UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 01-14358
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Harborside Healthcare Corporation
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Delaware 04-3307188
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
470 Atlantic Avenue, Boston, Massachusetts 02210
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(Address of principal executive offices) (Zip Code)
(617) 556-1515
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(Registrant's telephone number, including area code)
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
--- ---
Number of shares of common stock, par value $0.01 per share outstanding as of
May 12, 1997: 8,000,000.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
Table of Contents
PAGE
Part I. Financial Information
Condensed Consolidated Balance Sheets
December 31, 1996 and March 31, 1997 3
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1997 4
Condensed Consolidated Statements of Changes
in Stockholders' Equity
For the Three Months Ended March 31, 1997 5
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
Part II Other Information 14
Signatures 15
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
------------------
December 31, March 31,
1996 1997
ASSETS ----------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 9,722 $ 7,755
Accounts receivable, net of allowances for doubtful
accounts of $1,860 and $2,149, respectively 22,984 24,722
Prepaid expenses and other 3,570 7,801
Demand note due from limited partnership 1,369 --
Deferred income taxes 1,580 1,580
--------- ---------
Total current assets 39,225 41,858
Restricted cash 3,751 3,623
Investment in limited partnership 256 287
Property and equipment, net 95,187 95,196
Intangible assets, net 3,004 4,090
Deferred income taxes 376 376
--------- ---------
Total assets $ 141,799 $ 145,430
========= =========
LIABILITIES
Current liabilities:
Current maturities of long-term debt $ 169 $ 173
Current portion of capital lease obligation 3,744 3,816
Accounts payable 6,011 5,591
Employee compensation and benefits 8,639 9,877
Other accrued liabilities 2,177 3,319
Accrued interest 19 19
Current portion of deferred income 368 369
Income taxes payable 1,272 1,771
--------- ---------
Total current liabilities 22,399 24,935
Long-term portion of deferred income 2,948 2,855
Long-term portion of capital lease obligation 53,533 53,264
Long-term debt 18,039 17,994
--------- ---------
Total liabilities 96,919 99,048
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 30,000,000 shares
authorized, 8,000,000 shares issued
and outstanding 80 80
Additional paid-in capital 48,340 48,340
Accumulated deficit (3,540) (2,038)
--------- ---------
Total stockholders' equity 44,880 46,382
--------- ---------
Total liabilities and stockholders' equity $ 141,799 $ 145,430
========= =========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-3-
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Combined prior to June 14, 1996)
(Unaudited)
(dollars in thousands, except per share amounts)
------------------
For the three months ended
MARCH 31,
---------------------
1996 1997
------- -------
Total net revenues $34,931 $47,384
------- -------
Expenses:
Facility operating 28,120 37,452
General and administrative 1,720 2,389
Service charges paid to affiliate 185 177
Special compensation and other 515 --
Depreciation and amortization 539 922
Facility rent 2,545 2,622
------- -------
Total expenses 33,624 43,562
------- -------
Income from operations 1,307 3,822
Other:
Interest expense, net 975 1,392
(Income) loss on investment
in limited partnership 127 (31)
------- -------
Income before income taxes 205 2,461
Income taxes -- 959
------- -------
Net income $ 205 $ 1,502
======= =======
Net income per share $ 0.19
=======
Pro forma data:
Historical income $ 205
Pro forma income taxes 80
-------
Pro forma net income $ 125
=======
Pro forma net income per share $ 0.03
=======
Weighted average number of
common and common equivalent shares
used in per share computations 4,425,000 8,025,000
The accompanying notes are an integral part of the
condensed consolidated financial statements.
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<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(dollars in thousands)
------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
STOCK CAPITAL DEFICIT TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Stockholders' equity, December 31, 1996 $ 80 $48,340 $(3,540) $44,880
Net income for the three months ended
March 31, 1997 -- -- 1,502 1,502
------- ------- ------- -------
Stockholders' equity, March 31, 1997 $ 80 $48,340 $(2,038) $46,382
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Combined prior to June 14, 1996)
(Unaudited)
(dollars in thousands)
------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1997
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 205 $ 1,502
Adjustments to reconcile net income
to net cash provided by operating activities:
Minority interest 234 --
Depreciation of property and equipment 459 839
Amortization of intangible assets 80 83
Amortization of deferred income (91) (92)
Loss from investment in limited partnership 127 (31)
Amortization of loan costs and fees 33 17
Accretion of interest on capital lease obligation -- 709
Other (5) 3
-------- --------
1,042 3,030
Changes in operating assets and liabilities:
(Increase) in accounts receivable (1,387) (1,738)
(Increase) in prepaid expenses and other (406) (4,231)
(Increase) in deferred income taxes -- --
(Decrease) in accounts payable (272) (420)
Increase in employee compensation and benefits 2,145 1,238
Increase in accrued interest 42 --
(Decrease) increase in other accrued liabilities (67) 1,142
Increase in income taxes payable -- 499
-------- --------
Net cash provided (used) by operating activities 1,097 (480)
-------- --------
Investing activities:
Additions to property and equipment (504) (848)
Facility acquisition deposits 3,000 --
Additions to intangibles (696) (1,186)
Transfers to (from) restricted cash, net (1,576) 128
Repayment of demand note -- 1,369
-------- --------
Net cash provided (used) by investing activities 224 (537)
-------- --------
Financing activities:
Payment of long-term debt (102) (41)
Principal payments of capital lease obligation -- (909)
Note payable to an affiliate (2,000) --
Receipt of lease inducement 3,685 --
Dividend distribution (137) --
Distribution to minority interest (33,727) --
Purchase of equity interests 803 --
-------- --------
Net cash used by financing activities (31,478) (950)
-------- --------
Net (decrease) in cash and cash equivalents (30,157) (1,967)
Cash and cash equivalents, beginning of period 40,157 9,722
-------- --------
Cash and cash equivalents, end of period $ 10,000 $ 7,755
======== ========
Supplemental Disclosure:
Interest paid $ 1,227 $ 888
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
-6-
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Combined prior to June 14, 1996)
(Unaudited)
------------------
A. General
The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report or Form 10-K for the year ended December
31, 1996. In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position as of
March 31, 1997 and the results of its operations and its cash flows for the
three-month periods ended March 31, 1997 and 1996. The results of operations for
the three-month period ended March 31, 1997 are not necessarily indicative of
the results which may be expected for the full year. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
included elsewhere in this report.
B. Basis of Presentation
The Company was incorporated as a Delaware corporation on March 19, 1996 and was
formed as a holding company, in anticipation of an initial public offering (the
"Offering"), to combine under the control of a single corporation the operations
of various business entities (the "Predecessor Entities") which were all under
the majority control of several related stockholders. Immediately prior to the
Offering, the Company executed an agreement (the "Reorganization Agreement")
which resulted in the transfer of ownership of the Predecessor Entities to the
Company prior to completion of the Offering in exchange for 4,400,000 shares of
the Company's common stock. The Company's financial statements for periods prior
to the Offering have been prepared by combining the historical financial
statements of the Predecessor Entities, similar to a pooling of interests
presentation. On June 14, 1996, the Company completed the issuance of 3,600,000
shares of common stock through the Offering resulting in net proceeds to the
Company (after deducting underwriters' commissions and other offering expenses)
of $37,731,000. The consolidated financial statements include the accounts of
Harborside Healthcare Corporation and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.
C. Investment in Limited Partnership
The Company holds a 75% partnership interest in Bowie Center Limited Partnership
(the "Partnership") which the Company accounts for using the equity method.
Although the Company owns a majority interest in the Partnership, the Company
only holds a 50% voting interest in the Partnership and accordingly, it does not
exercise control over the operations of the Partnership.
The results of operations of the Partnership are summarized below:
For the three months ended
MARCH 31,
--------------------------------
1996 1997
----------- -----------
Net operating revenues $ 1,976,000 $ 2,092,000
Net operating expenses 1,982,000 1,900,000
Net income (loss) (170,000) 42,000
The financial position of the Partnership is as follows:
AS OF MARCH 31, 1997
--------------------
Current assets $2,504,000
Non-current assets 4,889,000
Current liabilities 751,000
Non-current liabilities 6,258,000
Partners' equity 384,000
continued
-7-
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Combined prior to June 14, 1996)
(Unaudited)
------------------
D. Special Compensation and Other
During the first quarter of 1996, the Company incurred $515,000 of non-recurring
expenses. Substantially all of these non-recurring expenses related to a special
compensation arrangement with a key member of management in connection with the
reorganization of the Company's ownership structure which preceded the
completion of its initial public offering.
E. Income Taxes
Prior to the implementation of the Reorganization Agreement, the Predecessor
Entities (primarily partnerships and subchapter S corporations) operated under
common control but were not directly subject to federal or state income taxes
and, accordingly, no provision for income taxes was made in the Company's
historical financial statements prior to the implementation date of the
Reorganization Agreement. A pro forma income tax expense has been reflected for
each period presented prior to the reorganization date, as if the Company had
always owned the Predecessor Entities. The pro forma income tax expense was
computed using an estimated effective tax rate of 39%. The rate was derived by
using the statutory federal income tax rate of 34% plus an average of the
various state statutory income tax rates (net of federal benefits) where the
Company operates.
F. Recent Acquisitions
As of July 1, 1996, a subsidiary of the Company began leasing four long-term
care facilities in Ohio (the "Ohio Facilities"). The following unaudited pro
forma condensed consolidated statement of earnings presents the condensed
results of operations of the Company after giving effect to the acquisition of
the Ohio Facilities for the three month period ended March 31, 1996, as if this
acquisition had occurred as of January 1, 1996. The pro forma financial results
are not necessarily indicative of the actual results of operations which might
have occurred or of the results of operations which may occur in the future.
FOR THE THREE MONTHS ENDED MARCH 31,
1996
-------
Total net revenues $43,203
Income before income taxes 578
Net income 578
Pro forma net income 353
Pro forma net income per common share
using 4,425,000 common and common
common equivalent shares $ 0.08
-8-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein and included under "Special Note
Regarding Forward-Looking Statements" below. Actual results may differ
materially from those anticipated by such forward-looking statements.
OVERVIEW
Harborside Healthcare provides high quality long-term care, subacute care and
other specialty medical services in four principal regions: the Southeast, the
Midwest, New England and the Mid-Atlantic. As of March 31, 1997, the Company
operated 31 facilities (13 owned and 18 leased) with a total of 3,864 licensed
beds. The Company provides traditional skilled nursing care, a wide range of
subacute care programs (such as orthopedic, CVA/stroke, cardiac, pulmonary and
wound care), as well as distinct programs for the provision of care to
Alzheimer's and hospice patients. In addition, the Company provides
rehabilitation therapy at Company-operated and non-affiliated facilities. As of
March 31, 1997, the Company provided rehabilitation therapy services to patients
at 39 non-affiliated long-term care facilities. The Company seeks to position
itself as the long-term care provider of choice to managed care and other
private referral sources in its target markets by achieving a strong regional
presence and by providing a full range of high quality, cost effective nursing
and specialty medical services.
The Company was created in March 1996, in anticipation of an initial public
offering (the "Offering"), in order to combine under its control the operations
of various long-term care facilities and ancillary businesses (the "Predecessor
Entities") which had operated since 1988. The Company completed the Offering on
June 14, 1996 and issued 3,600,000 shares of common stock at $11.75 per share.
The owners of the Predecessor Entities contributed their interests in such
Predecessor Entities to the Company and received 4,400,000 shares of the
Company's common stock.
The Company's financial statements for periods prior to the Offering have been
prepared by combining the historical financial statements of the Predecessor
Entities, similar to a pooling of interests presentation. The Company's
financial statements prior to the date of the Offering do not include a
provision for Federal or state income taxes because the Predecessor Entities
(primarily partnerships and subchapter S corporations) were not directly subject
to Federal or state income taxation. The Company's consolidated financial
statements for periods prior to the date of the Offering include a pro forma
income tax expense for each period presented, as if the Company had always owned
the Predecessor Entities. See Note E to the financial statements included
elsewhere in this report.
