate;
(b) to consent, in the sole discretion of Secured Party, to any and
all actions by or with respect to Pledgor for which the consent of the
Pledgor is or may be necessary or appropriate; and
(c) without limitation, to do all things which Pledgor can or could
do as a shareholder of APHI, giving to Secured Party full power and
substitution and revocation; provided, however, that this proxy shall not
be exercisable by Secured Party, and Pledgor alone shall have the
foregoing powers, so long as there is no Event of Default hereunder
pursuant to which Secured Party has notified Pledgor that Secured Party is
exercising its rights under this section, and provided further that this
proxy shall terminate at such time as this Agreement is terminated.
Pledgor hereby revokes any proxy or proxies heretofore given to any person
or persons and agrees not to give any other proxy in derogation hereof
until such time as this Agreement is terminated. Pledgor and Secured Party
hereby specifically agree that the proxy granted hereunder shall be deemed
to be valid and irrevocable until this Agreement shall be terminated.
12. Attorney-in-Fact. Pledgor hereby appoints Secured Party as Pledgor's
Attorney-in-Fact (without imposing any obligations on Secured Party), to perform
all acts which Secured Party
5
<PAGE> 6
deems appropriate to perfect and continue the security interest granted
hereunder. The Power of Attorney granted herein is coupled with an interest and
is irrevocable until this Agreement is terminated.
13. Miscellaneous. This Agreement, the Plan and its related documents, and
all other Loan Documents constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all other
prior agreements, written or oral, with respect thereto.
(a) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that Pledgor shall not have the right to assign or transfer
respective rights or obligations under this Agreement except with the
prior written consent of Secured Party. Secured Party, at any time with
seven (7) business days prior notice to Pledgor, may sell, assign, grant
or otherwise transfer, in whole or in part, the indebtedness secured
hereby and Secured Party's rights, interest and obligations under this
Agreement or the Collateral with the consent of the Pledgor, which will
not be unreasonably withheld, and in such event, the transferee shall have
the same rights, powers and authority with respect to this Agreement and
the Collateral so transferred as are hereby given to Secured Party;
(b) This Agreement may be amended modified, renewed or extended but
only by a written instrument, executed by all of the parties hereto in the
manner of the execution of this Agreement;
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA, AND, TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES;
(d) All parties hereto shall, from time to time, do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by any
other party to establish, maintain and protect the respective rights and
remedies of such other party and to carry out and effect the intents and
purposes of this Agreement;
(e) All documents, Agreements, certificates and instruments herein
required shall be in form and substance satisfactory in all respects to
Secured Party in its sole discretion and shall be provided at the sole
cost and expense of Pledgor;
(f) Pledgor's covenants shall survive the execution hereof and shall
be performed fully and faithfully by Pledgor at all times until the date
of repayment of the indebtedness secured hereby.
6
<PAGE> 7
(g) If any term or provision of this Agreement, or the application
thereof to any circumstance, shall be invalid, illegal or unenforceable to
any extent, such term or provision shall not invalidate or render
unenforceable any other term or provision of this Agreement, or the
application of such term or provision to any other circumstance. To the
extent permitted by law, the parties hereto hereby waive any provision of
law that renders any term or provision hereof invalid or unenforceable in
any respect;
(h) Time is of the essence of this Agreement; and
(i) Any notice, demand or any other instruments authorized by this
Agreement to be served on or given shall be sufficiently served or given
for all purposes on the earlier of: (a) when personally delivered to any
officer of the party to whom it is addressed; (b) when sent by certified,
registered or first class mail, postage prepaid, addressed to each party
at its address set forth above or at such other address as has been
furnished in writing by a party to the other in the manner provided in
this Section; or (c) by overnight courier.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
15. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
16. Construction. All references to the singular shall include the plural
and vice versa and all references to the masculine shall include the neuter or
feminine and vice versa. This Agreement has been reviewed and negotiated by
counsel for each party and no ambiguity in this Agreement shall be construed
against any party based upon its having prepared the same.
17. Termination. This Agreement and all of its terms and covenants,
representations and warranties shall terminate upon full satisfaction of the
indebtedness hereby secured, and, upon such termination, Secured Party shall
return to Pledgor any of the Collateral held by Secured Party pursuant to this
Agreement, and the original executed copy of this Agreement which contains an
irrevocable proxy.
18. Acknowledgment. Pledgor acknowledges that Secured Party would not
agree to make the Loan to Pledgor without the execution, delivery and
performance of this Agreement by Pledgor. Pledgor further acknowledges that it
has received good and sufficient consideration for the execution, delivery and
performance of this Agreement.
19. No Duty to Protect. This is a pledge and assignment of Pledgor's
rights and benefits in the Collateral without an assumption by Secured Party of
any of Pledgor's duties or obligations attendant thereto. Except for physical
safeguarding of the stock certificate(s) included in the
7
<PAGE> 8
Collateral delivered to Secured Party, Secured Party shall have no duty to
protect, insure, collect or realize upon the Collateral or any proceeds
therefrom nor shall Secured Party have any obligations to any third party by
virtue of Secured Party's possession of the Collateral.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
SECURED PARTY: ELK MEADOWS INVESTMENTS, L.L.C.,
a Colorado limited liability company
By:______________________________________
David Kremser, Managing Member
_________________________________________
David Kremser
_________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
_________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
8
<PAGE> 9
IRREVOCABLE STOCK POWER
Certificate(s) No(s).
FOR VALUE RECEIVED, RAINTREE HEALTHCARE CORPORATION, a Delaware
corporation ("Pledgor"), hereby assigns and transfers to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively the "Secured Party"), pursuant to the Stock
Pledge Agreement, dated as of January 31, 1999 (the "Stock Pledge Agreement"),
between the Pledgor and Secured Party, 100 shares of common stock of AMERICAN
PROFESSIONAL HOLDING, INC., a Utah corporation (the "Common Shares"), of the
Secured Party, as security for the Loan (as defined in the Pledge Agreement).
The undersigned does hereby irrevocably constitute and appoint David
Kremser as its attorney-in-fact to transfer the said stock or bond(s), as the
case may be, on the books of AMERICAN PROFESSIONAL HOLDING, INC. with full power
of substitution in the premises.
Dated: _______________, 1999
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 1
Exhibit 10.44
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of
the 31st day of January, 1999, by and between AMPRO MEDICAL SERVICES, INC. a
Texas corporation ("Debtor"), and David Kremser, Bernice Kremser, Holly Kremser,
Michael Kremser, Stanley Kremser and ELK MEADOWS INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as amended and supplemented), confirmed by a final Order
of the United States Bankruptcy Court effective January 20, 1999 (the "Plan"),
Secured Party is obligated to loan to Debtor certain funds in accordance with
the terms and conditions thereof (the "Loan"), evidenced by the Promissory Note
dated of even date herewith executed and delivered to Secured Party under the
Plan (the "Note"), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the
Note, Debtor grants to Secured Party a security interest in all of Debtor's
right, title and interest in the property and property rights more fully
described on Schedule A attached hereto and incorporated herein by reference
(collectively, the "Collateral"). Such security interest shall be superior and
prior to all other liens, except prior liens permitted by Secured Party.
<PAGE> 2
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the
Collateral, except the portion thereof consisting of after-acquired
property, and Debtor will be the owner of such after-acquired property,
free from any lien, except liens permitted by Secured Party.
(b) Chief Place of Business. There is listed in Schedule B
hereto the location of the chief place of business of Debtor and, if
different, the location where the major tangible collateral and the
books and records of Debtor are kept. Debtor shall not (i) change any
such location; or (ii) change its company name without, in each case,
giving to Secured Party 30 days' prior written notice of any such
change.
(c) Maintenance of Collateral. Debtor will at all times keep
the Collateral in good operating condition and repair, operate and
maintain the same in compliance with all material laws and insurance
policies applicable thereto, and pay promptly when due all taxes,
insurance premiums and other governmental charges upon or relating to
any of the property, income or receipts of Debtor, unless Debtor
reasonably disputes such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to
(i) maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except liens permitted
by Secured Party, and (iv) pay when due all taxes, levies and assessments on or
in respect of the Collateral, unless Debtor reasonably disputes such taxes,
levies or assessments, Secured Party, at its option, may (but shall not be
required to) procure and pay for such insurance, place the Collateral in good
repair and operating condition, or otherwise make good any other aforesaid
failure of Debtor and all sums advanced by Secured Party, with interest thereon
at the interest rate set forth in the Note shall be part of Debtor's obligations
to Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with
the execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note or if
Borrower shall fail to perform any covenant or condition of this Security
Agreement within thirty (30) days after written notice of such non-
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<PAGE> 3
compliance, or if any covenant, condition, agreement, representation or warranty
made by Debtor to Secured Party in this Agreement proves untrue in any material
respect or is breached and is not cured upon thirty (30) days written notice by
the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default
and the acceleration of Debtor's obligations, Secured Party shall have all the
rights and remedies of a Secured Party under the Arizona Uniform Commercial Code
and all other rights and remedies accorded to Secured Party in equity or law.
Upon the request of Secured Party, Debtor shall assemble and make the Collateral
available to Secured Party at a place designated by Secured Party. Any notice of
sale or other disposition of the Collateral given not less than ten days prior
to such proposed action shall constitute reasonable and fair notice of such
action. Debtor shall be liable for any deficiency. Debtor expressly waives any
right to have the collateral marshalled on any foreclosure, sale or other
enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Such notices, requests, demands and consents, if sent by mail shall be
deemed given 2 (two) Business Days after deposit in the United States mail, and
if delivered by hand, shall be deemed given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the
payment in full of Debtor's obligations to Secured Party as set forth in the
Note.
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<PAGE> 4
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
AMPRO MEDICAL SERVICES, INC.
a Texas corporation
By:________________________________________
Name:____________________________________
Title:_____________________________________
Address:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
"DEBTOR"
ELK MEADOWS INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
David Kremser, Managing Member
__________________________________________
David Kremser
__________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
__________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
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<PAGE> 5
__________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
__________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
Address:
c/o David Kremser
784 Yankee Creek Road
Evergreen, CO 80439
"SECURED PARTY"
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<PAGE> 6
SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but
not limited to all present and future debt instruments, chattel papers,
accounts, loans and obligations receivable, and tax refunds, whether such right
to payment now exists or hereafter arises, whether such right to payment arises
out of a sale, lease or other disposition of goods or other property by Debtor,
out of a rendering of services by Debtor, out of a loan by Debtor, out of the
overpayment of taxes or other liabilities of Debtor, or otherwise arises under
any contract or agreement, whether such right to payment is or is not already
earned by performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all liens and security
interests) which Debtor may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such payment or against
any of the property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
<PAGE> 7
SCHEDULE B
Chief Place of Business of Debtor:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
Location of major Collateral and Books and Records of Debtor:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
<PAGE> 1
Exhibit 10.45
STOCK PLEDGE AGREEMENT
(Ampro Medical Services, Inc.)
DATE: January 31, 1999
PARTIES:
Pledgor: AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
10405 E. Northwest, Highway #109
Dallas, Texas 75238
Secured Party: David Kremser, Bernice Kremser,
Holly Kremser, Michael Kremser,
Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C.
784 Yankee Creek Road
Evergreen, CO 80439
RECITALS:
A. In accordance with the terms of the Debtors' First Amended Joint
Plan of Reorganization dated October 15, 1998 (as amended and supplemented),
confirmed by a final Order of the United States Bankruptcy Court effective
January 20, 1999 (the "Plan"), Pledgor desires to borrow, and Secured Party
desires to lend, the sum of One Million Three Hundred Fifty-Three Thousand Seven
Hundred Four Dollars ($1,353,704) (the "Loan") to Pledgor pursuant to a
promissory note of even date herewith (the "Note"). All documents evidencing and
or securing the Loan may be hereinafter referred to as the "Loan Documents."
B. Pledgor owns one hundred percent (100%) of the issued and
outstanding capital stock of AMPRO MEDICAL SERVICES, INC., a Texas corporation
("AMPRO").
C. In order to induce Secured Party to make the Loan to Pledgor,
Pledgor desires to grant a security interest in, and, pledge, sign and transfer,
all of Pledgor's right, title and interest in and to the Shares, to Secured
Party.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Pledge. Pledgor hereby grants to Secured Party a security interest
in the Shares together with all rights thereof or arising therefrom, all
additions thereto, dividends, options, warrants and payments arising thereunder,
all proceeds from the sale or other disposition thereof,
<PAGE> 2
and all substitutions therefor (collectively the "Collateral"), as security for
all of the Pledgor's obligations to Secured Party under the Note and any and all
of the Loan Documents. Upon execution of this Agreement, Pledgor shall deliver
to Secured Party stock power(s) and assignment(s) separate from certificate for
the certificates representing the Shares endorsed in blank. The books of the
issuer of such Shares shall contain a legend to reflect such pledge of the
Shares hereunder.