One of the Predecessor Entities was the general partner of the Krupp Yield Plus
Limited Partnership ("KYP"), which owned seven facilities (the "Seven
Facilities") until December 31, 1995. The Company held a 5% interest in KYP
while the remaining 95% was owned by the limited partners of KYP (the
"Unitholders"). Effective December 31, 1995, KYP sold the Seven Facilities and a
subsidiary of the Company began leasing the facilities from the buyer. Prior to
December 31, 1995 the accounts of KYP were included in the Company's
consolidated financial statements and the interest of the Unitholders was
reflected as minority interest. In March of 1996, a liquidating distribution was
paid to the Unitholders.
The following table sets forth the number of facilities owned and leased by the
Company and the number of licensed beds operated by the Company:
AS OF MARCH 31,
-----------------------
1996 1997
----- -----
Facilities:
Owned (1) 9 13
Leased 17 18
----- -----
Total 26 31
===== =====
Licensed beds:
Owned (1) 1,028 1,720
Leased 1,980 2,144
----- -----
Total 3,008 3,864
===== =====
(1) Includes the Larkin Chase Center, which is owned by Bowie Center Limited
Partnership, a joint venture in which the Company has a 75% ownership
interest and a non-affiliated investor has a 25% ownership interest.
-9-
<PAGE>
The following table sets forth certain operating data for the periods indicated:
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1997
--------- ---------
Patient days:
Private and other 74,365 85,603
Medicare 23,496 33,906
Medicaid 142,226 178,893
--------- ---------
Total 240,087 298,402
========= =========
Average Occupancy rate (1) 91.3% 91.2%
Net patient service
revenue(2):
Private and other 31.8% 28.3%
Medicare 28.3% 31.4%
Medicaid 39.9% 40.3%
--------- ---------
Total 100.0% 100.0%
========= =========
(1) "Average occupancy rate" is computed by dividing the number of occupied
licensed beds by the total number of available licensed beds during each of
the periods indicated.
(2) Net patient service revenues exclude all rehabilitation therapy service
revenues from non-affiliate contracts.
RESULTS OF OPERATIONS
The Company's total net revenues include net patient service revenues and
rehabilitation therapy service revenues from contracts with non-affiliated
long-term care facilities. Private net patient service revenues are recorded at
established per diem billing rates. Net patient service revenues to be
reimbursed under contracts with third-party payers, primarily the Medicare and
Medicaid programs, are recorded at amounts estimated to be realized under these
contractual arrangements.
The Company's facility operating expenses consist primarily of payroll and
employee benefits related to nursing, housekeeping and dietary services provided
to patients, as well as maintenance and administration of the facilities. Other
significant facility operating expenses include the cost of rehabilitation
therapy services, medical and pharmacy supplies, food, utilities, insurance and
taxes. The Company's facility operating expenses also include the general and
administrative costs associated with the operation of the Company's
rehabilitation therapy business. The Company's general and administrative
expenses include all costs associated with its regional and corporate
operations.
-10-
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
TOTAL NET REVENUES. Total net revenues increased by $12,453,000 or 35.7%, from
$34,931,000 in the first three months of 1996 to $47,384,000 in the first three
months of 1997. This increase resulted primarily from the acquisition of four
Ohio Facilities on July 1, 1996 and the acquisition of the Harford Gardens
facility on March 1, 1997, the generation of revenues from rehabilitation
therapy services provided to additional non-affiliated long-term care facilities
and increased net patient service revenues per patient day at the Company's
"same store" facilities. Of such increase, $8,556,000 or 68.7% of the increase
resulted from the operation of the Ohio Facilities and $613,000 or 4.9% of the
increase resulted from the operation of the Harford Gardens facility. The
Company began providing rehabilitation therapy services at non-affiliated
long-term care facilities during 1995. Revenues generated by providing these
services increased by $1,211,000, from $2,141,000 in the first three months of
1996 to $3,352,000 in the first three months of 1997. The remaining $2,073,000,
or 16.7% of such increase, is attributable to higher average net patient service
revenues per patient day at the Company's "same store" facilities, primarily
resulting from increased levels of care provided to patients with medically
complex conditions. Average net patient service revenues per patient day at
"same store" facilities increased from $135.08 during the first three months of
1996 to $145.52 during the first three months of 1997. Partially offsetting this
increase was a reduction in occupancy at "same store" facilities from 91.4%
during the first three months of 1996 to 91.1% during the first three months of
1997. The average occupancy rate at all of the Company's facilities decreased
from 91.3% during the first three months of 1996 to 91.2% during the first three
months of 1997. The Company's quality mix of private, Medicare and insurance
revenues was 59.7% for the three months ended March 31, 1997 as compared to
60.1% in the similar period of 1996. The slight decrease in the quality mix
percentage was primarily due to the acquistion of the Harford Garden and Ohio
facilities.
FACILITY OPERATING EXPENSES. Facility operating expenses increased by
$9,332,000, or 33.2%, from $28,120,000 in the first three months of 1996 to
$37,452,000 in the first three months of 1997. The acquisition of the Ohio
Facilities accounted for $6,283,000, or 67.3% of the increase in facility
operating expenses while Harford Gardens accounted for $414,000, or 4.4% of this
increase. Operating expenses associated with additional non-affiliate therapy
contracts increased from $1,995,000 during the first three months of 1996 to
$3,034,000 during the first three months of 1997 and accounted for 11.1% of the
increased costs. The remainder of the increase in facility operating expenses,
approximately $1,596,000, is due to increases in the costs of labor, medical
supplies and rehabilitation therapy services purchased from third parties at
"same store" facilities.
GENERAL AND ADMINISTRATIVE; SERVICE CHARGES PAID TO AFFILIATE. General and
administrative expenses increased by $669,000, or 38.9%, from $1,720,000 in the
first three months of 1996 to $2,389,000 in the first three months of 1997. This
increase resulted from the acquisition of the Ohio Facilities, the expansion of
regional and corporate support, and additional travel and consulting expenses
associated with the Company's growth. The Company reimburses an affiliate for
rent and other expenses related to its corporate headquarters as well as for
certain data processing and administrative services provided to the Company.
During the first quarter of 1996, such reimbursements totaled $185,000 compared
to $177,000 during the first quarter of 1997.
SPECIAL COMPENSATION AND OTHER. In connection with the Offering and corporate
reorganization, the Company recorded $515,000 of non- recurring charges in the
first three months of 1996. Substantially all of these non-recurring expenses
consisted of compensation earned by a key member of management in connection
with the corporate restructuring which preceded the Offering.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$539,000 in the first three months of 1996 to $922,000 in the first three months
of 1997 primarily as a result of the acquisition of the Ohio facilities.
FACILITY RENT. Facility rent expense for the first three months increased by
$77,000 from $2,545,000 in 1996 to $2,622,000 in 1997. The increase in rent
expense is the result of the acquisition of Harford Gardens on March 1, 1997.
INTEREST EXPENSE, NET. Interest expense, net, increased from $975,000 in the
first three months of 1996 to $1,392,000 in the first three months of 1997. This
net increase is due to additional interest expense resulting from the
acquisition of the Ohio Facilities partially offset by reduced interest
following the repayment of $25,000,000 of long-term debt in June 1996, using
proceeds from the Offering.
LOSS ON INVESTMENT IN LIMITED PARTNERSHIP. The Company accounts for its
investment in Bowie Center Limited Partnership using the equity method. The
Company recorded a loss of $127,000 in the first three months of 1996 as
compared to income of $31,000 during the first three months of 1997 in
connection with this investment.
INCOME TAXES. Prior to the date of the Offering, the Company's financial
statements do not include a provision for Federal or state income taxes because
the Predecessor Entities were not subject to Federal or state income taxation.
Income taxes for the first three months of 1997 totaled $959,000.
NET INCOME. Net income was $205,000 in the first three months of 1996 as
compared to income of $1,502,000 in the first three months of 1997.
-11-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations and acquisitions growth
through a combination of mortgage financing and operating leases. Leased
facilities are leased from either the seller of the facilities or from a real
estate investment trust which has purchased the facilities from the seller. In
addition, in 1996 the Company financed the acquisition of the Ohio Facilities
from the seller by means of a lease which is accounted for as a capital lease
for financial reporting purposes. The Company's existing facility leases
generally require it to make monthly lease payments, establish escrow funds to
serve as debt service reserve accounts, and pay all property operating costs.
The Company generally negotiates leases which provide for extensions beyond the
initial lease term and an option to purchase the leased facility. The Company
expects that various forms of leasing arrangements will continue to provide it
with an attractive form of financing to support its growth. In April of 1997,
the Company obtained a three-year $25 million revolving credit facility from a
commercial bank. Borrowings under this facility will be used to provide working
capital for existing operations and acquisitions and to finance a portion of
future acquisitions. From time to time, the Company expects to pursue certain
expansion and new development opportunities associated with existing facilities.
In connection with a Certificate of Need received by its Ocala facility, the
Company expects to commence construction of a sixty-bed addition and a
rehabilitation therapy area during 1997. The costs of this project are estimated
to be approximately $2,800,000. The Company has been and will continue to be
dependent on third-party financing to fund its acquisition strategy, and there
can be no assurances that such financings will be available to the Company on
acceptable terms, or at all. The Company expects that cash on hand and generated
through operations, as well as funds available through the credit facility will
be sufficient to meet its operating requirements through the remainder of 1997.
The Company had two mortgage loans outstanding as of March 31, 1997. One
mortgage loan had an outstanding principal balance of $16,574,000, of which
$15,140,000 is due at maturity in 2004. This loan bears interest at an annual
rate of 10.65% plus additional interest equal to 0.3% of the difference between
the annual operating revenues of the four mortgaged facilities and actual
revenues during a twelve-month base period. As of March 31, 1997, the Company's
other mortgage loan, which encumbers a single facility, had an outstanding
principal balance of $1,593,000, of which $1,338,000 is due in 2010. This
mortgage matures bears interest at 14% per annum.
The Company's operating activities during the first three months of 1996
generated net cash of $1,097,000 as compared to a net use of cash of $480,000 in
1997, a decrease of $1,577,000. Most of the reduction in cash provided by
operations was the net result of increases in accounts receivable, prepaid and
other current assets and accruals relating to acquisitions.
Net cash generated by investing activities was $224,000 during the first three
months of 1996 as compared to $537,000 used in 1997. In each period the primary
use of invested cash related to additions to property and equipment ($504,000 in
1996 compared to $848,000 in 1997) and additions to deferred financing costs
associated with acquired facilities ($696,000 in 1996 compared to $1,186,000 in
1997). Additionally, in 1996 the Company received $3,000,000 in refunded
acquisition deposits (made in 1995) in connection with two groups of facilities
which it was negotiating to acquire. The Company began leasing the first group
of facilities (the New Hampshire Facilities) on January 1, 1996 and received a
$1,000,000 deposit back upon the closing of the transaction. The Company's offer
to lease the second group of facilities was rescinded by the Company and it
received its $2,000,000 deposit back in March 1996. The Company had borrowed
$2,000,000 in 1995 from an affiliate to pay this acquisition deposit and repaid
the affiliate in March 1996.
Net cash used by financing activities was $31,478,000 in 1996 as compared to
$950,000 in 1997. During the first half of 1996, the company received a cash
lease inducement from the landlord of $3,685,000 in connection with the leasing
of the New Hampshire Facilities. During the first three months of 1996 the
Company also received $803,000 from the sale of equity interests to an officer
and a director of the Company and paid a liquidating distribution of $33,727,000
to the KYP Unitholders. Also, as noted above, during the first quarter of 1996
the Company repaid a $2,000,000 advance from an affiliate. The Company had
borrowed these funds in order to make an acquisition deposit. During the first
three months of 1997, the Company made principal payments of $909,000 in
connection with capital lease obligations associated with the Ohio Facilities.
SEASONALITY
The Company's earnings generally fluctuate from quarter to quarter. This
seasonality is related to a combination of factors which include the timing and
amount of Medicaid rate increases, seasonal census cycles, and the number of
days in a given fiscal quarter.
-12-
<PAGE>
INFLATION
The healthcare industry is labor intensive. Wages and other labor related costs
are especially sensitive to inflation. Certain of the Company's other expense
items, such as supplies and real estate costs are also sensitive to inflationary
pressures. Shortages in the labor market or general inflationary pressure could
have a significant effect on the Company. In addition, suppliers pass along
rising costs to the Company in the form of higher prices. When faced with
increases in operating costs, the Company has sought to increase its charges for
services and its requests for reimbursement from government programs. The
Company's private pay customers and third party reimbursement sources may be
less able to absorb increased prices for the Company's services. The Company's
operations could be adversely affected if it is unable to recover future cost
increases or experiences significant delays in increasing rates of reimbursement
of its labor or other costs from Medicare and Medicaid revenue sources.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including information set forth under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations", constitute "Forward-Looking Statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The
Company desires to take advantage of certain "safe harbor" provisions of the
Reform Act and is including this special note to enable the Company to do so.
Forward-looking statements included in this Form 10-Q, or hereafter included in
other publicly available documents filed with the Securities and Exchange
Commission, reports to the Company's stockholders and other publicly available
statements issued or released by the Company involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ materially from
the future results, performance (financial or operating) or achievements
expressed or implied by such forward-looking statements. The Company believes
the following important factors could cause such a material difference to occur:
1. The Company's ability to grow through the acquisition and development
of long-term care facilities or the acquisition of ancillary
businesses.
2. The Company's ability to identify suitable acquisition candidates, to
consummate or complete construction projects, or to profitably operate
or successfully integrate enterprises into the Company's other
operations.
3. The occurrence of changes in the mix of payment sources utilized by the
Company's patients to pay for the Company's services.
4. The adoption of cost containment measures by private pay sources such
as commercial insurers and managed care organizations, as well as
efforts by governmental reimbursement sources to impose cost
containment measures.
5. Changes in the United States healthcare system, including changes in
reimbursement levels under Medicaid and Medicare, and other changes in
applicable government regulations that might affect the profitability
of the Company.
6. The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a
number of potentially adverse consequences, such as the imposition of
fines, temporary suspension of admission of patients, restrictions on
the ability to acquire new facilities, suspension or decertification
from Medicaid or Medicare programs, and in extreme cases, revocation of
a facility's license or the closure of a facility, including as a
result of unauthorized activities by employees.
7. The Company's ability to secure the capital and the related cost of
such capital necessary to fund its future growth through acquisition
and development, as well as internal growth.
8. Changes in certificate of need laws that might increase competition in
the Company's industry, including, particularly, in the states in which
the Company currently operates or anticipates operating in the future.
9. The Company's ability to staff its facilities appropriately with
qualified healthcare personnel, including in times of shortages of such
personnel and to maintain a satisfactory relationship with labor
unions.
10. The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers
of assisted and independent living and providers of home healthcare and
changes in the regulatory system in the state in which the Company
operates that facilitate such competition.
11. The continued availability of insurance for the inherent risks of
liability in the healthcare industry.
12. Price increases in pharmaceuticals, durable medical equipment and other
items.
13. The Company's reputation for delivering high-quality care and its
ability to attract and retain patients, including patients with
-13-
<PAGE>
relatively high acuity levels.
14. Changes in general economic conditions, including changes that pressure
governmental reimbursement sources to reduce the amount and scope of
healthcare coverage.
The foregoing review of significant factors should not be construed as
exhaustive or as an admission regarding the adequacy of disclosures previously
made by the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NUMBER DESCRIPTION
10.1 Credit Agreement, dated as of April 14,
1997, among Harborside Healthcare
Corporation and the other Borrowers
specified therein, the Lenders party
thereto and the Chase Manhattan Bank, as
Aministrative Agent
27.1 Financial Data Schedule
(b) Reports on 8-K
None
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Harborside Healthcare Corporation
By: /s/ Stephen L. Guillard
-------------------------------------------------
Stephen L. Guillard
Chairman, President, and Chief Executive Officer
By: /s/ William H. Stephan
-------------------------------------------------
William H. Stephan
Senior Vice President and Chief Financial Officer
DATE: May 13, 1997
-15-
Exhibit 10.1
================================================================================
CREDIT AGREEMENT
dated as of
April 14, 1997
among
HARBORSIDE HEALTHCARE CORPORATION
AND THE OTHER BORROWERS SPECIFIED HEREIN
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - Definitions................................................................1
Section 1.01 Defined Terms......................................................1
Section 1.02 Classification of Loans and Borrowings............................15
Section 1.03 Terms Generally...................................................15
Section 1.04 Accounting Terms; GAAP............................................15
ARTICLE II - The Credits..............................................................16
Section 2.01 Commitments.......................................................16
Section 2.02 Loans and Borrowings..............................................16
Section 2.03 Requests for Revolving Borrowings.................................17
Section 2.04 Swingline Loans...................................................18
Section 2.05 Letters of Credit.................................................19
Section 2.06 Funding of Borrowings.............................................23
Section 2.07 Interest Elections................................................23
Section 2.08 Termination and Reduction of Commitments..........................24
Section 2.09 Repayment of Loans; Evidence of Debt..............................25
Section 2.10 Prepayment of Loans...............................................26
Section 2.11 Fees..............................................................27
Section 2.12 Interest..........................................................27
Section 2.13 Alternate Rate of Interest........................................28
Section 2.14 Increased Costs...................................................28
Section 2.15 Break Funding Payments............................................29
Section 2.16 Taxes.............................................................30
Section 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.......31
Section 2.18 Mitigation Obligations; Replacement of Lenders....................32
Section 2.19 Appointment of HHC and Reliance on Representations of HHC.........33
ARTICLE III - Representations and Warranties..........................................33
Section 3.01 Organization; Powers..............................................33
Section 3.02 Authorization; Enforceability.....................................34
Section 3.03 Governmental Approvals; No Conflicts..............................34
Section 3.04 Financial Condition; No Material Adverse Change...................34
Section 3.05 Properties........................................................34
Section 3.06 Litigation and Environmental Matters..............................35
Section 3.07 Compliance with Laws and Agreements...............................35
Section 3.08 Investment and Holding Company Status.............................35
Section 3.09 Taxes.............................................................35
Section 3.10 ERISA.............................................................35
Section 3.11 Disclosure........................................................36
ARTICLE IV - Conditions...............................................................36
Section 4.01 Effective Date....................................................36
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 4.02 Each Credit Event.................................................37
ARTICLE V - Affirmative Covenants.....................................................38
Section 5.01 Financial Statements and Other Information........................38
Section 5.02 Notices of Material Events........................................39
Section 5.03 Existence; Conduct of Business....................................40
Section 5.04 Payment of Obligations............................................40
Section 5.05 Maintenance of Properties; Insurance..............................40
Section 5.06 Books and Records; Inspection Rights..............................40
Section 5.07 Compliance with Laws..............................................41
Section 5.08 Use of Proceeds and Letters of Credit.............................41
Section 5.09 Indebtedness......................................................41
Section 5.10 Other Matters.....................................................41
ARTICLE VI - Negative Covenants.......................................................41
Section 6.01 Indebtedness......................................................41
Section 6.02 Liens.............................................................42
Section 6.03 Fundamental Changes...............................................43
Section 6.04 Investments, Loans, Advances, Guarantees and Acquisitions.........43
Section 6.05 Hedging Agreements................................................44
Section 6.06 Restricted Payments...............................................44
Section 6.07 Transactions with Affiliates......................................45
Section 6.08 Restrictive Agreements............................................45
Section 6.09 Fixed Coverage Ratio..............................................45
Section 6.10 Leverage Ratio....................................................45
Section 6.11 Net Worth.........................................................45
ARTICLE VII - Events of Default.......................................................46
ARTICLE VIII - The Administrative Agent...............................................48
ARTICLE IX - Miscellaneous............................................................50
Section 9.01 Notices...........................................................50
Section 9.02 Waivers; Amendments...............................................50
Section 9.03 Expenses; Indemnity; Damage Waiver................................51
Section 9.04 Successors and Assigns............................................52
Section 9.05 Survival..........................................................54
Section 9.06 Counterparts; Integration; Effectiveness..........................55
Section 9.07 Severability......................................................55
Section 9.08 Right of Setoff...................................................55
Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process........55
Section 9.10 WAIVER OF JURY TRIAL..............................................56
Section 9.11 Headings..........................................................56
Section 9.12 Confidentiality...................................................56
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 9.13 Interest Rate Limitation..........................................57
</TABLE>
(iii)
<PAGE>
SCHEDULES:
Schedule I -- Borrowers
Schedule 2.01 -- Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 5.10 -- Other Matters
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Acquisition Strategy
Schedule 6.08 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C -- Borrowing Base Certificate
Exhibit D -- Interest Election Request
(iv)
<PAGE>
CREDIT AGREEMENT dated as of April 14, 1997, among Harborside Healthcare
Corporation ("HHC"), and the other entities listed on SCHEDULE I hereto, as
joint and several borrowers hereunder (each a "BORROWER" and collectively the
"BORROWERS"), the LENDERS party hereto, and THE CHASE MANHATTAN BANK, as
Administrative Agent.
WHEREAS, the Borrowers are and will be operated as separate entities but
are and will be operated on an integrated basis in connection with their
respective financial resources. The Borrowers conduct their operations on a
combined basis with shared management, purchasing, planning, financial controls
and other functions, and the access of all Borrowers to the credit facilities
provided hereunder benefits all Borrowers in connection with their various
businesses.
WHEREAS, HHC and the other Borrowers, jointly and severally desire to
arrange for a $25,000,000 credit facility, the proceeds of which will be used to
fund ongoing working capital, acquisitions, letters of credit and general
corporate purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINED TERMS. As used in this Agreement, the following terms
have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means The Chase Manhattan Bank, in its capacity as
administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
<PAGE>
"ALTA/ACSM LAND TITLE SURVEY REQUIREMENTS" means the minimum standard
detail requirements for conducting a land title survey jointly established by
the American Land Title Association and the American Congress on Surveying and
Mapping adopted by the American Land Title Association and the American Congress
on Surveying and Mapping in 1992 and including items 1 through 13 of Table A
thereof.
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the
Prime Rate in effect on such day. Any change in the Alternate Base Rate due to a
change in the Prime Rate, shall be effective from and including the effective
date of such change in the Prime Rate.
"APPLICABLE PERCENTAGE" means, with respect to any Lender, the percentage
of the total Commitments represented by such Lender's Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"APPLICABLE RATE" means, for any day, with respect to any Eurodollar
Revolving Loan, a rate per annum equal to 1.5%.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"ASSIGNMENT OF LEASES AND RENTS" means, collectively, the Assignments of
Leases and Rents, each dated as of the date hereof, executed by the Mortgagors
in favor of the Administrative Agent.
"AVAILABILITY PERIOD" means the period from and including the Effective
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"BOARD" means the Board of Governors of the Federal Reserve System of the
United States of America.
"BORROWING" means (a) Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect, or (b) a Swingline Loan.
"BORROWING BASE" means, at the date of the most recent Borrowing Base
Certificate required to be furnished pursuant to Section 2.02(e) hereof, the sum
of (i) 75% of the Eligible Accounts and (ii) 75% of the Designated Value of
Eligible Real Estate.
"BORROWING BASE CERTIFICATE" shall have the meaning set forth in Section
2.02(e) hereof.