2. Covenants and Representations. Pledgor agrees not to knowingly take
any action which would adversely affect the value of the Collateral or which
would encumber, dilute or cloud Pledgor's title or interest therein. Pledgor
makes the following representations, warranties, and covenants:
(a) Pledgor is and will continue to be the owner of the
Collateral, free of any liens, security interests or assignments other
than the security interest created by this Agreement;
(b) Pledgor shall deliver to Secured Party and Secured Party
shall retain physical possession of all stock certificates and other
instruments and documents representing or evidencing any of the
Collateral, which stock certificates shall be duly endorsed in blank;
(c) Pledgor will not modify or amend the instruments or
documents constituting the Collateral, except as required by law, court
order, or regulation, or make any compromise, adjustment, settlement or
termination in connection therewith;
(d) Pledgor will at all times defend the Collateral against
any and all claims of any person, adverse to the claims of Secured
Party upon Secured Party's request;
(e) upon the occurrence of an Event of Default (as defined in
paragraph 5 hereof and which is continuing) Pledgor will accept no
payments, distributions or dividends on the Collateral and shall remit
to Secured Party any payment or distribution received;
(f) Pledgor has the full power and authority to enter into
this Agreement, and the persons executing this Agreement on behalf of
Pledgor have been duly authorized to act on behalf of Pledgor in the
execution hereof;
(g) other than Pledgor, there are no parties who assert any
type of ownership interest whatsoever in the Shares;
(h) other than this Agreement, there are no agreements which
impose any conditions or restrictions on the Shares;
(i) all of the Shares have been duly authorized, validly
issued and are fully paid and non-assessable;
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<PAGE> 3
(j) Pledgor, as stockholder, shall not vote for, ratify,
accept, accede to, or approve any proposed transaction concerning the
Collateral which would have a material adverse effect on the rights of
Secured Party hereunder; and
(k) The Shares represent one hundred percent (100%) of the
issued and outstanding stock of AMPRO, and there are no agreements in
effect which require or obligate AMPRO to issue any additional shares
of stock of AMPRO and there are no outstanding options to purchase any
shares of stock of AMPRO. There will be no agreements in effect which
require or obligate AMPRO to issue any additional shares of stock of
AMPRO and there will be no outstanding options to purchase any shares
of stock of AMPRO.
3. Delivery of Instruments; Adjustments. Pledgor has delivered to
Secured Party, all stock certificates and all documents evidencing any ownership
of the Collateral or which are necessary or convenient for Secured Party to
exercise any of Secured Party's rights hereunder. If, during the term of this
Agreement, any stock dividends, reclassification, readjustments or other changes
are declared or made in the capital structure of any corporation represented by
the Collateral, or if any subscription or other options are exercisable with
respect to the Collateral, all such new, substitute or additional shares or
other securities, rights or interests issued shall be delivered to and held by
Secured Party subject to this Agreement in the same manner as the Collateral.
4. Voting. So long as Pledgor is not in default hereunder, any
Collateral may be voted by the Pledgor at all meetings of stockholders, subject
to the restrictions of Paragraph 2(j).
5. Events of Default. Any one or more of the following will constitute
an event of default ("Event of Default") under this Agreement:
(a) any event occurs which constitutes an Event of Default
under any of the Loan Documents;
(b) if Pledgor fails to pay or perform any of its material
obligations contained in paragraphs 2, 7 and 8 of this Agreement and
which failure is not cured upon 30 days written notice by Secured Party
to Pledgor;
(c) any covenant, condition, agreement, representation or
warranty made by Pledgor to Secured Party in this Agreement is
materially breached or proves untrue in any material respect and is not
cured upon 30 days written notice by Secured Party to Pledgor.
6. Remedies on Default. Upon the occurrence and during the continuance
of an Event of Default, Secured Party may exercise any or all of the rights and
remedies provided (a) by this Agreement, and/or (b) by any other applicable law.
Without limiting the generality of the foregoing, upon the occurrence and
continuance of an Event of Default, Secured Party may (i) instruct the secretary
of AMPRO to pay all dividends to Secured Party, and (ii) sell the Collateral or
any part
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<PAGE> 4
thereof, without recourse to judicial proceedings, with the right to
bid for and buy, free from any right of redemption, upon ten (10) days' notice
(which notice is agreed to be reasonable notice for the purposes hereof) to the
Pledgor, of the time and place of sale, for cash, upon credit or for future
delivery, at Secured Party's option and in Secured Party's complete discretion:
(a) at a public sale, including a sale at any broker's board
or exchange;
(b) at private sale in any commercially reasonable manner
which will not require the Collateral, or any part thereof, to be
registered in accordance with the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder, or any other law
or regulation. Secured Party is also hereby authorized, but not
obligated, to take such actions, give such notices, obtain such
consents, and do such other things as it may deem required or
appropriate in the event of sale or disposition of any of the
Collateral.
In connection with the sale of any of the Collateral, Secured Party is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Secured Party to render such sale exempt from
the registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, and any sale of the Collateral so made in good
faith by Secured Party shall be deemed to be commercially reasonable. In
connection with any such sale or other disposition in accordance with the
provision hereof, Secured Party shall be authorized to deliver the Stock to or
upon the order of Secured Party.
7. Taxes. Pledgor shall pay promptly, when due, any and all property
taxes, excise taxes (however called) and other taxes, assessments, duties and
other charges, which, if unpaid, might by law or otherwise become a lien or
charge upon the Collateral (including any and all interest, penalties and
related provisional fees) imposed, levied or assessed against the Collateral, or
upon or measured by the use, ownership, possession or operation thereof, or in
respect to this Agreement or the security interest in the Collateral granted and
conveyed herein.
8. Pledgor's Failure to Pay Taxes and Other Items. If Pledgor fails to
make any payment or do any act required of it under this Agreement, then Secured
Party shall have the right, but not the obligation, upon three (3) days notice
to Pledgor, and without releasing Pledgor from any obligation under this
Agreement, to make or do the same, and to pay, purchase, contest or compromise
any lien which in Secured Party's judgment places its security interest in the
Collateral or Pledgor's title to the Collateral in jeopardy, and in exercising
any such rights, to expend whatever reasonable amounts of Secured Party in its
sole discretion may deem necessary therefor. Any amounts expended by Secured
Party pursuant to this Section 8 shall be a demand obligation owing by Pledgor,
which shall bear interest at the default rate (as defined in the Loan Documents)
from the date Secured Party expends such amount until repaid.
9. Indemnification. Pledgor agrees to indemnify Secured Party from and
against all losses, claims, demands and liabilities of every kind and nature
arising by reason of the assignment and security interest granted and the
Collateral, excluding any of the same arising from the
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<PAGE> 5
negligence or wilful misconduct of the Secured Party, and agrees to pay all
expenses, including, without limitation, expert witness fees and attorneys fees,
incurred by Secured Party in the preservation, realization, enforcement or
exercise of any of its rights, powers or remedies hereunder.
10. Unregistered Securities. Pledgor acknowledges that the Shares
constitute unregistered securities subject to legal restrictions upon the
transfer thereof which will render a public sale of the Shares unavailable. If,
upon an Event of Default, Secured Party exercises its right to sell the shares,
Pledgor waives all rights to public sale and agrees to the private placement of
the Shares to any qualified third-party buyer at a commercially reasonable price
therefor. Pledgor further acknowledges that the legal restrictions upon transfer
of the Shares adversely affect the marketability of the Shares and any
commercially reasonable price for the shares will include a discount from the
proportionate part of the net asset value of the issuer represented by the
Shares to reflect those restrictions upon marketability.
11. Irrevocable Proxy. Pledgor does hereby irrevocably constitute and
appoint Secured Party and Secured Party's successors and assigns as its proxy,
with full power, in the same manner, to the same extent, and with the same
effect as if they were to do the same:
(a) to attend any and all meetings of the shareholders of
AMPRO held from the date hereof, and to vote the Collateral at any such
meeting in such manner as Secured Party shall, in its sole discretion,
deem appropriate;
(b) to consent, in the sole discretion of Secured Party, to
any and all actions by or with respect to Pledgor for which the consent
of the Pledgor is or may be necessary or appropriate; and
(c) without limitation, to do all things which Pledgor can or
could do as a shareholder of AMPRO, giving to Secured Party full power
and substitution and revocation; provided, however, that this proxy
shall not be exercisable by Secured Party, and Pledgor alone shall have
the foregoing powers, so long as there is no Event of Default hereunder
pursuant to which Secured Party has notified Pledgor that Secured Party
is exercising its rights under this section, and provided further that
this proxy shall terminate at such time as this Agreement is
terminated. Pledgor hereby revokes any proxy or proxies heretofore
given to any person or persons and agrees not to give any other proxy
in derogation hereof until such time as this Agreement is terminated.
Pledgor and Secured Party hereby specifically agree that the proxy
granted hereunder shall be deemed to be valid and irrevocable until
this Agreement shall be terminated.
12. Attorney-in-Fact. Pledgor hereby appoints Secured Party as
Pledgor's Attorney-in-Fact (without imposing any obligations on Secured Party),
to perform all acts which Secured Party deems appropriate to perfect and
continue the security interest granted hereunder. The Power of Attorney granted
herein is coupled with an interest and is irrevocable until this Agreement is
terminated.
5
<PAGE> 6
13. Miscellaneous. This Agreement, the Plan and its related documents,
and all other Loan Documents constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all other
prior agreements, written or oral, with respect thereto.
(a) This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and
assigns; provided, however, that Pledgor shall not have the right to
assign or transfer respective rights or obligations under this
Agreement except with the prior written consent of Secured Party.
Secured Party, at any time with seven (7) business days prior notice to
Pledgor, may sell, assign, grant or otherwise transfer, in whole or in
part, the indebtedness secured hereby and Secured Party's rights,
interest and obligations under this Agreement or the Collateral with
the consent of the Pledgor, which will not be unreasonably withheld,
and in such event, the transferee shall have the same rights, powers
and authority with respect to this Agreement and the Collateral so
transferred as are hereby given to Secured Party;
(b) This Agreement may be amended modified, renewed or
extended but only by a written instrument, executed by all of the
parties hereto in the manner of the execution of this Agreement;
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA, AND, TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES;
(d) All parties hereto shall, from time to time, do and
perform such other and further acts and execute and deliver any and all
such other and further instruments as may be required or reasonably
requested by any other party to establish, maintain and protect the
respective rights and remedies of such other party and to carry out and
effect the intents and purposes of this Agreement;
(e) All documents, Agreements, certificates and instruments
herein required shall be in form and substance satisfactory in all
respects to Secured Party in its sole discretion and shall be provided
at the sole cost and expense of Pledgor;
(f) Pledgor's covenants shall survive the execution hereof and
shall be performed fully and faithfully by Pledgor at all times until
the date of repayment of the indebtedness secured hereby.
(g) If any term or provision of this Agreement, or the
application thereof to any circumstance, shall be invalid, illegal or
unenforceable to any extent, such term or provision shall not
invalidate or render unenforceable any other term or provision of this
Agreement, or the application of such term or provision to any other
circumstance. To the extent
6
<PAGE> 7
permitted by law, the parties hereto hereby waive any provision of law
that renders any term or provision hereof invalid or unenforceable in
any respect;
(h) Time is of the essence of this Agreement; and
(i) Any notice, demand or any other instruments authorized by
this Agreement to be served on or given shall be sufficiently served or
given for all purposes on the earlier of: (a) when personally delivered
to any officer of the party to whom it is addressed; (b) when sent by
certified, registered or first class mail, postage prepaid, addressed
to each party at its address set forth above or at such other address
as has been furnished in writing by a party to the other in the manner
provided in this Section; or (c) by overnight courier.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
15. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
16. Construction. All references to the singular shall include the
plural and vice versa and all references to the masculine shall include the
neuter or feminine and vice versa. This Agreement has been reviewed and
negotiated by counsel for each party and no ambiguity in this Agreement shall be
construed against any party based upon its having prepared the same.
17. Termination. This Agreement and all of its terms and covenants,
representations and warranties shall terminate upon full satisfaction of the
indebtedness hereby secured, and, upon such termination, Secured Party shall
return to Pledgor any of the Collateral held by Secured Party pursuant to this
Agreement, and the original executed copy of this Agreement which contains an
irrevocable proxy.
18. Acknowledgment. Pledgor acknowledges that Secured Party would not
agree to make the Loan to Pledgor without the execution, delivery and
performance of this Agreement by Pledgor. Pledgor further acknowledges that it
has received good and sufficient consideration for the execution, delivery and
performance of this Agreement.
19. No Duty to Protect. This is a pledge and assignment of Pledgor's
rights and benefits in the Collateral without an assumption by Secured Party of
any of Pledgor's duties or obligations attendant thereto. Except for physical
safeguarding of the stock certificate(s) included in the Collateral delivered to
Secured Party, Secured Party shall have no duty to protect, insure, collect or
realize upon the Collateral or any proceeds therefrom nor shall Secured Party
have any obligations to any third party by virtue of Secured Party's possession
of the Collateral.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PLEDGOR: AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
By:_________________________________
Name:_______________________________
Title:______________________________
SECURED PARTY: ELK MEADOWS INVESTMENTS, L.L.C.,
a Colorado limited liability company
By:_________________________________
David Kremser, Managing Member
___________________________________
David Kremser
___________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
___________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
___________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
___________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
8
<PAGE> 9
IRREVOCABLE STOCK POWER
Certificate(s) No(s).
FOR VALUE RECEIVED, AMERICAN PROFESSIONAL HOLDINGS, INC., a Utah
corporation ("Pledgor"), hereby assigns and transfers to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively the "Secured Party"), pursuant to the Stock
Pledge Agreement, dated as of January 31, 1999 (the "Stock Pledge Agreement"),
between the Pledgor and Secured Party, _____ shares of common stock of AMPRO
MEDICAL SERVICES, INC., a Texas corporation (the "Common Shares"), of the
Secured Party, as security for the Loan (as defined in the Pledge Agreement).
The undersigned does hereby irrevocably constitute and appoint David
Kremser as its attorney-in-fact to transfer the said stock or bond(s), as the
case may be, on the books of AMRPO MEDICAL SERVICES, INC. with full power of
substitution in the premises.
Dated: _______________, 1999
AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE> 1
Exhibit 10.46
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of the
31st day of January, 1999, by and between GAMMA LABORATORIES, INC., a Missouri
corporation ("Debtor"), and David Kramer, Bernice Kremser, Holly Kremser,
Michael Kremser, Stanley Kremser and ELK MEADOWS INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as amended and supplemented), confirmed by a final Order
of the United States Bankruptcy Court effective January 20, 1999 (the "Plan"),
Secured Party is obligated to loan to Debtor certain funds in accordance with
the terms and conditions thereof (the "Loan"), evidenced by the Promissory Note
dated of even date herewith executed and delivered to Secured Party under the
Plan (the "Note"), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the Note,
Debtor grants to Secured Party a security interest in all of Debtor's right,
title and interest in the property and property rights more fully described on
Schedule A attached hereto and incorporated herein by reference (collectively,
the "Collateral"). Such security interest shall be superior and prior to all
other liens, except prior liens permitted by Secured Party.
<PAGE> 2
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the Collateral,
except the portion thereof consisting of after-acquired property, and
Debtor will be the owner of such after-acquired property, free from any
lien, except liens permitted by Secured Party.
(b) Chief Place of Business. There is listed in Schedule B hereto
the location of the chief place of business of Debtor and, if different,
the location where the major tangible collateral and the books and records
of Debtor are kept. Debtor shall not (i) change any such location; or (ii)
change its company name without, in each case, giving to Secured Party 30
days' prior written notice of any such change.
(c) Maintenance of Collateral. Debtor will at all times keep the
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all material laws and insurance policies
applicable thereto, and pay promptly when due all taxes, insurance
premiums and other governmental charges upon or relating to any of the
property, income or receipts of Debtor, unless Debtor reasonably disputes
such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to (i)
maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except liens permitted
by Secured Party, and (iv) pay when due all taxes, levies and assessments on or
in respect of the Collateral, unless Debtor reasonably disputes such taxes,
levies or assessments, Secured Party, at its option, may (but shall not be
required to) procure and pay for such insurance, place the Collateral in good
repair and operating condition, or otherwise make good any other aforesaid
failure of Debtor and all sums advanced by Secured Party, with interest thereon
at the interest rate set forth in the Note shall be part of Debtor's obligations
to Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with the
execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note or if
Borrower shall fail to perform any covenant or condition of this Security
Agreement within thirty (30) days after written notice of such non-
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<PAGE> 3
compliance, or if any covenant, condition, agreement, representation or warranty
made by Debtor to Secured Party in this Agreement proves untrue in any material
respect or is breached and is not cured upon thirty (30) days written notice by
the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default and
the acceleration of Debtor's obligations, Secured Party shall have all the
rights and remedies of a Secured Party under the Arizona Uniform Commercial Code
and all other rights and remedies accorded to Secured Party in equity or law.
Upon the request of Secured Party, Debtor shall assemble and make the Collateral
available to Secured Party at a place designated by Secured Party. Any notice of
sale or other disposition of the Collateral given not less than ten days prior
to such proposed action shall constitute reasonable and fair notice of such
action. Debtor shall be liable for any deficiency. Debtor expressly waives any
right to have the collateral marshalled on any foreclosure, sale or other
enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Such notices, requests, demands and consents, if sent by mail shall be
deemed given 2 (two) Business Days after deposit in the United States mail, and
if delivered by hand, shall be deemed given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the payment
in full of Debtor's obligations to Secured Party as set forth in the Note.
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<PAGE> 4
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
GAMMA LABORATORIES, INC.,
a Missouri Corporation
By:_______________________________________
Name:____________________________________
Title:___________________________________
Address:
1908A Greenwood Drive
Poplar Bluff, Missouri 63901
"DEBTOR"
ELK MEADOWS INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
David Kremser, Managing Member
____________________________________________
David Kremser
____________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
____________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
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<PAGE> 5
____________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
____________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
Address:
c/o David Kremser
784 Yankee Creek Road
Evergreen, CO 80439
"SECURED PARTY"
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<PAGE> 6
SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but not
limited to all present and future debt instruments, chattel papers, accounts,
loans and obligations receivable, and tax refunds, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property by Debtor, out of a
rendering of services by Debtor, out of a loan by Debtor, out of the overpayment
of taxes or other liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and security interests)
which Debtor may at any time have by law or agreement against any account debtor
or other obligor obligated to make any such payment or against any of the
property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
<PAGE> 7
SCHEDULE B
Chief Place of Business of Debtor:
1908A Greenwood Drive
Poplar Bluff, Missouri 63901
Location of major Collateral and Books and Records of Debtor:
1908A Greenwood Drive
Poplar Bluff, Missouri 63901
<PAGE> 1
Exhibit 10.47
STOCK PLEDGE AGREEMENT
(Gamma Laboratories, Inc.)
DATE: January 31, 1999
PARTIES:
Pledgor: AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
10405 E. Northwest, Highway #109
Dallas, Texas 75238
Secured Party: David Kremser, Bernice Kremser,
Holly Kremser, Michael Kremser,
Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C.
784 Yankee Creek Road
Evergreen, CO 80439
RECITALS:
A. In accordance with the terms of the Debtors' First Amended Joint Plan
of Reorganization dated October 15, 1998 (as amended and supplemented),
confirmed by a final Order of the United States Bankruptcy Court effective
January 20, 1999 (the "Plan"), Pledgor desires to borrow, and Secured Party
desires to lend, the sum of One Million Three Hundred Fifty-Three Thousand Seven
Hundred Four Dollars ($1,353,704) (the "Loan") to Pledgor pursuant to a
promissory note of even date herewith (the "Note"). All documents evidencing and
or securing the Loan may be hereinafter referred to as the "Loan Documents."
B. Pledgor owns one hundred percent (100%) of the issued and outstanding
capital stock of GAMMA LABORATORIES, INC., a Missouri corporation ("GAMMA").
C. In order to induce Secured Party to make the Loan to Pledgor, Pledgor
desires to grant a security interest in, and, pledge, sign and transfer, all of
Pledgor's right, title and interest in and to the Shares, to Secured Party.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Pledge. Pledgor hereby grants to Secured Party a security interest in
the Shares together with all rights thereof or arising therefrom, all additions
thereto, dividends, options, warrants and payments arising thereunder, all
proceeds from the sale or other disposition thereof,
<PAGE> 2
and all substitutions therefor (collectively the "Collateral"), as security for
all of the Pledgor's obligations to Secured Party under the Note and any and all
of the Loan Documents. Upon execution of this Agreement, Pledgor shall deliver
to Secured Party stock power(s) and assignment(s) separate from certificate for
the certificates representing the Shares endorsed in blank. The books of the
issuer of such Shares shall contain a legend to reflect such pledge of the
Shares hereunder.
2. Covenants and Representations. Pledgor agrees not to knowingly take any
action which would adversely affect the value of the Collateral or which would
encumber, dilute or cloud Pledgor's title or interest therein. Pledgor makes the
following representations, warranties, and covenants:
(a) Pledgor is and will continue to be the owner of the Collateral,
free of any liens, security interests or assignments other than the
security interest created by this Agreement;
(b) Pledgor shall deliver to Secured Party and Secured Party shall
retain physical possession of all stock certificates and other instruments
and documents representing or evidencing any of the Collateral, which
stock certificates shall be duly endorsed in blank;
(c) Pledgor will not modify or amend the instruments or documents
constituting the Collateral, except as required by law, court order, or
regulation, or make any compromise, adjustment, settlement or termination
in connection therewith;
(d) Pledgor will at all times defend the Collateral against any and
all claims of any person, adverse to the claims of Secured Party upon
Secured Party's request;
(e) upon the occurrence of an Event of Default (as defined in
paragraph 5 hereof and which is continuing) Pledgor will accept no
payments, distributions or dividends on the Collateral and shall remit to
Secured Party any payment or distribution received;
(f) Pledgor has the full power and authority to enter into this
Agreement, and the persons executing this Agreement on behalf of Pledgor
have been duly authorized to act on behalf of Pledgor in the execution
hereof;
(g) other than Pledgor, there are no parties who assert any type of
ownership interest whatsoever in the Shares;
(h) other than this Agreement, there are no agreements which impose
any conditions or restrictions on the Shares;
(i) all of the Shares have been duly authorized, validly issued and
are fully paid and non-assessable;
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<PAGE> 3
(j) Pledgor, as stockholder, shall not vote for, ratify, accept,
accede to, or approve any proposed transaction concerning the Collateral
which would have a material adverse effect on the rights of Secured Party
hereunder; and
(k) The Shares represent one hundred percent (100%) of the issued
and outstanding stock of GAMMA, and there are no agreements in effect
which require or obligate GAMMA to issue any additional shares of stock of
GAMMA and there are no outstanding options to purchase any shares of stock
of GAMMA. There will be no agreements in effect which require or obligate
GAMMA to issue any additional shares of stock of GAMMA and there will be
no outstanding options to purchase any shares of stock of GAMMA.
3. Delivery of Instruments; Adjustments. Pledgor has delivered to Secured
Party, all stock certificates and all documents evidencing any ownership of the
Collateral or which are necessary or convenient for Secured Party to exercise
any of Secured Party's rights hereunder. If, during the term of this Agreement,
any stock dividends, reclassification, readjustments or other changes are
declared or made in the capital structure of any corporation represented by the
Collateral, or if any subscription or other options are exercisable with respect
to the Collateral, all such new, substitute or additional shares or other
securities, rights or interests issued shall be delivered to and held by Secured
Party subject to this Agreement in the same manner as the Collateral.
4. Voting. So long as Pledgor is not in default hereunder, any Collateral
may be voted by the Pledgor at all meetings of stockholders, subject to the
restrictions of Paragraph 2(j).
5. Events of Default. Any one or more of the following will constitute an
event of default ("Event of Default") under this Agreement:
(a) any event occurs which constitutes an Event of Default under any
of the Loan Documents;
(b) if Pledgor fails to pay or perform any of its material
obligations contained in paragraphs 2, 7 and 8 of this Agreement and which
failure is not cured upon 30 days written notice by Secured Party to
Pledgor;
(c) any covenant, condition, agreement, representation or warranty
made by Pledgor to Secured Party in this Agreement is materially breached
or proves untrue in any material respect and is not cured upon 30 days
written notice by Secured Party to Pledgor.
6. Remedies on Default. Upon the occurrence and during the continuance of
an Event of Default, Secured Party may exercise any or all of the rights and
remedies provided (a) by this Agreement, and/or (b) by any other applicable law.
Without limiting the generality of the foregoing, upon the occurrence and
continuance of an Event of Default, Secured Party may (i) instruct the secretary
of GAMMA to pay all dividends to Secured Party, and (ii) sell the Collateral or
any part
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<PAGE> 4
thereof, without recourse to judicial proceedings, with the right to bid for and
buy, free from any right of redemption, upon ten (10) days' notice (which notice
is agreed to be reasonable notice for the purposes hereof) to the Pledgor, of
the time and place of sale, for cash, upon credit or for future delivery, at
Secured Party's option and in Secured Party's complete discretion:
(a) at a public sale, including a sale at any broker's board or
exchange;
(b) at private sale in any commercially reasonable manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other law or regulation.
Secured Party is also hereby authorized, but not obligated, to take such
actions, give such notices, obtain such consents, and do such other things
as it may deem required or appropriate in the event of sale or disposition
of any of the Collateral.
In connection with the sale of any of the Collateral, Secured Party is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Secured Party to render such sale exempt from
the registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, and any sale of the Collateral so made in good
faith by Secured Party shall be deemed to be commercially reasonable. In
connection with any such sale or other disposition in accordance with the
provision hereof, Secured Party shall be authorized to deliver the Stock to or
upon the order of Secured Party.
7. Taxes. Pledgor shall pay promptly, when due, any and all property
taxes, excise taxes (however called) and other taxes, assessments, duties and
other charges, which, if unpaid, might by law or otherwise become a lien or
charge upon the Collateral (including any and all interest, penalties and
related provisional fees) imposed, levied or assessed against the Collateral, or
upon or measured by the use, ownership, possession or operation thereof, or in
respect to this Agreement or the security interest in the Collateral granted and
conveyed herein.
8. Pledgor's Failure to Pay Taxes and Other Items. If Pledgor fails to
make any payment or do any act required of it under this Agreement, then Secured
Party shall have the right, but not the obligation, upon three (3) days notice
to Pledgor, and without releasing Pledgor from any obligation under this
Agreement, to make or do the same, and to pay, purchase, contest or compromise
any lien which in Secured Party's judgment places its security interest in the
Collateral or Pledgor's title to the Collateral in jeopardy, and in exercising
any such rights, to expend whatever reasonable amounts of Secured Party in its
sole discretion may deem necessary therefor. Any amounts expended by Secured
Party pursuant to this Section 8 shall be a demand obligation owing by Pledgor,
which shall bear interest at the default rate (as defined in the Loan Documents)
from the date Secured Party expends such amount until repaid.
9. Indemnification. Pledgor agrees to indemnify Secured Party from and
against all losses, claims, demands and liabilities of every kind and nature
arising by reason of the assignment and security interest granted and the
Collateral, excluding any of the same arising from the
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<PAGE> 5
negligence or wilful misconduct of the Secured Party, and agrees to pay all
expenses, including, without limitation, expert witness fees and attorneys fees,
incurred by Secured Party in the preservation, realization, enforcement or
exercise of any of its rights, powers or remedies hereunder.