2
<PAGE>
"BORROWING REQUEST" means a request by the Borrowers for a Revolving
Borrowing in accordance with Section 2.03.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by law to
remain closed; PROVIDED that, when used in connection with a Eurodollar Loan,
the term "BUSINESS DAY" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CHANGE IN CONTROL" means the occurrence of one or more of the following:
(a) the Ownership Group ceasing to own, directly or indirectly, beneficially or
of record, at least 40% (which shall be appropriately adjusted proportionately
to take into account any public offerings of HHC's Common Stock following the
Effective Date) of the outstanding Common Stock of HHC; or (b) the acquisition
of ownership, directly or indirectly, beneficially or of record, by any Person
or group of a number of shares of HHC's outstanding common stock which is
greater than the number of shares of such Common Stock owned, directly or
indirectly, beneficially or of record, by the Ownership Group; (c) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group, other than HHC or a direct or indirect wholly-owned
Subsidiary, of shares representing more than 20% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of any
Borrower (other than HHC); (d) occupation of a majority of the seats (other than
vacant seats) on the board of directors of the Borrowers by Persons who were
neither (i) nominated by the board of directors of the Borrowers nor (ii)
appointed by directors so nominated; or (e) the acquisition of direct or
indirect Control of the Borrowers by any Person or group other than the
Ownership Group. As used in this definition of "Change of Control", terms
defined in the Securities Exchange Act of 1934 or the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof, shall have
the respective meanings ascribed to them therein.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"CLASS", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Swingline Loans.
3
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL ASSIGNMENT OF PERMITS, LICENSES, APPROVALS AND CONTRACTS"
means, collectively, the Collateral Assignments of Permits, Licenses, Approvals
and Contracts, each dated as of the date hereof, executed by the Mortgagors in
favor of the Administrative Agent.
"COMMITMENT" means, with respect to each Lender, the commitment of such
Lender to make Revolving Loans and to acquire participations in Letters of
Credit and Swingline Loans hereunder, expressed as an amount representing the
maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.08
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.
The initial aggregate amount of the Lenders' Commitments is $25,000,000.
"CONSOLIDATED EBITDAR" means the sum of (a) Consolidated Net Income (but
excluding any extraordinary losses or nonrecurring expenses, in each case only
to the extent that such amount was otherwise included in the determination of
applicable Consolidated Net Income), PLUS (b) interest expense, PLUS (c) taxes
deducted in calculating Consolidated Net Income, PLUS (d) depreciation, PLUS (e)
amortization, PLUS (f) Rent, in each case of HHC and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.
"CONSOLIDATED FIXED COVERAGE RATIO" means, for each twelve month period
ending on or after July 1, 1997 (or at any time prior to July 1, 1997, the
period from July 1, 1996 to such date), the ratio of (i) EBITDAR for such
period, to (ii) (a) Rent, PLUS (b) the sum of interest and principal payments
due in respect of Indebtedness for such period of HHC and its Subsidiaries on a
consolidated basis determined in accordance with GAAP (for purposes hereof the
rental payments due with respect to the capital lease obligation associated with
HHC's four facilities acquired on July 1, 1996 in the Cleveland, Ohio area (the
"Ohio Capital Lease Obligation") shall be included as Rent and not as payments
due in respect of Indebtedness).
"CONSOLIDATED LEVERAGE RATIO" means, for each twelve month period, the
ratio of (A) (i) Indebtedness, PLUS (ii) LC Exposure, PLUS (iii) Capital Lease
Obligations (excluding the Ohio Capital Lease Obligation), PLUS (iv) the product
of eight (8) times Rent, to (B) EBITDAR, in each case of HHC and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means the net income (or loss), after taxes, of
HHC and its Subsidiaries on a consolidated basis determined in accordance with
GAAP.
"CONSOLIDATED NET WORTH" means as of the date of any determination
thereof, the sum of the capital stock (including paid-in-capital) accounts (net
of treasury shares) plus (or minus
4
<PAGE>
in the case of a deficit) the retained earnings of HHC and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DESIGNATED VALUE" means the lesser of (i) the fair market value of the
Eligible Real Estate in question as determined by a Qualified Appraisal, or (ii)
the amount of the Loans secured by a mortgage on such Eligible Real Estate;
PROVIDED, that the Designated Value of the Eligible Real Estate consisting of
the facility located in Toledo, Ohio shall be $6,666,667 until such time as a
Qualified Appraisal has been completed and accepted by the Administrative Agent.
"DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"DOLLARS" or "$" refers to lawful money of the United States of America.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"ELIGIBLE ACCOUNT" means an account owing to any one or more of the
Borrowers which initially and at all times until collected in full:
(a) is not more than (i) 90 days from the date of invoice if the
account debtor is a private payor or a private insurance provider, or (ii)
120 days from the date of invoice if the account is to be paid under any
Medicaid or Medicare reimbursement program;
(b) arose in the ordinary course of business from such Borrower's
performance of services, such services have been performed and such debtor
is not a supplier, employee, shareholder, parent, subsidiary or other
Affiliate of such Borrower and is located in the United States;
(c) is not evidenced by a promissory note or other instrument, is
subject to a first perfected security interest in favor of the
Administrative Agent and is not subject to any other Lien, except for
Liens permitted under Section 6.02(b) hereof;
5
<PAGE>
(d) is not subject to set-off, defense, warranty claim, credit,
allowance or adjustment by the account debtor (except normal discount
allowed for prompt payment), and such debtor has not disputed its
liability thereon;
(e) is owed by an account debtor as to which the Borrowers or such
Borrower has received no notice and has no knowledge of bankruptcy,
insolvency or other facts which make collection doubtful;
(f) to the extent such account is a Maryland Account, then the face
value of such account plus all other Maryland Accounts which the Borrowers
seek to include as Eligible Accounts, does not exceed $266,667; and
(g) has not been designated by the Administrative Agent in its sole
discretion as unacceptable.
"ELIGIBLE REAL ESTATE" means the real property owned by any of the
Borrowers with respect to which (i) the Administrative Agent, for the benefit of
the Lenders, has a first priority mortgage, and (ii) the Administrative Agent
and HHC have jointly designated as Eligible Real Estate (for purposes of this
clause (ii), the Administrative Agent and HHC have designated Harborside
Healthcare-Toledo, Harborside Healthcare-Ocala, and Harborside Healthcare-Gulf
Coast as Eligible Real Estate.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental Indemnity
Agreement made as of the date hereof, executed by and between HHC, the
Mortgagors, and the Administrative Agent.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the any Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrowers, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
6
<PAGE>
"ERISA EVENT" means (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrowers or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EURODOLLAR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in Article VII.
"EXCLUDED TAXES" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrowers hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrowers are located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrowers under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrowers with respect to such withholding tax
pursuant to Section 2.16(a).
"FEDERAL FUNDS EFFECTIVE RATE" means for any day, a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent.
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"FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"FIRST MORTGAGED PROPERTIES" means all real properties and interests
therein owned by any of the Borrowers with respect to which the Administrative
Agent, for the benefit of the Lenders, has a first priority mortgage.
"FOREIGN LENDER" means any Lender that is organized under the laws of a
jurisdiction other than that in which HHC is located. For purposes of this
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the United States
of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; PROVIDED, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
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debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances,
PROVIDED, that the term Indebtedness shall not include any indebtedness now or
hereafter owing by Bowie Center Limited Partnership, a Maryland limited
partnership. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INDEX DEBT" means senior, unsecured, long-term indebtedness for borrowed
money of the Borrowers that is not guaranteed by any other Person or subject to
any other credit enhancement.
"INTEREST ELECTION REQUEST" means a request by the Borrowers to convert or
continue a Revolving Borrowing in accordance with Section 2.07.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan (other than
a Swingline Loan), the last day of each March, June, September and December, (b)
with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period,
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid.
"INTEREST PERIOD" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two or three months
thereafter, as the Borrowers may elect, PROVIDED, that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Borrowing only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
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the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
"ISSUING BANK" means The Chase Manhattan Bank, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC DISBURSEMENT" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrowers at such time. The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the total LC Exposure at such time.
"LENDERS" means the Persons listed on Schedule 2.01 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lender.
"LETTER OF CREDIT" means any letter of credit issued pursuant to this
Agreement.
"LIBO RATE" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO RATE" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate rounded upwards,
if necessary, to the next 1/16 of 1% at which dollar deposits of $5,000,000 and
for a maturity comparable to such Interest Period are offered by the principal
London office of the Administrative Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
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"LOANS" means the loans made by the Lenders to the Borrowers pursuant to
this Agreement.
"MARYLAND ACCOUNTS" means any account receivable owed to any Borrower
which in order to properly perfect a security interest in favor of the
Administrative Agent would require the filing with the Secretary of State for
the state of Maryland of financing statements on form UCC-1 or other appropriate
documents prepared in compliance with Section 9-402 of the Uniform Commercial
Code, as adopted in Maryland.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
any Borrower and its respective Subsidiaries taken as a whole, (b) the ability
of any Borrower to perform any of its obligations under this Agreement or (c)
the rights of or benefits available to the Lenders under this Agreement.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrowers and its Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrowers or any
Subsidiary in respect of any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrowers or
such Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"MATURITY DATE" means April ___, 2000.
"MEDITRUST ENTITIES" means Meditrust Mortgage Investments, Inc., Meditrust
of Florida, Inc., Meditrust of Ohio, Inc., Meditrust of New Hampshire, Inc.,
Meditrust of Bedford, Inc., Meditrust of New Jersey, Inc., Meditrust Tri-States,
Inc. and any of their Affiliates.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGORS" means Belmont Nursing Center Corporation, Oakhurst Manor
Nursing Center Corporation, Orchard Ridge Nursing Center Corporation, Bay Tree
Nursing Center, Countryside Nursing Center Corporation, Sunset Point Nursing
Center Corporation, and West Bay Nursing Center Corporation.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"OPEN-END MORTGAGE, ASSIGNMENT AND SECURITY AGREEMENT" means,
collectively, the Open-End Mortgage, Assignment and Security Agreements, each
made as of the date hereof, executed by and between the Administrative Agent and
the Mortgagors.
"OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
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"OWNERSHIP GROUP" means the group consisting of: Krupp Enterprises Limited
Partnership, The Douglas Krupp 1994 Family Trust, The George Krupp 1994 Family
Trust, The Berkshire Companies Limited Partnership, Laurence Gerber, Stephen
Guillard, Damian Dell'Anno, or their successors.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business;
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrowers or any Subsidiary;
and
(f) rights of set-off of any depository institution with regard to
deposits of any Borrower or any Subsidiary held by such institution;
PROVIDED that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
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(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of
not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above.
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PLAN" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which any Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PRIME RATE" means the rate of interest per annum publicly announced from
time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"QUALIFIED APPRAISAL" means an appraisal of the fair market value of any
portion of the Eligible Real Estate, which appraisal meets each of the following
requirements: (i) such appraisal was prepared by a nationally recognized
reputable appraiser acceptable to the Administrative Agent, (ii) the date of
such appraisal is not more than twelve (12) months prior to the date such
appraisal is being used to determine the Designated Value of such Eligible Real
Estate, (iii) such appraisal has been assigned to the Administrative Agent by
the preparer thereof, and (iv) the scope and basis of such appraisal is
satisfactory to the Administrative Agent in its sole discretion.
"REAL ESTATE SECURITY DOCUMENTS" means, collectively, the Open-End
Mortgage Assignment of Leases and Security Agreement, the Assignment of Leases
and Rents, the Collateral Assignment of Permits, Licenses, Approvals and
Contracts, and the Environmental Indemnity Agreement, each as from time to time
amended or supplemented.
"REGISTER" has the meaning set forth in Section 9.04.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
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"RENT" means, as of the date of determination, all fixed payments which
any Borrower or its Subsidiaries is required to make by the terms of any lease
to its landlords in any given twelve month period, including the amount required
to be paid in connection with the Borrowers' Ohio Capital Lease Obligation, but
shall not include amounts required to be accrued in the period as a result of
step rent required to be recognized by GAAP or amounts required to be paid in
respect of maintenance, repairs, income taxes, insurance, assessments or other
similar charges.