10. Unregistered Securities. Pledgor acknowledges that the Shares
constitute unregistered securities subject to legal restrictions upon the
transfer thereof which will render a public sale of the Shares unavailable. If,
upon an Event of Default, Secured Party exercises its right to sell the shares,
Pledgor waives all rights to public sale and agrees to the private placement of
the Shares to any qualified third-party buyer at a commercially reasonable price
therefor. Pledgor further acknowledges that the legal restrictions upon transfer
of the Shares adversely affect the marketability of the Shares and any
commercially reasonable price for the shares will include a discount from the
proportionate part of the net asset value of the issuer represented by the
Shares to reflect those restrictions upon marketability.
11. Irrevocable Proxy. Pledgor does hereby irrevocably constitute and
appoint Secured Party and Secured Party's successors and assigns as its proxy,
with full power, in the same manner, to the same extent, and with the same
effect as if they were to do the same:
(a) to attend any and all meetings of the shareholders of GAMMA held
from the date hereof, and to vote the Collateral at any such meeting in
such manner as Secured Party shall, in its sole discretion, deem
appropriate;
(b) to consent, in the sole discretion of Secured Party, to any and
all actions by or with respect to Pledgor for which the consent of the
Pledgor is or may be necessary or appropriate; and
(c) without limitation, to do all things which Pledgor can or could
do as a shareholder of GAMMA, giving to Secured Party full power and
substitution and revocation; provided, however, that this proxy shall not
be exercisable by Secured Party, and Pledgor alone shall have the
foregoing powers, so long as there is no Event of Default hereunder
pursuant to which Secured Party has notified Pledgor that Secured Party is
exercising its rights under this section, and provided further that this
proxy shall terminate at such time as this Agreement is terminated.
Pledgor hereby revokes any proxy or proxies heretofore given to any person
or persons and agrees not to give any other proxy in derogation hereof
until such time as this Agreement is terminated. Pledgor and Secured Party
hereby specifically agree that the proxy granted hereunder shall be deemed
to be valid and irrevocable until this Agreement shall be terminated.
12. Attorney-in-Fact. Pledgor hereby appoints Secured Party as Pledgor's
Attorney-in-Fact (without imposing any obligations on Secured Party), to perform
all acts which Secured Party deems appropriate to perfect and continue the
security interest granted hereunder. The Power of Attorney granted herein is
coupled with an interest and is irrevocable until this Agreement is terminated.
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<PAGE> 6
13. Miscellaneous. This Agreement, the Plan and its related documents, and
all other Loan Documents constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all other
prior agreements, written or oral, with respect thereto.
(a) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that Pledgor shall not have the right to assign or transfer
respective rights or obligations under this Agreement except with the
prior written consent of Secured Party. Secured Party, at any time with
seven (7) business days prior notice to Pledgor, may sell, assign, grant
or otherwise transfer, in whole or in part, the indebtedness secured
hereby and Secured Party's rights, interest and obligations under this
Agreement or the Collateral with the consent of the Pledgor, which will
not be unreasonably withheld, and in such event, the transferee shall have
the same rights, powers and authority with respect to this Agreement and
the Collateral so transferred as are hereby given to Secured Party;
(b) This Agreement may be amended modified, renewed or extended but
only by a written instrument, executed by all of the parties hereto in the
manner of the execution of this Agreement;
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA, AND, TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES;
(d) All parties hereto shall, from time to time, do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by any
other party to establish, maintain and protect the respective rights and
remedies of such other party and to carry out and effect the intents and
purposes of this Agreement;
(e) All documents, Agreements, certificates and instruments herein
required shall be in form and substance satisfactory in all respects to
Secured Party in its sole discretion and shall be provided at the sole
cost and expense of Pledgor;
(f) Pledgor's covenants shall survive the execution hereof and shall
be performed fully and faithfully by Pledgor at all times until the date
of repayment of the indebtedness secured hereby;
(g) If any term or provision of this Agreement, or the application
thereof to any circumstance, shall be invalid, illegal or unenforceable to
any extent, such term or provision shall not invalidate or render
unenforceable any other term or provision of this Agreement, or the
application of such term or provision to any other circumstance. To the
extent
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<PAGE> 7
permitted by law, the parties hereto hereby waive any provision of law
that renders any term or provision hereof invalid or unenforceable in any
respect;
(h) Time is of the essence of this Agreement; and
(i) Any notice, demand or any other instruments authorized by this
Agreement to be served on or given shall be sufficiently served or given
for all purposes on the earlier of: (a) when personally delivered to any
officer of the party to whom it is addressed; (b) when sent by certified,
registered or first class mail, postage prepaid, addressed to each party
at its address set forth above or at such other address as has been
furnished in writing by a party to the other in the manner provided in
this Section; or (c) by overnight courier.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
15. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
16. Construction. All references to the singular shall include the plural
and vice versa and all references to the masculine shall include the neuter or
feminine and vice versa. This Agreement has been reviewed and negotiated by
counsel for each party and no ambiguity in this Agreement shall be construed
against any party based upon its having prepared the same.
17. Termination. This Agreement and all of its terms and covenants,
representations and warranties shall terminate upon full satisfaction of the
indebtedness hereby secured, and, upon such termination, Secured Party shall
return to Pledgor any of the Collateral held by Secured Party pursuant to this
Agreement, and the original executed copy of this Agreement which contains an
irrevocable proxy.
18. Acknowledgment. Pledgor acknowledges that Secured Party would not
agree to make the Loan to Pledgor without the execution, delivery and
performance of this Agreement by Pledgor. Pledgor further acknowledges that it
has received good and sufficient consideration for the execution, delivery and
performance of this Agreement.
19. No Duty to Protect. This is a pledge and assignment of Pledgor's
rights and benefits in the Collateral without an assumption by Secured Party of
any of Pledgor's duties or obligations attendant thereto. Except for physical
safeguarding of the stock certificate(s) included in the Collateral delivered to
Secured Party, Secured Party shall have no duty to protect, insure, collect or
realize upon the Collateral or any proceeds therefrom nor shall Secured Party
have any obligations to any third party by virtue of Secured Party's possession
of the Collateral.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
SECURED PARTY: ELK MEADOWS INVESTMENTS, L.L.C.,
a Colorado limited liability company
By:______________________________________
David Kremser, Managing Member
_________________________________________
David Kremser
_________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
_________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
8
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IRREVOCABLE STOCK POWER
Certificate(s) No(s).
FOR VALUE RECEIVED, AMERICAN PROFESSIONAL HOLDINGS, INC., a Utah
corporation ("Pledgor"), hereby assigns and transfers to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively the "Secured Party"), pursuant to the Stock
Pledge Agreement, dated as of January 31, 1999 (the "Stock Pledge Agreement"),
between the Pledgor and Secured Party, _____ shares of common stock of GAMMA
LABORATORIES, INC., a Missouri corporation (the "Common Shares"), of the Secured
Party, as security for the Loan (as defined in the Pledge Agreement).
The undersigned does hereby irrevocably constitute and appoint David
Kremser as its attorney-in-fact to transfer the said stock or bond(s), as the
case may be, on the books of GAMMA LABORATORIES, INC. with full power of
substitution in the premises.
Dated: _______________, 1999
AMERICAN PROFESSIONAL HOLDINGS, INC.
a Utah corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE> 1
Exhibit 10.48
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of the
31st day of January, 1999, by and between MEMPHIS CLINICAL LABORATORY, INC., a
Tennessee corporation ("Debtor"), and David Kremser, Bernice Kremser, Holly
Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as amended and supplemented), confirmed by a final Order
of the United States Bankruptcy Court effective January 20, 1999 (the "Plan"),
Secured Party is obligated to loan to Debtor certain funds in accordance with
the terms and conditions thereof (the "Loan"), evidenced by the Promissory Note
dated of even date herewith executed and delivered to Secured Party under the
Plan (the "Note"), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the Note,
Debtor grants to Secured Party a security interest in all of Debtor's right,
title and interest in the property and property rights more fully described on
Schedule A attached hereto and incorporated herein by reference (collectively,
the "Collateral"). Such security interest shall be superior and prior to all
other liens, except prior liens permitted by Secured Party.
<PAGE> 2
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the Collateral,
except the portion thereof consisting of after-acquired property, and
Debtor will be the owner of such after-acquired property, free from any
lien, except liens permitted by Secured Party.
(b) Chief Place of Business. There is listed in Schedule B hereto
the location of the chief place of business of Debtor and, if different,
the location where the major tangible collateral and the books and records
of Debtor are kept. Debtor shall not (i) change any such location; or (ii)
change its company name without, in each case, giving to Secured Party 30
days' prior written notice of any such change.
(c) Maintenance of Collateral. Debtor will at all times keep the
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all material laws and insurance policies
applicable thereto, and pay promptly when due all taxes, insurance
premiums and other governmental charges upon or relating to any of the
property, income or receipts of Debtor, unless Debtor reasonably disputes
such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to (i)
maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except liens permitted
by Secured Party, and (iv) pay when due all taxes, levies and assessments on or
in respect of the Collateral, unless Debtor reasonably disputes such taxes,
levies or assessments, Secured Party, at its option, may (but shall not be
required to) procure and pay for such insurance, place the Collateral in good
repair and operating condition, or otherwise make good any other aforesaid
failure of Debtor and all sums advanced by Secured Party, with interest thereon
at the interest rate set forth in the Note shall be part of Debtor's obligations
to Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with the
execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note or if
Borrower shall fail to perform any covenant or condition of this Security
Agreement within thirty (30) days after written notice of such non-
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<PAGE> 3
compliance, or if any covenant, condition, agreement, representation or warranty
made by Debtor to Secured Party in this Agreement proves untrue in any material
respect or is breached and is not cured upon thirty (30) days written notice by
the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default and
the acceleration of Debtor's obligations, Secured Party shall have all the
rights and remedies of a Secured Party under the Arizona Uniform Commercial Code
and all other rights and remedies accorded to Secured Party in equity or law.
Upon the request of Secured Party, Debtor shall assemble and make the Collateral
available to Secured Party at a place designated by Secured Party. Any notice of
sale or other disposition of the Collateral given not less than ten days prior
to such proposed action shall constitute reasonable and fair notice of such
action. Debtor shall be liable for any deficiency. Debtor expressly waives any
right to have the collateral marshalled on any foreclosure, sale or other
enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Such notices, requests, demands and consents, if sent by mail shall be
deemed given 2 (two) Business Days after deposit in the United States mail, and
if delivered by hand, shall be deemed given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the payment
in full of Debtor's obligations to Secured Party as set forth in the Note.
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<PAGE> 4
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
MEMPHIS CLINICAL LABORATORY, INC.,
a Tennessee Corporation
By:_______________________________________
Name:____________________________________
Title:___________________________________
Address:
4088 Barton
Memphis, Tennessee 38116
"DEBTOR"
ELK MEADOWS INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
David Kremser, Managing Member
___________________________________________
David Kremser
___________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
___________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
-4-
<PAGE> 5
___________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
___________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
Address:
c/o David Kremser
784 Yankee Creek Road
Evergreen, CO 80439
"SECURED PARTY"
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<PAGE> 6
SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but not
limited to all present and future debt instruments, chattel papers, accounts,
loans and obligations receivable, and tax refunds, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property by Debtor, out of a
rendering of services by Debtor, out of a loan by Debtor, out of the overpayment
of taxes or other liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and security interests)
which Debtor may at any time have by law or agreement against any account debtor
or other obligor obligated to make any such payment or against any of the
property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
<PAGE> 7
SCHEDULE B
Chief Place of Business of Debtor:
4088 Barton
Memphis, Tennessee 38116
Location of major Collateral and Books and Records of Debtor:
4088 Barton
Memphis, Tennessee 38116
<PAGE> 1
Exhibit 10.49
STOCK PLEDGE AGREEMENT
(Memphis Clinical Laboratory, Inc.)
DATE: January 31, 1999
PARTIES:
Pledgor: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
15300 North 90th Street
Suite 100
Scottsdale, AZ 85260
Secured Party: David Kremser, Bernice Kremser,
Holly Kremser, Michael Kremser,
Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C.
784 Yankee Creek Road
Evergreen, CO 80439
RECITALS:
A. In accordance with the terms of the Debtors' First Amended Joint Plan
of Reorganization dated October 15, 1998 (as amended and supplemented),
confirmed by a final Order of the United States Bankruptcy Court effective
January 20, 1999 (the "Plan"), Pledgor desires to borrow, and Secured Party
desires to lend, the sum of One Million Three Hundred Fifty-Three Thousand Seven
Hundred Four Dollars ($1,353,704) (the "Loan") to Pledgor pursuant to a
promissory note of even date herewith (the "Note"). All documents evidencing and
or securing the Loan may be hereinafter referred to as the "Loan Documents."
B. Pledgor owns one hundred percent (100%) of the issued and outstanding
capital stock of MEMPHIS CLINICAL LABORATORY, INC., a Tennessee corporation
("MEMPHIS"), consisting of 1,000 shares represented by Certificate(s) No. 10
(the "Shares").
C. In order to induce Secured Party to make the Loan to Pledgor, Pledgor
desires to grant a security interest in, and, pledge, sign and transfer, all of
Pledgor's right, title and interest in and to the Shares, to Secured Party.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Pledge. Pledgor hereby grants to Secured Party a security interest in
the Shares together with all rights thereof or arising therefrom, all additions
thereto, dividends, options,
<PAGE> 2
warrants and payments arising thereunder, all proceeds from the sale or other
disposition thereof, and all substitutions therefor (collectively the
"Collateral"), as security for all of the Pledgor's obligations to Secured Party
under the Note and any and all of the Loan Documents. Upon execution of this
Agreement, Pledgor shall deliver to Secured Party stock power(s) and
assignment(s) separate from certificate for the certificates representing the
Shares endorsed in blank. The books of the issuer of such Shares shall contain a
legend to reflect such pledge of the Shares hereunder.
2. Covenants and Representations. Pledgor agrees not to knowingly take any
action which would adversely affect the value of the Collateral or which would
encumber, dilute or cloud Pledgor's title or interest therein. Pledgor makes the
following representations, warranties, and covenants:
(a) Pledgor is and will continue to be the owner of the Collateral,
free of any liens, security interests or assignments other than the
security interest created by this Agreement;
(b) Pledgor shall deliver to Secured Party and Secured Party shall
retain physical possession of all stock certificates and other instruments
and documents representing or evidencing any of the Collateral, which
stock certificates shall be duly endorsed in blank;
(c) Pledgor will not modify or amend the instruments or documents
constituting the Collateral, except as required by law, court order, or
regulation, or make any compromise, adjustment, settlement or termination
in connection therewith;
(d) Pledgor will at all times defend the Collateral against any and
all claims of any person, adverse to the claims of Secured Party upon
Secured Party's request;
(e) upon the occurrence of an Event of Default (as defined in
paragraph 5 hereof and which is continuing) Pledgor will accept no
payments, distributions or dividends on the Collateral and shall remit to
Secured Party any payment or distribution received;
(f) Pledgor has the full power and authority to enter into this
Agreement, and the persons executing this Agreement on behalf of Pledgor
have been duly authorized to act on behalf of Pledgor in the execution
hereof;
(g) other than Pledgor, there are no parties who assert any type of
ownership interest whatsoever in the Shares;
(h) other than this Agreement, there are no agreements which impose
any conditions or restrictions on the Shares;
2
<PAGE> 3
(i) all of the Shares have been duly authorized, validly issued and
are fully paid and non-assessable;
(j) Pledgor, as stockholder, shall not vote for, ratify, accept,
accede to, or approve any proposed transaction concerning the Collateral
which would have a material adverse effect on the rights of Secured Party
hereunder; and
(k) The Shares represent one hundred percent (100%) of the issued
and outstanding stock of MEMPHIS, and there are no agreements in effect
which require or obligate MEMPHIS to issue any additional shares of stock
of MEMPHIS and there are no outstanding options to purchase any shares of
stock of MEMPHIS. There will be no agreements in effect which require or
obligate MEMPHIS to issue any additional shares of stock of MEMPHIS and
there will be no outstanding options to purchase any shares of stock of
MEMPHIS.
3. Delivery of Instruments; Adjustments. Pledgor has delivered to Secured
Party, all stock certificates and all documents evidencing any ownership of the
Collateral or which are necessary or convenient for Secured Party to exercise
any of Secured Party's rights hereunder. If, during the term of this Agreement,
any stock dividends, reclassification, readjustments or other changes are
declared or made in the capital structure of any corporation represented by the
Collateral, or if any subscription or other options are exercisable with respect
to the Collateral, all such new, substitute or additional shares or other
securities, rights or interests issued shall be delivered to and held by Secured
Party subject to this Agreement in the same manner as the Collateral.
4. Voting. So long as Pledgor is not in default hereunder, any Collateral
may be voted by the Pledgor at all meetings of stockholders, subject to the
restrictions of Paragraph 2(j).
5. Events of Default. Any one or more of the following will constitute an
event of default ("Event of Default") under this Agreement:
(a) any event occurs which constitutes an Event of Default under any
of the Loan Documents;
(b) if Pledgor fails to pay or perform any of its material
obligations contained in paragraphs 2, 7 and 8 of this Agreement and which
failure is not cured upon 30 days written notice by Secured Party to
Pledgor;
(c) any covenant, condition, agreement, representation or warranty
made by Pledgor to Secured Party in this Agreement is materially breached
or proves untrue in any material respect and is not cured upon 30 days
written notice by Secured Party to Pledgor.
6. Remedies on Default. Upon the occurrence and during the continuance of
an Event of Default, Secured Party may exercise any or all of the rights and
remedies provided (a) by this
3
<PAGE> 4
Agreement, and/or (b) by any other applicable law. Without limiting the
generality of the foregoing, upon the occurrence and continuance of an Event of
Default, Secured Party may (i) instruct the secretary of MEMPHIS to pay all
dividends to Secured Party, and (ii) sell the Collateral or any part thereof,
without recourse to judicial proceedings, with the right to bid for and buy,
free from any right of redemption, upon ten (10) days' notice (which notice is
agreed to be reasonable notice for the purposes hereof) to the Pledgor, of the
time and place of sale, for cash, upon credit or for future delivery, at Secured
Party's option and in Secured Party's complete discretion:
(a) at a public sale, including a sale at any broker's board or
exchange;
(b) at private sale in any commercially reasonable manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other law or regulation.
Secured Party is also hereby authorized, but not obligated, to take such
actions, give such notices, obtain such consents, and do such other things
as it may deem required or appropriate in the event of sale or disposition
of any of the Collateral.
In connection with the sale of any of the Collateral, Secured Party is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Secured Party to render such sale exempt from
the registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, and any sale of the Collateral so made in good
faith by Secured Party shall be deemed to be commercially reasonable. In
connection with any such sale or other disposition in accordance with the
provision hereof, Secured Party shall be authorized to deliver the Stock to or
upon the order of Secured Party.
7. Taxes. Pledgor shall pay promptly, when due, any and all property
taxes, excise taxes (however called) and other taxes, assessments, duties and
other charges, which, if unpaid, might by law or otherwise become a lien or
charge upon the Collateral (including any and all interest, penalties and
related provisional fees) imposed, levied or assessed against the Collateral, or
upon or measured by the use, ownership, possession or operation thereof, or in
respect to this Agreement or the security interest in the Collateral granted and
conveyed herein.
8. Pledgor's Failure to Pay Taxes and Other Items. If Pledgor fails to
make any payment or do any act required of it under this Agreement, then Secured
Party shall have the right, but not the obligation, upon three (3) days notice
to Pledgor, and without releasing Pledgor from any obligation under this
Agreement, to make or do the same, and to pay, purchase, contest or compromise
any lien which in Secured Party's judgment places its security interest in the
Collateral or Pledgor's title to the Collateral in jeopardy, and in exercising
any such rights, to expend whatever reasonable amounts of Secured Party in its
sole discretion may deem necessary therefor. Any amounts expended by Secured
Party pursuant to this Section 8 shall be a demand obligation owing by Pledgor,
which shall bear interest at the default rate (as defined in the Loan Documents)
from the date Secured Party expends such amount until repaid.
4
<PAGE> 5
9. Indemnification. Pledgor agrees to indemnify Secured Party from and
against all losses, claims, demands and liabilities of every kind and nature
arising by reason of the assignment and security interest granted and the
Collateral, excluding any of the same arising from the negligence or wilful
misconduct of the Secured Party, and agrees to pay all expenses, including,
without limitation, expert witness fees and attorneys fees, incurred by Secured
Party in the preservation, realization, enforcement or exercise of any of its
rights, powers or remedies hereunder.
10. Unregistered Securities. Pledgor acknowledges that the Shares
constitute unregistered securities subject to legal restrictions upon the
transfer thereof which will render a public sale of the Shares unavailable. If,
upon an Event of Default, Secured Party exercises its right to sell the shares,
Pledgor waives all rights to public sale and agrees to the private placement of
the Shares to any qualified third-party buyer at a commercially reasonable price
therefor. Pledgor further acknowledges that the legal restrictions upon transfer
of the Shares adversely affect the marketability of the Shares and any
commercially reasonable price for the shares will include a discount from the
proportionate part of the net asset value of the issuer represented by the
Shares to reflect those restrictions upon marketability.
11. Irrevocable Proxy. Pledgor does hereby irrevocably constitute and
appoint Secured Party and Secured Party's successors and assigns as its proxy,
with full power, in the same manner, to the same extent, and with the same
effect as if they were to do the same:
(a) to attend any and all meetings of the shareholders of MEMPHIS
held from the date hereof, and to vote the Collateral at any such meeting
in such manner as Secured Party shall, in its sole discretion, deem
appropriate;
(b) to consent, in the sole discretion of Secured Party, to any and
all actions by or with respect to Pledgor for which the consent of the
Pledgor is or may be necessary or appropriate; and
(c) without limitation, to do all things which Pledgor can or could
do as a shareholder of MEMPHIS, giving to Secured Party full power and
substitution and revocation; provided, however, that this proxy shall not
be exercisable by Secured Party, and Pledgor alone shall have the
foregoing powers, so long as there is no Event of Default hereunder
pursuant to which Secured Party has notified Pledgor that Secured Party is
exercising its rights under this section, and provided further that this
proxy shall terminate at such time as this Agreement is terminated.
Pledgor hereby revokes any proxy or proxies heretofore given to any person
or persons and agrees not to give any other proxy in derogation hereof
until such time as this Agreement is terminated. Pledgor and Secured Party
hereby specifically agree that the proxy granted hereunder shall be deemed
to be valid and irrevocable until this Agreement shall be terminated.
12. Attorney-in-Fact. Pledgor hereby appoints Secured Party as Pledgor's
Attorney-in-Fact (without imposing any obligations on Secured Party), to perform
all acts which Secured Party
5
<PAGE> 6
deems appropriate to perfect and continue the security interest granted
hereunder. The Power of Attorney granted herein is coupled with an interest and
is irrevocable until this Agreement is terminated.
13. Miscellaneous. This Agreement, the Plan and its related documents, and
all other Loan Documents constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all other
prior agreements, written or oral, with respect thereto.
(a) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that Pledgor shall not have the right to assign or transfer
respective rights or obligations under this Agreement except with the
prior written consent of Secured Party. Secured Party, at any time with
seven (7) business days prior notice to Pledgor, may sell, assign, grant
or otherwise transfer, in whole or in part, the indebtedness secured
hereby and Secured Party's rights, interest and obligations under this
Agreement or the Collateral with the consent of the Pledgor, which will
not be unreasonably withheld, and in such event, the transferee shall have
the same rights, powers and authority with respect to this Agreement and
the Collateral so transferred as are hereby given to Secured Party;
(b) This Agreement may be amended modified, renewed or extended but
only by a written instrument, executed by all of the parties hereto in the
manner of the execution of this Agreement;
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA, AND, TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES;
(d) All parties hereto shall, from time to time, do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by any
other party to establish, maintain and protect the respective rights and
remedies of such other party and to carry out and effect the intents and
purposes of this Agreement;
(e) All documents, Agreements, certificates and instruments herein
required shall be in form and substance satisfactory in all respects to
Secured Party in its sole discretion and shall be provided at the sole
cost and expense of Pledgor;
(f) Pledgor's covenants shall survive the execution hereof and shall
be performed fully and faithfully by Pledgor at all times until the date
of repayment of the indebtedness secured hereby.
6
<PAGE> 7
(g) If any term or provision of this Agreement, or the application
thereof to any circumstance, shall be invalid, illegal or unenforceable to
any extent, such term or provision shall not invalidate or render
unenforceable any other term or provision of this Agreement, or the
application of such term or provision to any other circumstance. To the
extent permitted by law, the parties hereto hereby waive any provision of
law that renders any term or provision hereof invalid or unenforceable in
any respect;
(h) Time is of the essence of this Agreement; and
(i) Any notice, demand or any other instruments authorized by this
Agreement to be served on or given shall be sufficiently served or given
for all purposes on the earlier of: (a) when personally delivered to any
officer of the party to whom it is addressed; (b) when sent by certified,
registered or first class mail, postage prepaid, addressed to each party
at its address set forth above or at such other address as has been
furnished in writing by a party to the other in the manner provided in
this Section; or (c) by overnight courier.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
15. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
16. Construction. All references to the singular shall include the plural
and vice versa and all references to the masculine shall include the neuter or
feminine and vice versa. This Agreement has been reviewed and negotiated by
counsel for each party and no ambiguity in this Agreement shall be construed
against any party based upon its having prepared the same.
17. Termination. This Agreement and all of its terms and covenants,
representations and warranties shall terminate upon full satisfaction of the
indebtedness hereby secured, and, upon such termination, Secured Party shall
return to Pledgor any of the Collateral held by Secured Party pursuant to this
Agreement, and the original executed copy of this Agreement which contains an
irrevocable proxy.
18. Acknowledgment. Pledgor acknowledges that Secured Party would not
agree to make the Loan to Pledgor without the execution, delivery and
performance of this Agreement by Pledgor. Pledgor further acknowledges that it
has received good and sufficient consideration for the execution, delivery and
performance of this Agreement.