"REQUIRED LENDERS" means, at any time, Lenders having Revolving Credit
Exposures and unused Commitments representing that percentage of the sum of the
total Revolving Credit Exposures and unused Commitments at such time as
determined by Administrative Agent from time to time.
"RESTRICTED PAYMENT" means any dividend or other distribution (whether in
cash, securities or other property) with respect to any shares of any class of
capital stock of any Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of capital stock of any
Borrower or any option, warrant or other right to acquire any such shares of
capital stock of the Borrower.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Lender at any time,
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure and Swingline Exposure at such time.
"REVOLVING LOAN" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's.
"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject, with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
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partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"SUBSIDIARY" means any subsidiary of any Borrower as of the date of this
Agreement, or formed or acquired hereafter (but only if as a result of such
formation or acquisition any Borrower directly or indirectly owns 100% of the
equity interests in such subsidiary); PROVIDED, that the term "Subsidiary" shall
not include Bowie Center Limited Partnership and Harborside of Florida Limited
Partnership.
"SWINGLINE EXPOSURE" means, at any time, the aggregate principal amount of
all Swingline Loans outstanding at such time. The Swingline Exposure of any
Lender at any time shall be its Applicable Percentage of the total Swingline
Exposure at such time.
"SWINGLINE LENDER" means The Chase Manhattan Bank, in its capacity as
lender of Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to Section 2.05.
"TAXES" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TRANSACTIONS" means the execution, delivery and performance by the
Borrowers of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
"TYPE", when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate or.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02 CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of this
Agreement, Loans may be classified and referred to by Class (E.G., a "Revolving
Loan") or by Type (E.G., a "Eurodollar Loan") or by Class and Type (E.G., a
"Eurodollar Revolving Loan"). Borrowings also may be classified and referred to
by Class (E.G., a "Revolving Borrowing") or by Type (E.G., a "Eurodollar
Borrowing") or by Class and Type (E.G., a "Eurodollar Revolving Borrowing").
Section 1.03 TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
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supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
Section 1.04 ACCOUNTING TERMS; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; PROVIDED
that, if HHC, as agent for the Borrowers, notifies the Administrative Agent that
the Borrowers request an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies the Borrowers that the Required Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect
and applied immediately before such change shall have become effective until
such notice shall have been withdrawn or such provision amended in accordance
herewith.
ARTICLE II
THE CREDITS
Section 2.01 COMMITMENTS. Subject to the terms and conditions set forth
herein, each Lender agrees to make Revolving Loans to the Borrowers from time to
time during the Availability Period in an aggregate principal amount that will
not result in (a) such Lender's Revolving Credit Exposure exceeding the lesser
of (i) such Lender's Commitment at such time and (ii) such Lender's Applicable
Percentage of the Borrowing Base at such time, or (b) the total Revolving Credit
Exposures exceeding the lesser of (i) the total Commitments at such time and
(ii) the Borrowing Base at such time. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrowers may borrow, prepay and
reborrow Revolving Loans.
Section 2.02 LOANS AND BORROWINGS.
(a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; PROVIDED that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender's failure to make Loans as
required.
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(b) Subject to Section 2.13, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrowers may request
in accordance herewith, and each Swingline Loan shall be an ABR Loan. Each
Lender at its option may make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any
exercise of such option shall not affect the obligation of the Borrowers to
repay such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000. At the time that each ABR Revolving Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000; PROVIDED that an ABR Revolving Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total
Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e). Each Swingline Loan shall be in
an amount that is an integral multiple of $100,000. Borrowings of more than one
Type and Class may be outstanding at the same time; PROVIDED that there shall
not at any time be more than a total of ten (10) Eurodollar Revolving Borrowings
outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrowers shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
(e) On the date hereof, and from time to time thereafter as
specified herein, HHC, as agent for the Borrowers, shall furnish to the Agent a
certificate ("Borrowing Base Certificate") substantially in the form of Exhibit
C hereto, appropriately completed, signed by a Financial Officer of HHC, as
agent for the Borrowers, and setting forth the Borrowing Base and the other
information required therein. Borrowing Base Certificates shall be delivered to
the Agent:
(i) within 30 days after the last day of each fiscal month of the
Borrowers';
(ii) as part of the financial statements and reports, as provided
in Section 5.01(i); and
(iii) at such other time as the Required Lenders shall specify in
their sole discretion from time to time.
To the extent the Borrowers are required to deliver a Borrowing Base Certificate
on a particular day, the Eligible Accounts reflected on such Borrowing Base
Certificate, and the calculation of the Borrowing Base, shall be determined as
of the last day of the fiscal month immediately preceding the date the Borrower
is required to deliver such Borrowing Base Certificate. The Borrowing Base set
forth in any such Borrowing Base Certificate shall be effective until delivery
of a subsequent Borrowing Base Certificate.
Section 2.03 REQUESTS FOR REVOLVING BORROWINGS. To request a Revolving
Borrowing, HHC, as agent for the Borrowers, shall notify the Administrative
Agent of such request by telephone (a) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., New York City time, three Business Days before the
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date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not
later than 11:00 a.m., New York City time, one Business Day before the date of
the proposed Borrowing; PROVIDED that any such notice of an ABR Revolving
Borrowing to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.06(e) may be given not later than 10:00 a.m., New York City time, on
the date of the proposed Borrowing. Each such telephonic Borrowing Request shall
be irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Borrowing Request in a form approved by
the Administrative Agent and signed by HHC, as agent for the Borrowers. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrowers' account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrowers shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
Section 2.04 SWINGLINE LOANS.
(a) Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrowers from time to
time during the Availability Period, in an aggregate principal amount at any
time outstanding that will not result in (i) the aggregate principal amount of
outstanding Swingline Loans exceeding $2,500,000 or (ii) the sum of the total
Revolving Credit Exposures at such time exceeding the lesser of (i) the total
Commitments at such time, and (ii) the Borrowing Base at such time; PROVIDED
that the Swingline Lender shall not be required to make a Swingline Loan to
refinance an outstanding Swingline Loan. Within the foregoing limits and subject
to the terms and conditions set forth herein, the Borrowers may borrow, prepay
and reborrow Swingline Loans. Notwithstanding anything to the contrary in this
Section 2.04, the Borrowers can not request a Swingline Loan and the Lender
shall not provide any Swingline Loans until otherwise agreed to by the Swingline
Lender.
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(b) To request a Swingline Loan, HHC, as agent for the Borrowers,
shall notify the Administrative Agent of such request by telephone (confirmed by
telecopy), not later than 12:00 noon, New York City time, on the day of a
proposed Swingline Loan. Each such notice shall be irrevocable and shall specify
the requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. The Administrative Agent will promptly advise the Swingline
Lender of any such notice received from the Borrowers. The Swingline Lender
shall make each Swingline Loan available to the Borrowers by means of a credit
to the general deposit account of the Borrowers with the Swingline Lender (or,
in the case of a Swingline Loan made to finance the reimbursement of an LC
Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank)
by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender's
Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, MUTATIS MUTANDIS, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Swingline Lender the
amounts so received by it from the Lenders. The Administrative Agent shall
notify HHC, as agent for the Borrowers, of any participations in any Swingline
Loan acquired pursuant to this paragraph, and thereafter payments in respect of
such Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from the
Borrowers (or other party on behalf of the Borrowers) in respect of a Swingline
Loan after receipt by the Swingline Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent;
any such amounts received by the Administrative Agent shall be promptly remitted
by the Administrative Agent to the Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline Lender, as their interests may
appear. The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrowers of any default in the payment thereof.
Section 2.05 LETTERS OF CREDIT.
(a) GENERAL. Subject to the terms and conditions set forth herein,
HHC, as agent for the Borrowers, may request the issuance of Letters of Credit
for its own account, in a form reasonably acceptable to the Administrative Agent
and the Issuing Bank, at any time and from time to time during the Availability
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Period. In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrowers to, or entered into by
the Borrowers with, the Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), HHC, as agent for the
Borrowers, shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, HHC, as agent for the Borrowers,
also shall submit a letter of credit application on the Issuing Bank's standard
form in connection with any request for a Letter of Credit. A Letter of Credit
shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrowers shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the LC Exposure shall not exceed $10,000,000
and (ii) the sum of the total Revolving Credit Exposures at such time shall not
exceed the lesser of (i) the total Commitments at such time, and (ii) the
Borrowing Base at such time.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender's Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrowers on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrowers for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
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(e) REIMBURSEMENT. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if HHC, as agent for the Borrowers, shall
have received notice of such LC Disbursement prior to 10:00 a.m., New York City
time, on such date, or, if such notice has not been received by HHC, as agent
for the Borrowers, prior to such time on such date, then not later than 12:00
noon, New York City time, on (i) the Business Day that HHC, as agent for the
Borrowers, receives such notice, if such notice is received prior to 10:00 a.m.,
New York City time, on the day of receipt, or (ii) the Business Day immediately
following the day that HHC, as agent for the Borrowers, receives such notice, if
such notice is not received prior to such time on the day of receipt; PROVIDED
that, if such LC Disbursement is not less than $100,000, the Borrowers hereby,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving
Borrowing in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing. If the Borrowers fail to make such payment
when due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrowers in respect thereof and
such Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, MUTATIS MUTANDIS, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrowers pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear. Any payment made by a Lender pursuant to
this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than
the funding of ABR Revolving Loans as contemplated above) shall not constitute a
Loan and shall not relieve the Borrowers of its obligation to reimburse such LC
Disbursement.
(f) OBLIGATIONS ABSOLUTE. The Borrowers' obligations to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrowers' obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
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circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; PROVIDED that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrowers to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by each Borrower to the extent permitted by applicable law) suffered by
any Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and HHC, as agent for the Borrowers, by
telephone (confirmed by telecopy) of such demand for payment and whether the
Issuing Bank has made or will make an LC Disbursement thereunder; PROVIDED that
any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the Issuing Bank and the Lenders with
respect to any such LC Disbursement.
(h) INTERIM INTEREST. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrowers shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrowers reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
PROVIDED that, if the Borrowers fail to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.12(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.
(i) REPLACEMENT OF THE ISSUING BANK. The Issuing Bank may be
replaced at any time by written agreement among HHC, as agent for the Borrowers,
the Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank. The Administrative Agent shall notify the Lenders of any such replacement
of the Issuing Bank. At the time any such replacement shall become effective,
the Borrowers shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.11(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
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and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall occur and
be continuing, on the Business Day that HHC, as agent for the Borrowers,
receives notice from the Administrative Agent or the Required Lenders (or, if
the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 66 2/3% of the total LC Exposure) demanding the
deposit of cash collateral pursuant to this paragraph, the Borrowers shall
deposit in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash equal
to 107% of LC Exposure as of such date plus any accrued and unpaid interest
thereon; PROVIDED that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to any Borrower described in clause (h) or (i) of
Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrowers
under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrowers' risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrowers for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated (but subject to the
consent of Lenders with LC Exposure representing greater than 66 2/3% of the
total LC Exposure), be applied to satisfy other obligations of the Borrowers
under this Agreement. If the Borrowers are required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrowers within three Business Days after all Events of Default have been cured
or waived.
Section 2.06 FUNDING OF BORROWINGS.
(a) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer of immediately available funds by
12:00 noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders; PROVIDED
that Swingline Loans shall be made as provided in Section 2.04. The
Administrative Agent will make such Loans available to the Borrowers by promptly
crediting the amounts so received, in like funds, to an account of the Borrowers
maintained with the Administrative Agent in New York City and designated by the
Borrowers in the applicable Borrowing Request; PROVIDED that ABR Revolving Loans
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made to finance the reimbursement of an LC Disbursement as provided in Section
2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrowers severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrowers to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrowers,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
Section 2.07 INTEREST ELECTIONS.
(a) Each Revolving Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Revolving Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrowers may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrowers may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing. This Section shall not apply to Swingline Borrowings, which
may not be converted or continued.
(b) To make an election pursuant to this Section, HHC, as agent for
the Borrowers, shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrowers were requesting a Revolving Borrowing of the Type
resulting from such election to be made on the effective date of such election.
Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request, substantially in the form of EXHIBIT D
hereto, and signed by HHC, as agent for the Borrowers.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified
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pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrowers shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrowers fail to deliver a timely Interest Election
Request with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies HHC, as agent for the
Borrower, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.08 TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, the Commitments shall terminate
on the Maturity Date.
(b) The Borrowers may at any time terminate, or from time to time
reduce, the Commitments; PROVIDED that (i) each reduction of the Commitments
shall be in an amount that is an integral multiple of $2,000,000 and (ii) the
Borrowers shall not terminate or reduce the Commitments if, after giving effect
to any concurrent prepayment of the Loans in accordance with Section 2.10, the
Revolving Credit Exposures would exceed the total Commitments.
(c) HHC, as agent for Borrowers shall notify the Administrative
Agent of any election to terminate or reduce the Commitments under paragraph (b)
of this Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by HHC,
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as agent for the Borrowers, pursuant to this Section shall be irrevocable;
PROVIDED that a notice of termination of the Commitments delivered by the HHC,
as agent for Borrowers may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrowers (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Commitments shall be permanent. Each reduction
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.
Section 2.09 REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) If on any date (whether or not such date is a date on which a
Borrowing Base Certificate is required to be furnished pursuant to Section
2.02(e) hereof) the sum of the total Revolving Credit Exposures shall exceed the
Borrowing Base, then the Borrowers shall prepay a principal amount of Loans
(prepaying outstanding Swingline Loans first, then any outstanding Revolving
Loans bearing interest at the Alternate Base Rate, then any outstanding
Eurodollar Revolving Loans, then, to the extent any Letter of Credit is undrawn,
providing cash collateral therefor in accordance with the terms hereof) in an
aggregate amount not less than the amount by which the sum of the total
Revolving Credit Exposures shall exceed the Borrowing Base. Concurrently with
the delivery of any Borrowing Base Certificate which shows such an excess (and
at each other time when the Borrowers becomes aware of such an excess), the
Borrowers shall give notice to the Agent of such prepayment in accordance with
Section 2.10 hereof, which notice shall specify a prepayment date no later than
three Business Days after the date of delivery of such Borrowing Base
Certificate or, if an Event of Default exists, no later then the date of
delivery of such Borrowing Base Certificate.
(b) The Borrowers hereby unconditionally promise to pay (i) to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Revolving Loan on the Maturity Date, and (ii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of
the Maturity Date and the first date after such Swingline Loan is made that is
the 15th or last day of a calendar month and is at least two Business Days after
such Swingline Loan is made; PROVIDED that on each date that a Revolving
Borrowing is made, the Borrowers shall repay all Swingline Loans then
outstanding.
(c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrowers to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(d) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrowers to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
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(e) The entries made in the accounts maintained pursuant to
paragraph (c) or (d) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrowers
to repay the Loans in accordance with the terms of this Agreement.
(f) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrowers shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
Section 2.10 PREPAYMENT OF LOANS.
(a) The Borrowers shall have the right at any time and from time to
time to prepay any Borrowing in whole or in part, subject to prior notice in
accordance with paragraph (b) of this Section.
(b) HHC, as agent for Borrowers, shall notify the Administrative
Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender)
by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of prepayment, (ii) in
the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m.,
New York City time, one Business Day before the date of prepayment or (iii) in
the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York
City time, on the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; PROVIDED that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.08, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.08. Promptly
following receipt of any such notice relating to a Revolving Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Revolving Borrowing shall be in an amount that would
be permitted in the case of an advance of a Revolving Borrowing of the same Type
as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.12.
Section 2.11 FEES.
(a) The Borrowers, jointly and severally agree to pay to the
Administrative Agent for the account of each Lender a facility fee which shall
accrue at the rate of 1/4% per annum on the daily average unused portion of the
facility until the later of the termination of the Commitment or until the
entire Revolving Credit Exposure has been paid or terminated in full. Accrued
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facility fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Commitments
terminate, commencing on the first such date to occur after the date hereof;
PROVIDED that any facility fees accruing after the date on which the Commitments
terminate shall be payable on demand. All facility fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b) The Borrowers agree to pay to the Administrative Agent, for the
account of each Lender, on the date of issuance of each Letter of Credit and on
the anniversary of each Letter of Credit (i) an annual letter of credit fee in
an amount equal to 1% of the face amount of each Letter of Credit, and (ii) the
Issuing Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.
(c) The Borrowers agree to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrowers and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
(e) The Borrowers, agree to pay to the Administrative Agent a
closing fee in the amount of $25,000 with respect to the credit facilities
provided hereunder and such closing fee shall be deemed earned by the
Administrative Agent in full on the date hereof.
Section 2.12 INTEREST.
(a) The Loans comprising each ABR Borrowing (including each
Swingline Loan) shall bear interest at the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate
for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest
on any Loan or any fee or other amount payable by the Borrowers hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the Commitments; PROVIDED that (i) interest accrued pursuant
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of an ABR
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Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
Section 2.13 ALTERNATE RATE OF INTEREST. If prior to the commencement of
any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in
such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to HHC, as agent for the
Borrowers, and the Lenders by telephone or telecopy as promptly as practicable
thereafter and, until the Administrative Agent notifies HHC, as agent for the
Borrowers, and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any Interest Election Request that requests the conversion of
any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a
Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request
requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an
ABR Borrowing and PROVIDED that if the circumstances giving rise to such notice
affect only one Type of Borrowings, then the other Type of Borrowings shall be
permitted.
Section 2.14 INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
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(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking into consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding company with respect to
capital adequacy), then from time to time the Borrowers will pay to such Lender
or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section, together with reasonable detail related thereto, shall be
delivered to HHC, as agent for the Borrowers, and shall be conclusive absent
manifest error. The Borrowers shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; PROVIDED
that the Borrowers shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies HHC, as agent for the Borrowers, of the Change in Law
giving rise to such increased costs or reductions and of such Lender's or the
Issuing Bank's intention to claim compensation therefor; PROVIDED FURTHER that,
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.
Section 2.15 BREAK FUNDING PAYMENTS. In the event of (a) the payment of
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert,
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continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.10(b) and is revoked in accordance therewith) or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrowers pursuant to
Section 2.18, then, in any such event, the Borrowers shall compensate each
Lender for the loss, cost and expense attributable to such event. In the case of
a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section, together with
reasonable detail related thereto, shall be delivered to HHC, as agent for the
Borrowers, and shall be conclusive absent manifest error. The Borrowers shall
pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.
Section 2.16 TAXES.
(a) Any and all payments by or on account of any obligation of the
Borrowers hereunder shall be made free and clear of and without deduction for
any Indemnified Taxes or Other Taxes; PROVIDED that if the Borrowers shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law; PROVIDED FURTHER, that
the payment of any taxes relating to any Property which is subject to the Real
Estate Security Documents shall be governed by the terms of the Real Estate
Security Documents.
(b) In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrowers shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrowers
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
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asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to HHC, as agent for the Borrowers, by a
Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or
on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest
error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrowers to a Governmental Authority, HHC, as agent for the
Borrowers, shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which any
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to HHC, as agent for the
Borrowers, (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrowers as will
permit such payments to be made without withholding or at a reduced rate.
Section 2.17 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS.
(a) The Borrowers shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 999 Broad Street,
Bridgeport, Connecticut, or such other address as the Administrative Agent shall
specify in writing, except payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
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(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Revolving Loans and participations in LC Disbursements and Swingline Loans of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements and Swingline Loans; PROVIDED that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrowers pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrowers or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against any Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
HHC, as agent for the Borrowers, prior to the date on which any payment is due
to the Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing Bank, as the case may be, the amount due. In such event,
if the Borrowers have not in fact made such payment, then each of the Lenders or
the Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.17(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
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Section 2.18 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.14, or if
the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. Each Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or if
the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); PROVIDED that (i) HHC, as agent
for the Borrowers, shall have received the prior written consent of the
Administrative Agent (and, if a Commitment is being assigned, the Issuing Bank
and Swingline Lender), which consent shall not unreasonably be withheld, (ii)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrowers (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.14 or payments required to be made pursuant to
Section 2.16, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.
Section 2.19 APPOINTMENT OF HHC AND RELIANCE ON REPRESENTATIONS OF HHC.
Each Borrower hereby appoints HHC as its agent for all purposes hereunder, and
each Borrower agrees that the Administrative Agent and the Lenders may rely upon
any representations, warranty, certificate, notice, document or telephone
request which purports to be executed or made or which the Administrative Agent
or the Lenders in good faith believe to have been executed or made by HHC or any
of its executive officers, and each Borrower further agrees to indemnify and
hold the Administrative Agent and the Lenders harmless for any action, including
the making of Borrowings hereunder, and any loss or expense, taken or incurred
by any of them as a result of their good faith reliance upon any such
representations, warranty, certificate, notice, document or telephone request.
All obligations of the Borrowers under this Agreement or any notes, instruments
or agreements entered in connection herewith, shall be joint and several
obligations of each of the Borrowers.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Lenders that:
Section 3.01 ORGANIZATION; POWERS. Each Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of
jurisdiction of its organization, has the corporate or partnership power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, and is duly qualified as a
foreign corporation or partnership and in good standing under the laws of each
other jurisdiction where such qualification is required and where such failure
to qualify could reasonably be expected to have a Material Adverse Effect.
Section 3.02 AUTHORIZATION; ENFORCEABILITY. The Transactions are within
each Borrower's powers and have been duly authorized by all necessary corporate
or partnership action and, if required, stockholder action. This Agreement has
been duly executed and delivered by each Borrower and constitutes a legal, valid
and binding obligation of each Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
Section 3.03 GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a) do
not require any consent or approval of, registration or filing with (other than
a filing of a Current Report on Form 8-K with the Securities and Exchange
Commission), or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrowers or any of their Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon the Borrowers or
any of their Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Borrowers or any of their Subsidiaries,
and (d) will not result in the creation or imposition of any Lien on any asset
of the Borrowers or any of their Subsidiaries except pursuant to this Agreement.
Section 3.04 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrowers have heretofore furnished to the Lenders their
consolidated balance sheet and statements of income, stockholders equity and
cash flows as of and for the fiscal years ended December 31, 1994, December 31,
1995, and December 31, 1996, reported on by Coopers & Lybrand L.L.P.,
independent public accountants. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrowers and their consolidated Subsidiaries as of such dates and
for such periods in accordance with GAAP.
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(b) Since December 31, 1996, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrowers and their Subsidiaries, taken as a whole.
Section 3.05 PROPERTIES.
(a) Each Borrower and its Subsidiaries has good title to, or valid
leasehold or subleasehold interests in, all its real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
(b) Each Borrower and its Subsidiaries owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
Section 3.06 LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Borrowers, threatened against or affecting the Borrowers or any of their
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrowers nor any
of their Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
Section 3.07 COMPLIANCE WITH LAWS AND AGREEMENTS. Each Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
Section 3.08 INVESTMENT AND HOLDING COMPANY STATUS. Neither the Borrowers
nor any of their Subsidiaries is (a) an "investment company" as defined in, or
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subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
Section 3.09 TAXES. Each Borrower and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Borrowers or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
Section 3.10 ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $100,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $100,000 the fair market value of
the assets of all such underfunded Plans.