19. No Duty to Protect. This is a pledge and assignment of Pledgor's
rights and benefits in the Collateral without an assumption by Secured Party of
any of Pledgor's duties or obligations attendant thereto. Except for physical
safeguarding of the stock certificate(s) included in the
7
<PAGE> 8
Collateral delivered to Secured Party, Secured Party shall have no duty to
protect, insure, collect or realize upon the Collateral or any proceeds
therefrom nor shall Secured Party have any obligations to any third party by
virtue of Secured Party's possession of the Collateral.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
SECURED PARTY: ELK MEADOWS INVESTMENTS, L.L.C.,
a Colorado limited liability company
By:______________________________________
David Kremser, Managing Member
_________________________________________
David Kremser
_________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
_________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
8
<PAGE> 9
IRREVOCABLE STOCK POWER
Certificate(s) No(s).
FOR VALUE RECEIVED, RAINTREE HEALTHCARE CORPORATION, a Delaware
corporation ("Pledgor"), hereby assigns and transfers to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively the "Secured Party"), pursuant to the Stock
Pledge Agreement, dated as of January 31, 1999 (the "Stock Pledge Agreement"),
between the Pledgor and Secured Party, 1,000 shares of common stock of MEMPHIS
CLINICAL LABORATORY, INC., a Tennessee corporation (the "Common Shares"), of the
Secured Party, as security for the Loan (as defined in the Pledge Agreement).
The undersigned does hereby irrevocably constitute and appoint David
Kremser as its attorney-in-fact to transfer the said stock or bond(s), as the
case may be, on the books of MEMPHIS CLINICAL LABORATORY, INC. with full power
of substitution in the premises.
Dated: _______________, 1999
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE> 1
Exhibit 10.50
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered and made as of the
29th day of January, 1999, by and between QUEST PHARMACIES, INC., an Arizona
corporation ("Debtor"), and David Kremser, Bernice Kremser, Holly Kremser,
Michael Kremser, Stanley Kremser and ELK MEADOWS INVESTMENTS, L.L.C.
(collectively the "Secured Party").
RECITALS
Pursuant to that certain Debtors' First Amended Plan of Reorganization
dated October 15, 1998 (as supplemented), confirmed by a final Order of the
United States Bankruptcy Court dated January 22, 1999 (the "Plan"), Secured
Party is obligated to loan to Debtor certain funds in accordance with the terms
and conditions thereof (the "Loan"), evidenced by the Promissory Note dated of
even date herewith executed and delivered to Secured Party under the Plan (the
"Note"), Debtor has agreed to grant to Secured Party, among other things, a
second priority security interest in the Collateral, as hereinafter described.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENTS
1. Definitions. All terms used herein which are defined in the Arizona
Uniform Commercial Code (the "Code") shall have the same meanings herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. All capitalized terms defined in the Plan and which are used as
defined terms in this Security Agreement, unless otherwise defined herein, shall
have the meanings ascribed to them in the Plan.
2. Security Interest. To secure the performance and payment of the Note,
Debtor grants to Secured Party a second priority security interest in all of
Debtor's right, title and interest in the property and property rights more
fully described on Schedule A attached hereto and incorporated herein by
reference (collectively, the "Collateral"). Such security interest shall be
superior and prior to all other liens; subject to the priority of the rights,
liens, and powers granted to Norwest Bank Minnesota, National Association,
Trustee under the Indenture dated _________, 1999 for the 11% Senior Secured
Note due 2003 for up to $26,000,000.00, subject to adjustment ("Norwest").
3. Representations, Warranties and Covenants. Debtor hereby represents,
warrants and covenants to Secured Party as follows:
(a) Debtor Owns Collateral. Debtor is the owner of the Collateral,
except the portion thereof consisting of after-acquired property, and
Debtor will be the owner of such after-acquired property, free from any
lien, except the first priority security interest of Norwest (the "Norwest
Lien").
<PAGE> 2
(b) Chief Place of Business. There is listed in Schedule B hereto
the location of the chief place of business of Debtor and, if different,
the location where the major tangible collateral and the books and records
of Debtor are kept. Debtor shall not (i) change any such location; or (ii)
change its company name without, in each case, giving to Secured Party 30
days' prior written notice of any such change.
(c) Maintenance of Collateral. Debtor will at all times keep the
Collateral in good operating condition and repair, operate and maintain
the same in compliance with all material laws and insurance policies
applicable thereto, and pay promptly when due all taxes, insurance
premiums and other governmental charges upon or relating to any of the
property, income or receipts of Debtor, unless Debtor reasonably disputes
such payments, taxes, premiums or charges.
4. Protection of Collateral. In the event of the failure of Debtor to (i)
maintain insurance in form and amounts, and with companies, in all respects
comparable to that maintained by entities such as the Debtor, covering all of
the insurable Collateral, (ii) keep the Collateral in good repair and operating
condition, (iii) keep the Collateral free from any liens, except the Norwest
Lien, and (iv) pay when due all taxes, levies and assessments on or in respect
of the Collateral, unless Debtor reasonably disputes such taxes, levies or
assessments, Secured Party, at its option, may (but shall not be required to)
procure and pay for such insurance, place the Collateral in good repair and
operating condition, or otherwise make good any other aforesaid failure of
Debtor and all sums advanced by Secured Party, with interest thereon at the
interest rate set forth in the Note shall be part of Debtor's obligations to
Secured Party, payable on demand.
5. Financing Statements; Further Assurances. Debtor, concurrently with the
execution of this Security Agreement, and from time to time thereafter as
requested by Secured Party, shall execute and deliver to Secured Party such
financing statements, continuation statements, amendments to financing
statements and other documents, in form satisfactory to Secured Party, as
Secured Party may require to perfect and continue in effect the lien of Secured
Party. Debtor irrevocably appoints Secured Party its attorney-in-fact, in the
name of Debtor or Secured Party, to execute and file from time to time any such
financing statements, continuation statements and amendments thereto, which
appointment shall be deemed to be a power coupled with an interest.
6. Events of Default. Debtor shall be in default under this Security
Agreement upon the occurrence of an Event of Default under the Note, the Norwest
Security Documents or if Borrower shall fail to perform any covenant or
condition of this Security Agreement within thirty (30) days after written
notice of such non-compliance, or if any covenant, condition, agreement,
representation or warranty made by Debtor to Secured Party in this Agreement
proves untrue in any material respect or is breached and is not cured upon
thirty (30) days written notice by the Secured Party to the Pledgor.
7. Remedies Upon Default. Upon the occurrence of an Event of Default and
the acceleration of Debtor's obligations, subject to the prior rights, liens and
powers of Norwest, Secured
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<PAGE> 3
Party shall have all the rights and remedies of a Secured Party under the
Arizona Uniform Commercial Code and all other rights and remedies accorded to
Secured Party in equity or law. Upon the request of Secured Party, Debtor shall
assemble and make the Collateral available to Secured Party at a place
designated by Secured Party. Any notice of sale or other disposition of the
Collateral given not less than ten days prior to such proposed action shall
constitute reasonable and fair notice of such action. Debtor shall be liable for
any deficiency. Debtor expressly waives any right to have the collateral
marshalled on any foreclosure, sale or other enforcement hereof.
8. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by registered mail or certified mail, postage prepaid, return
receipt requested, through the United States Postal Service to the parties at
the respective addresses listed on the signature page of this Security Agreement
or such other address which the parties may provide to one another in accordance
herewith. Notices to Norwest shall be delivered to:
____________________________________________. Such notices, requests, demands
and consents, if sent by mail shall be deemed given 2 (two) Business Days after
deposit in the United States mail, and if delivered by hand, shall be deemed
given when delivered.
9. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of Secured Party and Debtor.
10. APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, EXCEPT TO THE
EXTENT THAT APPLICABLE LAW REQUIRES THAT THE LAWS OF ANOTHER JURISDICTION GOVERN
THE PERFECTION AND ENFORCEMENT OF THE SECURITY INTERESTS GRANTED TO SECURED
PARTY.
11. Termination. This Security Agreement shall terminate upon the payment
in full of Debtor's obligations to Secured Party as set forth in the Note.
12. Release of Lien. Notwithstanding anything else contained herein this
Agreement to the contrary, Secured Party shall release its lien with respect to
the Collateral in the event Quest is sold provided that (i) no Event of Default
shall have occurred and be continuing; (ii) Quest is sold to a third party
unrelated to Borrower for fair market value, and (iii) the proceeds from any
such sale in excess of those needed to pay the obligations due and payable to
Norwest are remitted to Secured Party for application to the Loan.
This Security Agreement has been executed and delivered by each of the
parties hereto by a duly authorized officer of each such party on the date first
set forth above.
QUEST PHARMACIES, INC., an Arizona
corporation
-3-
<PAGE> 4
By:_______________________________________
Name:____________________________________
Title:___________________________________
Address:
10405 E. Northwest Hwy. #109
Dallas, TX 75238
"DEBTOR"
ELK MEADOWS INVESTMENTS, L.L.C., a
Colorado limited liability company
By:________________________________________
David Kremser, Managing Member
___________________________________________
David Kremser
___________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
___________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
-4-
<PAGE> 5
___________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
___________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
Address:
c/o David Kremser
784 Yankee Creek Road
Evergreen, CO 80439
"SECURED PARTY"
-5-
<PAGE> 6
SCHEDULE A
COLLATERAL
All equipment of Debtor, whether now owned or hereafter acquired and
wherever located, including but not limited to all present and future machinery,
furniture, fixtures, and office and record keeping equipment.
All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents, copyrights,
trademarks, trade secrets, good will, trade names, customers lists, permits and
franchises, and the right to use Debtor's name.
All inventory of Debtor, whether now owned or hereafter acquired and
wherever located including without limitation, all inventory, wherever located
in which the Debtor now has or hereafter may acquire any right, title or
interest, including, without limitation, all goods and other personal property
now or hereafter owned by the Debtor which are held for sale or lease or are
furnished or are to be furnished under a contract of service.
Each and every right of Debtor to the payment of money, including but not
limited to all present and future debt instruments, chattel papers, accounts,
loans and obligations receivable, and tax refunds, whether such right to payment
now exists or hereafter arises, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property by Debtor, out of a
rendering of services by Debtor, out of a loan by Debtor, out of the overpayment
of taxes or other liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and security interests)
which Debtor may at any time have by law or agreement against any account debtor
or other obligor obligated to make any such payment or against any of the
property of such account debtor or other obligor.
All of Debtor's rights, title and interest in and to any fixtures.
Together with all substitutions and replacements for and products of any of the
foregoing property and together with all proceeds of the sale, lease or other
disposition of any and all of the foregoing property, any and all proceeds of
insurance thereon and, in the case of all tangible collateral, together with all
accessions and, together with (i) all accessories, attachments, additions,
parts, equipment and repairs now or hereafter attached or affixed to or used in
connection with any such collateral, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such collateral.
<PAGE> 7
SCHEDULE B
Chief Place of Business of Debtor:
Location of major Collateral and Books and Records of Debtor:
<PAGE> 1
Exhibit 10.51
STOCK PLEDGE AGREEMENT
(Quest Pharmacies, Inc.)
DATE: January 31, 1999
PARTIES:
Pledgor: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation 15300 North 90th Street Suite 100
Scottsdale, AZ 85260
Secured Party: David Kremser, Bernice Kremser,
Holly Kremser, Michael Kremser,
Stanley Kremser and
ELK MEADOWS INVESTMENTS, L.L.C.
784 Yankee Creek Road
Evergreen, CO 80439
RECITALS:
A. In accordance with the terms of the Debtors' First Amended Joint Plan
of Reorganization dated October 15, 1998 (as amended and supplemented),
confirmed by a final Order of the United States Bankruptcy Court effective
January 20, 1999 (the "Plan"), Pledgor desires to borrow, and Secured Party
desires to lend, the sum of One Million Three Hundred Fifty-Three Thousand Seven
Hundred Four Dollars ($1,353,704) (the "Loan") to Pledgor pursuant to a
promissory note of even date herewith (the "Note"). All documents evidencing and
or securing the Loan may be hereinafter referred to as the "Loan Documents."
B. Pledgor owns seventy-five percent (75%) of the issued and outstanding
capital stock of QUEST PHARMACIES, INC., an Arizona corporation ("Quest"),
consisting of 7,500 shares represented by Certificate(s) No. 1 (the "Shares").
C. In order to induce Secured Party to make the Loan to Pledgor, Pledgor
desires to grant a second priority security interest in, and, pledge, sign and
transfer, all of Pledgor's right, title and interest in and to the Shares, to
Secured Party; subject to the priority of the rights, liens, and powers granted
to Norwest Bank Minnesota, National Association, Trustee ("Norwest") under the
Indenture dated January 31, 1999 (the "Indenture") for the 11% Senior Secured
Note due 2003 for up to $26,000,000.00, subject to adjustment, on behalf of the
holders (the "Holders") of such notes.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
<PAGE> 2
1. Pledge. Pledgor hereby grants to Secured Party a second priority
security interest in the Shares together with all rights thereof or arising
therefrom, all additions thereto, dividends, options, warrants and payments
arising thereunder, all proceeds from the sale or other disposition thereof, and
all substitutions therefor (collectively the "Collateral"), as security for all
of the Pledgor's obligations to Secured Party under the Note and any and all of
the Loan Documents. Upon execution of this Agreement, Pledgor shall deliver to
Secured Party stock power(s) and assignment(s) separate from certificate for the
certificates representing the Shares endorsed in blank. The books of the issuer
of such Shares shall contain a legend to reflect such pledge of the Shares
hereunder. Notwithstanding the order of attachment or perfection, or any other
matter affecting priority, Secured Party agrees, for the benefit of Norwest and
the Holders, that the lien granted hereunder is junior and subordinate to the
lien granted to Norwest for the benefit of the Holders.