Section 3.11 DISCLOSURE. The Borrowers have disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrowers to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; PROVIDED that,
with respect to projected financial information, the Borrowers represent only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
ARTICLE IV
CONDITIONS
Section 4.01 EFFECTIVE DATE. The obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed
on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
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signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of Peabody & Brown, counsel for the Borrowers,
substantially in the form of Exhibit B, and covering such other matters
relating to the Borrowers, this Agreement or the Transactions as the
Required Lenders shall reasonably request. The Borrowers hereby request
such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the
Borrowers, the authorization of the Transactions and any other legal
matters relating to the Borrowers, this Agreement or the Transactions, all
in form and substance satisfactory to the Administrative Agent and its
counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the President, a Vice President or
a Financial Officer of each Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Administrative Agent shall have received such security
agreements, mortgages, pledge agreements, financing statements,
intercreditor agreements, and other documents relating to all collateral
securing the Loans, in form, substance and scope satisfactory to the
Administrative Agent.
(f) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrowers hereunder.
The Administrative Agent shall notify HHC, as agent for the Borrowers, and the
Lenders of the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on April
30, 1997 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
Section 4.02 EACH CREDIT EVENT. The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of each Borrower set forth in
this Agreement shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable.
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(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be
continuing.
(c) HHC, as agent for the Borrowers, shall have provided a Borrowing
Base Certificate within the time periods required by Section 2.02(e). In
addition, if the Required Lenders have requested delivery of a new
Borrowing Base Certificate pursuant to clause (iii) of Section 2.02(e) and
have advised the Borrowers of their good faith belief that the total
outstanding Revolving Credit Exposures at such time exceed the
Commitments, the Borrowers shall have provided such new Borrowing Base
Certificate.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by each
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each Borrower covenants and agrees
with the Lenders that:
Section 5.01 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrowers
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the
Borrowers, its audited consolidated balance sheet and related statements
of operations, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by Coopers and Lybrand
L.L.P. or other independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit) to
the effect that such consolidated financial statements present fairly in
all material respects the financial condition and results of operations of
the Borrowers and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied; PROVIDED that delivery within
the period specified above of copies of the Annual Report on Form 10-K of
HHC filed with the Securities and Exchange Commission (together with the
adjustments to such consolidated financial statements necessary to provide
consolidating information for each of its Subsidiaries in the same manner,
to the same extent and on the same basis as historically provided to the
Meditrust Entities), shall be deemed to satisfy the requirements of
Section 5.01(a) so long as such Form 10-K as so adjusted shall contain the
information referred to in this Section 5.01(a);
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrowers, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
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flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrowers and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes; PROVIDED that delivery
within the period specified above of copies of the Quarterly Report on
Form 10-Q of HHC filed with the Securities and Exchange Commission
(together with the adjustments to such consolidated financial statements
necessary to provide consolidating information for each of its
Subsidiaries in the same manner, to the same extent and on the same basis
as historically provided to the Meditrust Entities), shall be deemed to
satisfy the requirements of Section 5.01(b) so long as such Form 10-Q as
so adjusted shall contain the information referred to in this Section
5.01(b);
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrowers (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.09, 6.10 and 6.11 and (iii) stating whether any change in GAAP or in the
application thereof has occurred since the date of the audited financial
statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
(d) Within sixty (60) days after the beginning of each fiscal year,
budgets in the form previously provided to the Administrative Agent and
the Lenders or such other form satisfactory to the Administrative Agent
prepared by HHC, setting forth, with appropriate discussion, the principal
assumptions upon which such budgets are based, which shall be accompanied
by a certificate of the chief financial officer of the Borrowers to the
effect that such principal assumptions are reasonable for the period
covered thereby;
(e) Within ten (10) Business Days of receipt by Borrowers, a copy of
each report or "management letter" submitted to the Borrowers by their
independent accountants in connection with any annual, interim or special
audit made by it of the books of the Borrowers;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials
(including but not limited to all 8- K's, 10-K's and 10-Q's) filed by any
Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Borrower to its shareholders generally, as the case may be;
(g) promptly following any request therefor, such other information
(including, but not limited to, copies of licensure surveys, upon request
of the Administrative Agent) regarding the operations, business affairs
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and financial condition of the Borrower or any Subsidiary, or compliance
with the terms of this Agreement, as the Administrative Agent or any
Lender may reasonably request;
(i) as soon as practicable, and in any event within 30 days after
the close of each month of each fiscal year of the Borrowers and such
other time as shall be specified in Section 2.02(e), a Borrowing Base
Certificate; and
(j) contemporaneously with the delivery to any Meditrust Entity by
any Borrower, copies of all compliance certificates and similar periodic
reports and any and all notices of default which any Borrower delivers or
is required to deliver to any Meditrust Entity.
Section 5.02 NOTICES OF MATERIAL EVENTS. The Borrowers will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
any Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrowers and its Subsidiaries in an aggregate
amount exceeding $100,000;
(d) the initiation by any party of any delicensure proceedings
affecting any of the Borrowers' facilities (which notice shall be
furnished within three days after such initiation); and
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of each Borrower setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
Section 5.03 EXISTENCE; CONDUCT OF BUSINESS. The Borrowers will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; PROVIDED that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
Section 5.04 PAYMENT OF OBLIGATIONS. The Borrowers will, and will cause
each of its Subsidiaries to, pay its obligations, including Tax liabilities,
that, if not paid, could result in a Material Adverse Effect before the same
shall become delinquent or in default, except where (a) the validity or amount
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thereof is being contested in good faith by appropriate proceedings, (b) each
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
Section 5.05 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrowers will, and
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations; PROVIDED, that the
covenants contained in this Section 5.05 shall not be deemed to modify or limit
any other covenants relating to insurance coverage or maintenance of property
contained in the Real Estate Security Documents.
Section 5.06 BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrowers will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrowers will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested and any such costs associated therewith shall be borne by
the Borrowers.
Section 5.07 COMPLIANCE WITH LAWS. The Borrowers will, and will cause each
of its Subsidiaries to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 5.08 USE OF PROCEEDS AND LETTERS OF CREDIT. The proceeds of the
Loans will be used only to fund acquisitions of the stock or assets of nursing
or retirement facilities or other health care facilities, (and such other
related ancillary businesses, such as home healthcare and pharmaceutical
businesses associated therewith), and to provide working capital. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations G, U and X. Letters of Credit will be issued only to
support workmen's compensation reserves, debt service reserves for the Meditrust
Entities and for other purposes satisfactory to the Administrative Agent.
Section 5.09 INDEBTEDNESS. Any Indebtedness owed to any Borrower by any
other Borrower shall be subordinate in right of payment to the obligations of
the Borrowers to the Lenders hereunder.
Section 5.10 OTHER MATTERS. The Borrowers will provide to the
Administrative Agent, on or before the dates set forth on SCHEDULE 5.10, each of
the items listed on SCHEDULE 5.10.
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ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, the Borrowers covenant and agree with the Lenders that:
Section 6.01 INDEBTEDNESS. The Borrowers will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof;
(c) Indebtedness of any Borrower to any Subsidiary and of any
Subsidiary to any Borrower or any other Subsidiary;
(d) Guarantees by any Borrower of Indebtedness of any Subsidiary
and by any Subsidiary of Indebtedness of any Borrower or any other
Subsidiary;
(e) Indebtedness of any Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured
by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; PROVIDED that (i) such
Indebtedness is incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement and (ii) the
aggregate principal amount of Indebtedness permitted by this clause (e)
shall not exceed $500,000 at any time outstanding;
(f) Indebtedness incurred in connection with an acquisition by any
Borrower satisfying the requirements of Section 6.04(e);
(g) Indebtedness of any Borrower or any Subsidiary as an account
party in respect of trade letters of credit; and
(h) Indebtedness in respect of (i) taxes, assessments, governmental
charges or levies, (ii) judgments or awards which have been in force for
less than the applicable appeal period so long as execution is not levied
thereunder or in respect of which any of the Borrowers and their
Subsidiaries shall not in good faith be prosecuting an appeal or
proceedings for review in a manner satisfactory to the Administrative
Agent and in respect of which a stay of execution shall have been obtained
pending such appeal or review, and (iii) endorsements made in connection
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with the deposit of items for credit or collection in the normal and
ordinary course of business.
Notwithstanding anything to the contrary in subsections 6.01(a) through (h)
hereof, in no event will Oakhurst Manor Nursing Center Corporation and Orchard
Ridge Nursing Center Corporation incur any Indebtedness at any time.
Section 6.02 LIENS. The Borrowers will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of any Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
PROVIDED that (i) such Lien shall not apply to any other property or asset
of any Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;
(c) any Lien incurred or assumed in connection with an acquisition
by any Borrower satisfying the requirements of Section 6.04(e);
(d) Liens on fixed or capital assets acquired, constructed or
improved by any Borrower or any Subsidiary; PROVIDED that (i) such
security interests secure Indebtedness permitted by clause (e) of Section
6.01, (ii) such security interests and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 80% of the cost of acquiring, constructing
or improving such fixed or capital assets and (iv) such security interests
shall not apply to any other property or assets of any Borrower or any
Subsidiary; and
(e) any Lien securing the Indebtedness permitted under Section
6.01(h).
Section 6.03 FUNDAMENTAL CHANGES.
(a) The Borrowers will not, and will not permit any Subsidiary to,
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or substantially all
of their assets, or all or substantially all of the stock, or other beneficial
interest in, any of their Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Person may merge into any Borrower in a
transaction in which such Borrower is the surviving legal entity, (ii) any
Subsidiary may sell, transfer, lease or otherwise dispose of its assets to any
Borrower or to another Subsidiary and (iii) any Subsidiary may liquidate or
dissolve if HHC, as agent for any Borrower, determines in good faith that such
liquidation or dissolution is in the best interests of the Borrowers and does
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not result in a Material Adverse Effect; PROVIDED that any such merger involving
a Person that is not a wholly owned Subsidiary immediately prior to such merger
shall not be permitted unless also permitted by Section 6.04.
(b) The Borrowers will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrowers and their Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
Section 6.04 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS.
The Borrowers will not, and will not permit any of its Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by any Borrower existing on the date hereof in the
capital stock, or other beneficial interest in, any Subsidiary;
(c) additional investments in the capital stock, or other
beneficial interest of, any other Borrower;
(d) loans or advances made by any Borrower to any other Borrower;
(e) acquisitions by any Borrower as long as (i) the Board of
Directors of the acquiring Borrower (or at the Board's discretion, such
Borrower's Executive Committee of its Board of Directors) has approved the
proposed acquisition, (ii) the Administrative Agent is notified at least
three business days in advance of the consummation of such acquisition if
more than $5,000,000 of Loans are to be borrowed hereunder and used in
connection with the completion of such acquisition, (iii) immediately
before and immediately after such acquisition no Default or Event of
Default will occur or exist, (iv) thirty days prior to the consummation of
such acquisition, the Borrowers provide the most recent audited annual
financial statements for the entity being acquired (PROVIDED, that the
requirements of this clause (iv) shall apply only if the purchase price
for such acquisition exceeds $15,000,000 and a majority of such purchase
price will be financed using Loans borrowed under this Agreement), (v)
such acquisition is consistent with the Borrowers current acquisition
strategy set forth on SCHEDULE 6.04 hereto, and (vi) if such acquisition
involves the formation or acquisition by any Borrower of any Person that
becomes a Subsidiary or as a result of or in connection with such
acquisition, such Subsidiary shall execute such security agreements,
mortgages, pledge agreements, financing statements, intercreditor
agreements and such other documents as are requested by the Administrative
Agent and shall become bound by this Agreement and such other documents
executed in connection herewith (PROVIDED, that the requirements of this
clause (vi) shall not apply if, but only to the extent, that such
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Subsidiary is or at the time of such acquisition becomes a party to any
agreement for borrowed funds Indebtedness with any third party that
prohibits the Administrative Agent from obtaining a Lien on the assets or
capital stock of or other beneficial interests in such Subsidiary);
(f) the Guarantee Agreement dated March 20, 1997 (the "Guarantee
Agreement") of HHC regarding Bowie Center Limited Partnership, a Maryland
limited partnership, of all amounts owing under the Loan Agreement (as
defined in the Guarantee Agreement); and
(g) creation of a new general partner to acquire the general partner
interest in HHCI Limited Partnership from Harborside Health I Corporation.