2. Covenants and Representations. Pledgor agrees not to knowingly take any
action which would adversely affect the value of the Collateral or which would
encumber, dilute or cloud Pledgor's title or interest therein, other than the
grant of a first priority lien on the collateral granted to Norwest for the
benefit of the Holders. Pledgor makes the following representations, warranties,
and covenants:
(a) Pledgor is and will continue to be the owner of the Collateral,
free of any liens, security interests or assignments other than the
security interest created by this Agreement and the prior lien of Norwest;
(b) Pledgor shall deliver to Norwest and Norwest shall retain
physical possession of all stock certificates and other instruments and
documents representing or evidencing any of the Collateral ("Stock
Certificates"), which Stock Certificates shall be duly endorsed in blank
until such time as the obligations under the Indenture are satisfied in
full, at which time Norwest shall deliver the Stock Certificates to the
Secured Party, which Stock Certificates shall be duly endorsed in blank
until such time as the obligations under the Note are satisfied in full,
at which time the Stock Certificates shall be returned to the Pledgor;
(c) Pledgor will not modify or amend the instruments or documents
constituting the Collateral, except as required by law, court order, or
regulation, or make any compromise, adjustment, settlement or termination
in connection therewith;
(d) Pledgor will at all times defend the Collateral against any and
all claims of any person, adverse to the claims of Norwest or Secured
Party upon either of Norwest's or Secured Party's request;
(e) upon the occurrence of an Event of Default (as defined in
paragraph 5 hereof and which is continuing) Pledgor will accept no
payments, distributions or dividends on the Collateral and shall remit to
Secured Party any payment or distribution received, subject to the prior
right of Norwest to receive such payment or distribution;
2
<PAGE> 3
(f) Pledgor has the full power and authority to enter into this
Agreement, and the persons executing this Agreement on behalf of Pledgor
have been duly authorized to act on behalf of Pledgor in the execution
hereof;
(g) other than Pledgor and Norwest on behalf of the Holders, there
are no parties who assert any type of ownership interest whatsoever in the
Shares;
(h) other than this Agreement and any security documents evidencing
Norwest's first priority security position of Norwest on behalf of the
Holders (the "Norwest Security Documents"), there are no agreements which
impose any conditions or restrictions on the Shares;
(i) all of the Shares have been duly authorized, validly issued and
are fully paid and non-assessable;
(j) Pledgor, as stockholder, shall not vote for, ratify, accept,
accede to, or approve any proposed transaction concerning the Collateral
which would have a material adverse effect on the rights of Secured Party
hereunder except an approved sale of Quest, as provided in Section 20; and
(k) The Shares represent seventy-five percent (75%) of the issued
and outstanding stock of Quest, and there are no agreements in effect
which require or obligate Quest to issue any additional shares of stock of
Quest and there are no outstanding options to purchase any shares of stock
of Quest except that certain option in favor of Pledgor for the purchase
of the remaining 25% of the shares of Quest from Robert Oberfield. There
will be no agreements in effect which require or obligate Quest to issue
any additional shares of stock of Quest and there will be no additional
outstanding options to purchase any shares of stock of Quest.
3. Delivery of Instruments; Adjustments. Pledgor has delivered to Norwest,
all stock certificates and all documents evidencing any ownership of the
Collateral or which are necessary or convenient for Secured Party to exercise
any of Secured Party's rights hereunder. If, during the term of this Agreement,
any stock dividends, reclassification, readjustments or other changes are
declared or made in the capital structure of any corporation represented by the
Collateral, or if any subscription or other options are exercisable with respect
to the Collateral, including, but not limited to, the option referred to in 3(k)
above, all such new, substitute or additional shares or other securities, rights
or interests issued shall be delivered to and held by Norwest subject to this
Agreement in the same manner as the Collateral.
4. Voting. So long as Pledgor is not in default hereunder, any Collateral
may be voted by the Pledgor at all meetings of stockholders, subject to the
restrictions of Paragraph 2(j).
3
<PAGE> 4
5. Events of Default. Any one or more of the following will constitute an
event of default ("Event of Default") under this Agreement:
(a) any event occurs which constitutes an Event of Default
under any of the Loan Documents;
(b) if Pledgor fails to pay or perform any of its material
obligations contained in paragraphs 2, 7 and 8 of this Agreement and which
failure is not cured upon 30 days written notice by Secured Party to
Pledgor;
(c) any covenant, condition, agreement, representation or warranty
made by Pledgor to Secured Party in this Agreement is materially breached
or proves untrue in any material respect and is not cured upon 30 days
written notice by Secured Party to Pledgor; or
(d) an Event of Default under the Norwest Security Documents.
6. Remedies on Default. Upon the occurrence and during the continuance of
an Event of Default, Secured Party may exercise any or all of the rights and
remedies provided (a) by this Agreement, and/or (b) by any other applicable law.
Without limiting the generality of the foregoing, upon the occurrence and
continuance of an Event of Default and subject to the prior rights, liens and
powers of Norwest on behalf of the Holders, Secured Party may (i) instruct the
secretary of Quest to pay all dividends to Secured Party, and (ii) sell Secured
Party's interest in the Collateral or any part thereof, without recourse to
judicial proceedings, with the right to bid for and buy, free from any right of
redemption, upon ten (10) days' notice (which notice is agreed to be reasonable
notice for the purposes hereof) to the Pledgor, of the time and place of sale,
for cash, upon credit or for future delivery, at Secured Party's option and in
Secured Party's complete discretion:
(a) at a public sale, including a sale at any broker's board or
exchange;
(b) at private sale in any commercially reasonable manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, or any other law or regulation.
Secured Party is also hereby authorized, but not obligated, to take such
actions, give such notices, obtain such consents, and do such other things
as it may deem required or appropriate in the event of sale or disposition
of any of the Collateral.
In connection with the sale of any of the Collateral, Secured Party is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Secured Party to render such sale exempt from
the registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws, and any sale of the Collateral so made in good
faith by Secured Party shall be deemed to be commercially reasonable. Any such
sale shall be subject to the prior security interest of Norwest for the benefit
of the Holders.
4
<PAGE> 5
7. Taxes. Pledgor shall pay promptly, when due, any and all property
taxes, excise taxes (however called) and other taxes, assessments, duties and
other charges, which, if unpaid, might by law or otherwise become a lien or
charge upon the Collateral (including any and all interest, penalties and
related provisional fees) imposed, levied or assessed against the Collateral, or
upon or measured by the use, ownership, possession or operation thereof, or in
respect to this Agreement or the security interest in the Collateral granted and
conveyed herein.
8. Pledgor's Failure to Pay Taxes and Other Items. If Pledgor fails to
make any payment or do any act required of it under this Agreement, then Secured
Party shall have the right, but not the obligation, upon three (3) days notice
to Pledgor, and without releasing Pledgor from any obligation under this
Agreement, to make or do the same, and to pay, purchase, contest or compromise
any lien which in Secured Party's judgment places its security interest in the
Collateral or Pledgor's title to the Collateral in jeopardy, and in exercising
any such rights, to expend whatever reasonable amounts of Secured Party in its
sole discretion may deem necessary therefor. Any amounts expended by Secured
Party pursuant to this Section 8 shall be a demand obligation owing by Pledgor,
which shall bear interest at the default rate (as defined in the Loan Documents)
from the date Secured Party expends such amount until repaid.
9. Indemnification. Pledgor agrees to indemnify Secured Party from and
against all losses, claims, demands and liabilities of every kind and nature
arising by reason of the assignment and security interest granted and the
Collateral, excluding any of the same arising from the negligence or wilful
misconduct of the Secured Party, and agrees to pay all expenses, including,
without limitation, expert witness fees and attorneys fees, incurred by Secured
Party in the preservation, realization, enforcement or exercise of any of its
rights, powers or remedies hereunder.
10. Unregistered Securities. Pledgor acknowledges that the Shares
constitute unregistered securities subject to legal restrictions upon the
transfer thereof which will render a public sale of the Shares unavailable. If,
upon an Event of Default, Secured Party exercises its right to sell its interest
in the shares, Pledgor waives all rights to public sale and agrees to the
private placement of the Shares to any qualified third-party buyer at a
commercially reasonable price therefor. Pledgor further acknowledges that the
legal restrictions upon transfer of the Shares adversely affect the
marketability of the Shares and any commercially reasonable price for the shares
will include a discount from the proportionate part of the net asset value of
the issuer represented by the Shares to reflect those restrictions upon
marketability.
11. Irrevocable Proxy. Pledgor does, subject to the prior rights, liens
and powers of Norwest for the benefit of the Holders, hereby irrevocably
constitute and appoint Secured Party and Secured Party's successors and assigns
as its proxy, with full power, in the same manner, to the same extent, and with
the same effect as if they were to do the same:
(a) to attend any and all meetings of the shareholders of QUEST held
from the date hereof, and to vote the Collateral at any such meeting in
such manner as Secured Party shall, in its sole discretion, deem
appropriate;
5
<PAGE> 6
(b) to consent, in the sole discretion of Secured Party, to any and
all actions by or with respect to Pledgor for which the consent of the
Pledgor is or may be necessary or appropriate; and
(c) without limitation, to do all things which Pledgor can or could
do as a shareholder of QUEST, giving to Secured Party full power and
substitution and revocation; provided, however, that this proxy shall not
be exercisable by Secured Party, and Pledgor alone shall have the
foregoing powers, so long as there is no Event of Default hereunder
pursuant to which Secured Party has notified Pledgor that Secured Party is
exercising its rights under this section, and provided further that this
proxy shall terminate at such time as this Agreement is terminated.
Pledgor hereby revokes any proxy or proxies heretofore given to any person
or persons and agrees not to give any other proxy in derogation hereof
until such time as this Agreement is terminated. Pledgor and Secured Party
hereby specifically agree that the proxy granted hereunder shall be deemed
to be valid and irrevocable until this Agreement shall be terminated.
12. Attorney-in-Fact. Pledgor hereby appoints Secured Party as Pledgor's
Attorney-in-Fact (without imposing any obligations on Secured Party), to perform
all acts which Secured Party deems appropriate to perfect and continue the
security interest granted hereunder. The Power of Attorney granted herein is
coupled with an interest and is irrevocable until this Agreement is terminated.
13. Miscellaneous. This Agreement, the Plan and its related documents, and
all other Loan Documents constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all other
prior agreements, written or oral, with respect thereto.
(a) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that Pledgor shall not have the right to assign or transfer
respective rights or obligations under this Agreement except with the
prior written consent of Secured Party. Secured Party, at any time with
seven (7) business days prior notice to Pledgor, may sell, assign, grant
or otherwise transfer, in whole or in part, the indebtedness secured
hereby and Secured Party's rights, interest and obligations under this
Agreement or the Collateral with the consent of the Pledgor, which will
not be unreasonably withheld, and in such event, the transferee shall have
the same rights, powers and authority with respect to this Agreement and
the Collateral so transferred as are hereby given to Secured Party;
(b) This Agreement may be amended modified, renewed or extended but
only by a written instrument, executed by all of the parties hereto in the
manner of the execution of this Agreement;
6
<PAGE> 7
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARIZONA, AND, TO
THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES;
(d) All parties hereto shall, from time to time, do and perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by any
other party to establish, maintain and protect the respective rights and
remedies of such other party and to carry out and effect the intents and
purposes of this Agreement;
(e) All documents, Agreements, certificates and instruments herein
required shall be in form and substance satisfactory in all respects to
Secured Party in its sole discretion and shall be provided at the sole
cost and expense of Pledgor;
(f) Pledgor's covenants shall survive the execution hereof and shall
be performed fully and faithfully by Pledgor at all times until the date
of repayment of the indebtedness secured hereby.
(g) If any term or provision of this Agreement, or the application
thereof to any circumstance, shall be invalid, illegal or unenforceable to
any extent, such term or provision shall not invalidate or render
unenforceable any other term or provision of this Agreement, or the
application of such term or provision to any other circumstance. To the
extent permitted by law, the parties hereto hereby waive any provision of
law that renders any term or provision hereof invalid or unenforceable in
any respect;
(h) Time is of the essence of this Agreement; and
(i) Any notice, demand or any other instruments authorized by this
Agreement to be served on or given shall be sufficiently served or given
for all purposes on the earlier of: (a) when personally delivered to any
officer of the party to whom it is addressed; (b) when sent by certified,
registered or first class mail, postage prepaid, addressed to each party
at its address set forth above or at such other address as has been
furnished in writing by a party to the other in the manner provided in
this Section; or (c) by overnight courier.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
15. Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
7
<PAGE> 8
16. Construction. All references to the singular shall include the plural
and vice versa and all references to the masculine shall include the neuter or
feminine and vice versa. This Agreement has been reviewed and negotiated by
counsel for each party and no ambiguity in this Agreement shall be construed
against any party based upon its having prepared the same.
17. Termination. This Agreement and all of its terms and covenants,
representations and warranties shall terminate upon full satisfaction of the
indebtedness hereby secured, and, upon such termination, Secured Party shall
return to Pledgor any of the Collateral held by Secured Party pursuant to this
Agreement, and the original executed copy of this Agreement which contains an
irrevocable proxy.
18. Acknowledgment. Pledgor acknowledges that Secured Party would not
agree to make the Loan to Pledgor without the execution, delivery and
performance of this Agreement by Pledgor. Pledgor further acknowledges that it
has received good and sufficient consideration for the execution, delivery and
performance of this Agreement.
19. No Duty to Protect. This is a pledge and assignment of Pledgor's
rights and benefits in the Collateral without an assumption by Secured Party of
any of Pledgor's duties or obligations attendant thereto. In the event the
Collateral is delivered to Secured Party by Norwest pursuant to Section 2,
except for physical safeguarding of the stock certificate(s) included in the
Collateral delivered to Secured Party, Secured Party shall have no duty to
protect, insure, collect or realize upon the Collateral or any proceeds
therefrom nor shall Secured Party have any obligations to any third party by
virtue of Secured Party's possession of the Collateral.
20. Release of Lien. Notwithstanding anything else contained herein this
Agreement to the contrary, Secured Party shall release its lien, and shall
complete all documents necessary to evidence the same, with respect to the
Collateral in the event Quest is sold provided that (1)(i) the sale of the
Collateral and release of Norwest's lien is authorized under the Indenture, and
(ii) the proceeds from any such sale in excess of those needed to pay all
obligations under the Indenture are remitted to Secured Party for application to
the Loan; or (2) if all obligations under the Indenture have been satisfied in
full, (i) no Event of Default shall have occurred and be continuing; (ii) Quest
is sold to a non-affiliate of Borrower for fair market value as determined in
good faith by the Board of Directors, and (iii) the proceeds from any such sale,
net of transaction costs, in excess of those needed to pay all obligations due
and payable under the Indenture to Norwest for the benefit of the Holders are
remitted to Secured Party for application to the Loan, and any proceeds
remaining after the payment of obligations due and payable to the Secured Party
under the Note are remitted to the Pledgor.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
SECURED PARTY: ELK MEADOWS INVESTMENTS, L.L.C.,
a Colorado limited liability company
By:______________________________________
David Kremser, Managing Member
_________________________________________
David Kremser
_________________________________________
Bernice Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Holly Kremser by her attorney-in-fact,
David Kremser
_________________________________________
Michael Kremser by his attorney-in-fact,
David Kremser
_________________________________________
Stanley Kremser by his attorney-in-fact,
David Kremser
9
<PAGE> 10
ACCEPTANCE
1. The undersigned (the "Pledgor") acknowledges the following:
a) Pledgor has entered into a pledge agreement (the "Norwest Pledge
Agreement") pursuant to which it has pledged 7,500 shares (the
"Collateral") of QUEST PHARMACIES, INC., an Arizona corporation ("Quest"),
which currently represents seventy-five percent (75%) of the issued and
outstanding shares of Quest, to Norwest Bank Minnesota, National
Association, Trustee ("Norwest") under the Indenture dated January 31,
1999 (the "Indenture") for the 11% Senior Secured Note due 2003 for up to
$26,000,000.00, subject to adjustment, on behalf of the holders (the
"Holders") of such notes.
b) Pledgor has entered into a Stock Pledge Agreement dated January
31, 1999 (the "Kremser Pledge Agreement"), with David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively "Secured Party"), pursuant to which it
has pledged the Collateral, subject to the prior interest of the Trustee
on behalf of the Holders. All capitalized terms not otherwise defined
herein shall have the same meaning as set forth in the Kremser Pledge
Agreement.
2. Quest, in its capacity as Pledgor under the Norwest Pledge Agreement,
has delivered to Norwest possession of the Collateral, for the purpose of
thereby permitting Norwest, on behalf of the Holders, to perfect its possessory
pledge lien in the Collateral through means of such possession-by-agent.
3. At such time as the Collateral, or any part of it, shall come into the
possession of Pledgor, or its officers, agents or assigns, and Pledgor's
obligations to Secured Party have not been satisfied, Pledgor agrees to deliver
to Secured Party the Pledged Stock, for the purpose of thereby permitting
Secured Party, on behalf of the Holders, to perfect its possessory pledge lien
in the Collateral through means of such possession-by-agent.
DATED this 31st day of January, 1999.
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
10
<PAGE> 11
IRREVOCABLE STOCK POWER
Certificate(s) No(s).
FOR VALUE RECEIVED, RAINTREE HEALTHCARE CORPORATION, a Delaware
corporation ("Pledgor"), hereby assigns and transfers to David Kremser, Bernice
Kremser, Holly Kremser, Michael Kremser, Stanley Kremser and ELK MEADOWS
INVESTMENTS, L.L.C. (collectively the "Secured Party"), pursuant to the Stock
Pledge Agreement, dated as of January 31, 1999 (the "Stock Pledge Agreement"),
between the Pledgor and Secured Party, 7,500 shares of common stock of QUEST
PHARMACIES, INC., an Arizona corporation (the "Common Shares"), of the Secured
Party, as security for the Loan (as defined in the Pledge Agreement).
The undersigned does hereby irrevocably constitute and appoint David
Kremser as its attorney-in-fact to transfer the said stock or bond(s), as the
case may be, on the books of QUEST PHARMACIES, INC. with full power of
substitution in the premises.
Dated: _______________, 1999
RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE> 1
Exhibit 10.52
SHARING AGREEMENT
THIS SHARING AGREEMENT is made this 31st day of January, 1999 by and
between NORWEST BANK MINNESOTA, National Association, as Trustee (the "Trustee")
under the Indenture relating to the 11% Senior Secured Notes due 2003 dated as
of January 31, 1999 for up to $26 million, subject to adjustment, RAINTREE
HEALTHCARE CORPORATION ("RainTree Healthcare"), both as Issuer of the New Senior
Notes, and together with BritWill Healthcare Company, a Delaware corporation
("BHC"), a guarantor of the Indiana Returned Facility Note, BritWill Indiana
Partnership, an Arizona general partnership, the maker of the Indiana Returned
Facility Note ("Maker"), BHC (RainTree Healthcare, BHC and Maker collectively
"RainTree"), and OMEGA HEALTHCARE INVESTORS, INC., a Maryland corporation
("Omega").
RECITAL:
On January 29, 1999 the Debtors' First Amended Joint Plan of
Reorganization Dated October 15, 1998, as further amended (the "Plan"), filed in
the United States Bankruptcy Court for the District of Arizona and styled, In re
Unison HealthCare Corporation, Case Nos. B-98-06583-PHX-GBN through
B-98-06612-PHX-GBN, and In re BritWill Investments-I, Inc., Case Nos.
B-98-0173-PHX-GBN through B-98-0175-PHX-GBN, (Jointly Administered), was
confirmed. Pursuant to Section 6.1.2(c) of the Plan, a sharing arrangement is
required by and between the Trustee, RainTree and Omega. This Sharing Agreement
sets forth the terms and conditions of the sharing arrangement. Capitalized
terms used herein without definition have the meanings set forth in the Plan.
NOW, THEREFORE, the Trustee, RainTree and Omega hereby agree as follows:
1. DEFINITIONS: Unless defined otherwise in this Sharing Agreement, the
terms used herein are as defined in the Plan. In addition, the following
definitions are used herein:
"BLOCKAGE PERIOD" shall mean any period of time during which a continuing
Default exists. If a Default is cured or waived, the Blockage Period shall end.
There may be one or more Blockage Periods.
"DEFAULT" shall mean the occurrence of an Event of Default as defined in
the Indiana Returned Facility Note, issued by Maker and dated as of January 31,
1999, as such may be amended (the "IRF Note").
"ORIGINAL PLAN PAYMENT" shall mean the sum of (x) the principal of the
Senior Notes issued as of the Effective Date plus (y) the Effective Date Excess
Cash paid to creditors entitled to receive New Senior Notes.
"PARAGRAPH 2 SHARING PAYMENTS" shall mean the sharing of certain principal
payments required to be made as set forth in Paragraph 2 of this Sharing
Agreement.
<PAGE> 2
"SHARING CONDITIONS" shall mean that the following shall have occurred:
(i) on the second anniversary of the Effective Date principal payments made
between the Effective Date and the second anniversary of the Effective Date have
not reduced the Original Plan Payment by at least 50%, which reductions shall
include, without limitation, payments of Effective Date Excess Cash, and (ii) a
Blockage Period does not exist.
2. AGREEMENT TO SHARE CERTAIN PRINCIPAL PAYMENTS: If on or after the
second anniversary of the Effective Date of the Plan, the Sharing Conditions are
met, payments of principal by RainTree with regard to the IRF Note shall be
shared pari passu among Omega and the holders of the New Senior Notes, provided,
however, no sharing shall occur with regard to the proceeds of any collateral
held as security by Omega with regard to the IRF Note. RainTree agrees to make
Paragraph 2 Sharing Payments due to Omega in the place of any periodic payment
terms set forth in the IRF Note. RainTree shall make the Paragraph 2 Sharing
Payments due to holders of the New Senior Notes to the Trustee for application
pursuant to the Indenture. If a Blockage Period occurs, Paragraph 2 Sharing
Payments shall cease during such period and, during the Blockage Period,
payments shall be made to Omega on the IRF Note as though this Sharing Agreement
did not exist. Payments made during a Blockage Period shall not be shared even
if subsequent to such payment the Blockage Period is ended. Once a Blockage
Period ends, subsequent Paragraph 2 Sharing Payments with regard to the IRF Note
shall be shared pari passu among Omega and the holders of the New Senior Notes.
Regardless of whether or not a Blockage Period exists, RainTree shall pay
interest on the Omega Returned Facility Note as required by such note.
3. NO DEFAULT UNDER OMEGA RETURNED FACILITY NOTE: Omega hereby agrees that
Paragraph 2 Sharing Payments will not constitute an Event of Default under the
IRF Note on account of the failure to pay the full periodic principal payments
required under such Note nor a default with respect to any of the Company's
other obligations to Omega. All payments deferred on account of this Sharing
Agreement shall be repaid pursuant to the terms of the IRF Note. All principal
that is deferred because of this Sharing Agreement shall bear interest at the
rate of ten percent (10%) per annum from the date it would otherwise have been
paid.
4. NO COLLATERAL SHARING: This Sharing Agreement is not a sharing or
assignment of collateral securing the IRF Note.
5. NOTICES: Upon Default, Omega shall commence the Blockage Period by
notifying the Maker, BHC, RainTree Healthcare and Trustee. All notices, demands,
requests, consents, approvals and other communications ("Notice" or "Notices")
hereunder shall be in writing and personally served upon an Executive Officer of
the party being served or mailed (by registered or certified mail, return
receipt requested and postage prepaid), or delivered by national overnight
delivery service such as Federal Express or D.H.L., or sent by facsimile
transmission addressed to the respective parties, as follows:
2
<PAGE> 3
(i) If to RainTree Healthcare, Maker or BHC:
RainTree HealthCare Corporation
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
ATTN: Michael A. Jeffries
Tel: (602) 607-4000
Fax: (602) 607-4014
with a copy to:
ATTN: Nir E. Margalit
Tel: (602) 607-4000
Fax: (602) 607-4114
(ii) If to Omega:
Omega Healthcare Investors, Inc.
900 Victors Way
Suite 350
Ann Arbor, MI 48108
ATTN: Essel W. Bailey, Jr.
Tel: (734) 747-9890
Fax: (734) 996-0020
with a copy to:
Dykema Gossett
ATTN: Fred J. Fechheimer
1577 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2820
Tel: (248) 203-0743
Fax: (248) 203-0763
(iii) If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479
Attention: Corporate Trust Services
3
<PAGE> 4
6. COUNTERPARTS: This Sharing Agreement may be executed in separate
counterparts, each of which shall be considered an original when each party has
executed and delivered to the other one or more copies of this Sharing
Agreement.
7. CHOICE OF LAW: This Sharing Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan without regard to
Michigan's conflict of interest rules.
8. ENTIRE AGREEMENT: Except for the Plan and the IRF Note, this Sharing
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof, and no representation, understanding, promise or
condition concerning the subject matter shall be binding upon either party
unless expressed herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
NORWEST BANK MINNESOTA,
National Association, Trustee
By: _____________________________________
Its:_________________________________
RAINTREE HEALTHCARE CORPORATION,
By: _____________________________________
Its:_________________________________
OMEGA HEALTHCARE INVESTORS, INC.,
a Maryland corporation
By: _____________________________________
F. Scott Kellman
Its: Executive Vice President
4
<PAGE> 5
BRITWILL INDIANA PARTNERSHIP,
an Arizona general partnership
By: Britwill Investments-I, Inc.
By: _____________________________________
Its:_________________________________
BRITWILL HEALTHCARE COMPANY,
a Delaware company
By: _____________________________________
Its:_________________________________
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RAINTREE'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,863
<SECURITIES> 0
<RECEIVABLES> 32,284
<ALLOWANCES> 9,663
<INVENTORY> 1,473
<CURRENT-ASSETS> 48,154
<PP&E> 38,583
<DEPRECIATION> 9,356
<TOTAL-ASSETS> 170,540
<CURRENT-LIABILITIES> 27,002
<BONDS> 8,144
0
0
<COMMON> 5
<OTHER-SE> (79,082)
<TOTAL-LIABILITY-AND-EQUITY> 170,540
<SALES> 0
<TOTAL-REVENUES> 184,031
<CGS> 0
<TOTAL-COSTS> 166,986
<OTHER-EXPENSES> 52,486
<LOSS-PROVISION> 6,210
<INTEREST-EXPENSE> 12,140
<INCOME-PRETAX> (53,791)
<INCOME-TAX> (9,842)
<INCOME-CONTINUING> (43,949)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,094)
<CHANGES> 0
<NET-INCOME> (45,043)
<EPS-PRIMARY> (7.01)
<EPS-DILUTED> 0
</TABLE>