Section 6.05 HEDGING AGREEMENTS. The Borrowers will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements acceptable to the Administrative Agent and entered into in
the ordinary course of business to hedge or mitigate risks to which the
Borrowers or any Subsidiary is exposed in the conduct of its business or the
management of its liabilities.
Section 6.06 RESTRICTED PAYMENTS. The Borrowers will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except (a) any Borrower may
declare and pay dividends with respect to its capital stock payable solely in
additional shares of its common stock, (b) Subsidiaries may declare and pay
dividends ratably with respect to their capital stock, (c) any Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrowers and its
Subsidiaries, and (d) any Borrower which is a limited partnership may make
Restricted Payments pursuant to and in accordance with its limited partnership
agreement.
Section 6.07 TRANSACTIONS WITH AFFILIATES. The Borrowers will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrowers or such Subsidiary than could
be obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Borrowers and their wholly owned Subsidiaries
not involving any other Affiliate and (c) any Restricted Payment permitted by
Section 6.06.
Section 6.08 RESTRICTIVE AGREEMENTS. The Borrowers will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Borrowers or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrowers or any other Subsidiary or to Guarantee Indebtedness of the
Borrowers or any other Subsidiary; PROVIDED that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 6.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
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restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness, (v) clause (a) of the foregoing shall not
apply to customary provisions in leases restricting the assignment thereof, and
(vi) the foregoing shall not apply to the restrictions imposed by the Meditrust
Entities in those certain agreements in effect on the date hereof.
Section 6.09 FIXED COVERAGE RATIO. The Borrowers shall not permit the
Consolidated Fixed Coverage Ratio to be less than 1.25-to-1.00 at any time.
Section 6.10 LEVERAGE RATIO. The Borrowers shall not permit the
Consolidated Leverage Ratio to exceed 7.00-to-1.00 at any time.
Section 6.11 NET WORTH. The Borrowers shall maintain at all times minimum
Consolidated Net Worth of not less than the sum of (i) $44,000,000 PLUS (ii) 50%
of Consolidated Net Income for each fiscal period beginning after December 31,
1996, PLUS (iii) all cash net proceeds actually received by the Borrowers after
December 31, 1996 from the issuance of equity interests.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Borrowers shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise, and such failure shall
continue unremedied for a period of five days;
(b) the Borrowers shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall
become due and payable, and such failure shall continue unremedied for a
period of five days;
(c) any representation or warranty made or deemed made by or on
behalf of any Borrower or any Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder, or
in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or any
amendment or modification hereof or waiver hereunder, shall prove to have
been incorrect when made or deemed made;
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(d) the Borrowers shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.03 (with respect to
the Borrower's existence) or 5.08 or in Article VI;
(e) the Borrowers shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent to HHC, as agent for the Borrowers, (which
notice will be given at the request of any Lender);
(f) the Borrowers or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; PROVIDED that this clause (g)
shall not apply to secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of any Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) any Borrower or any Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to
the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Borrower or any
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of the
foregoing;
(j) any Borrower or any Subsidiary shall become unable, admit in
writing or fail generally to pay its debts as they become due;
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(k) one or more judgments for the payment of money in an aggregate
amount in excess of $1,000,000 shall be rendered against any Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of any Borrower or any
Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in a Material
Adverse Effect;
(m) a Change in Control shall occur;
(n) the failure by any Borrower to make any payment or any other
amount due to any Meditrust Entity when and as the same shall become due
and payable, and such failure shall continue unremedied for a period of
five days, or any other failure by any Borrower to observe or perform any
covenant, condition or agreement with any Meditrust Entity which is not
cured or waived within thirty days; PROVIDED, that if such failure is
being contested in good faith and none of the Meditrust Entities have
commenced any action to enforce its rights against any Borrower (including
without limitation the giving of a Trigger Notice, as defined in and under
the Accounts Receivable Intercreditor Agreement (Leased Facilities) and in
and under the Accounts Receivable Intercreditor Agreement (Mortgaged
Facilities), such failure will not be deemed an Event of Default.
(o) the Borrowers shall fail to observe or perform any covenant,
condition or agreement contained in the Real Estate Security Documents.
then, and in every such event (other than an event with respect to any Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to HHC, as agent for the
Borrowers, take either or both of the following actions, at the same or
different times: (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.
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ARTICLE VIII
THE ADMINISTRATIVE AGENT
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrowers or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrowers or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrowers or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
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relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Lenders, the Issuing Bank and HHC, as agent for the
Borrowers. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Borrowers, to appoint a successor. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on behalf
of the Lenders and the Issuing Bank, appoint a successor Administrative Agent
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrowers to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrowers and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrowers, to c/o Harborside Healthcare Corporation,
470 Atlantic Avenue, Boston, MA 02210, Attention of William H. Stephan,
Senior Vice President and Chief Financial Officer (Telecopy No. (617)
556-1565), with a copy to Peabody & Brown, 101 Federal Street, Boston, MA
02110, Attention of Craig D. Mills, P.C. (Telecopy No. (617) 345-1300);
(b) if to the Administrative Agent and the Issuing Bank, to The
Chase Manhattan Bank, 999 Broad Street, Bridgeport, CT 06604, Attention of
Loan Department (Telecopy No. (203)382-5360), with a copy to (i) The Chase
Manhattan Bank, 85 Wells Avenue, Suite 200, Newton, MA 02159, Attention of
Roger A. Stone (Telecopy No. (617) 928-3057), and (ii) Goodwin, Procter &
Hoar, Exchange Place, Boston, MA 02109, Attention of Raymond C. Zemlin,
P.C. (Telecopy No. (617) 523-1231)
(c) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
Section 9.02 WAIVERS; AMENDMENTS.
(a) No failure or delay by the Administrative Agent, the Issuing
Bank or any Lender in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.
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(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Required Lenders or by the Borrowers and
the Administrative Agent with the consent of the Required Lenders; PROVIDED that
no such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (v) change any of the provisions of this
Section or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; PROVIDED FURTHER that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder
without the prior written consent of the Administrative Agent, the Issuing Bank
or the Swingline Lender, as the case may be.
Section 9.03 EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) The Borrowers shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all out-of-pocket expenses incurred
by the Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Borrowers shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "INDEMNITEE") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
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the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
any Borrower or any of its Subsidiaries, or any Environmental Liability related
in any way to any Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; PROVIDED that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrowers fail to pay any amount required
to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as
the case may be, such Lender's Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; PROVIDED that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such.
(d) To the extent permitted by applicable law, the Borrowers shall
not assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later
than three days after written demand therefor.
Section 9.04 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that the Borrowers may not assign or otherwise
transfer any of their rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the
Borrowers without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the
Related Parties of each of the Administrative Agent, the Issuing Bank and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); PROVIDED that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender,
HHC, as agent for the Borrowers, and the Administrative Agent (and, in the case
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of an assignment of all or a portion of a Commitment or any Lender's obligations
in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the
Swingline Lender) must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Commitment, the amount of the
Commitment of the assigning Lender subject to each such assignment (determined
as of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 unless
each of the Borrower and the Administrative Agent otherwise consent, (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender's rights and obligations under this Agreement, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance, together with a processing and recordation fee of
$3,500, (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire, and (vi) if an Event of
Default has not occurred, The Chase Manhattan Bank's Commitment shall not be
less than $10,000,000 (or if the aggregate Commitment is reduced, 40% of such
aggregate Commitment); and PROVIDED FURTHER that any consent of the Borrowers
otherwise required under this paragraph shall not be required if an Event of
Default under clause (h) or (i) of Article VII has occurred and is continuing.
Subject to acceptance and recording thereof pursuant to paragraph (d) of this
Section, from and after the effective date specified in each Assignment and
Acceptance the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Accep tance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.14,
2.15, 2.16 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "REGISTER"). The entries in
the Register shall be conclusive, and the Borrowers, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrowers, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
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Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of HHC, as agent for the
Borrowers, the Administrative Agent, the Issuing Bank or the Swingline Lender,
sell participations to one or more banks or other entities (a "PARTICIPANT") in
all or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
PROVIDED that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrowers, the
Administrative Agent, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; PROVIDED
that such agreement or instrument may provide that such Lender will not, without
the consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Borrowers agree that each
Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.17(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrowers' prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16 unless
HHC, as agent for the Borrowers, is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, to
comply with Section 2.16(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; PROVIDED that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
Section 9.05 SURVIVAL. All covenants, agreements, representations and
warranties made by the Borrowers herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
56
<PAGE>
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
Section 9.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
Section 9.07 SEVERABILITY. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 9.08 RIGHT OF SETOFF. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrowers
against any of and all the obligations of the Borrowers now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
Section 9.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
57
<PAGE>
(b) Each Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against any Borrower or its properties in
the courts of any jurisdiction.
(c) Each Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 9.11 HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 9.12 CONFIDENTIALITY. Each of the Administrative Agent, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
58
<PAGE>
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrowers or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis from a source other than the
Borrowers. For the purposes of this Section, "INFORMATION" means all information
received from the Borrowers relating to the Borrowers or their business, other
than any such information that is available to the Administrative Agent, the
Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the
Borrowers; PROVIDED that, in the case of information received from any Borrower
after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
Section 9.13 INTEREST RATE LIMITATION. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively the "CHARGES"), shall exceed the maximum
lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
[Remainder of Page Left Intentionally Blank]
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
HARBORSIDE HEALTHCARE CORPORATION
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Senior Vice President and
Chief Financial Officer
BAY TREE NURSING CENTER CORP.
BELMONT NURSING CENTER CORP.
COUNTRYSIDE CARE CENTER CORP.
HARBORSIDE HEALTH I CORPORATION
HARBORSIDE TOLEDO CORP.
KHI CORPORATION
OAKHURST MANOR NURSING CENTER CORP.
ORCHARD RIDGE NURSING CENTER CORP.
SUNSET POINT NURSING CENTER CORP.
WEST BAY NURSING CENTER CORP.
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE OF CLEVELAND LIMITED
PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
60
<PAGE>
HARBORSIDE HEALTHCARE ADVISORS
LIMITED PARTNERSHIP
By: KHI Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE HEALTHCARE BALTIMORE
LIMITED PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE HEALTHCARE LIMITED
PARTNERSHIP
By: KHI Corp.
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE HEALTHCARE NETWORK
LIMITED PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
61
<PAGE>
HARBORSIDE NEW HAMPSHIRE LIMITED
PARTNERSHIP
By: Harborside Toledo Corp.
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE OF OHIO LIMITED PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE REHABILITATION LIMITED
PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
HARBORSIDE TOLEDO LIMITED PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
62
<PAGE>
HHCI LIMITED PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
RIVERSIDE RETIREMENT LIMITED
PARTNERSHIP
By: Harborside Health I Corporation
Its General Partner
By /s/ William H. Stephan
-----------------------------------------
Name: William H. Stephan
Title: Treasurer
THE CHASE MANHATTAN BANK, individually and
as Administrative Agent,
By /s/ Roger A. Stone
-----------------------------------------
Name: Roger A. Stone
Title: SR VP
63
<PAGE>
SCHEDULE I
BORROWERS:
Bay Tree Nursing Center Corp.
Belmont Nursing Center Corp.
Countryside Care Center Corp.
Harborside of Cleveland Limited Partnership
Harborside Health I Corporation
Harborside Healthcare Advisors Limited Partnership
Harborside Healthcare Baltimore Limited Partnership
Harborside Healthcare Corporation
Harborside Healthcare Limited Partnership
Harborside Healthcare Network Limited Partnership
Harborside New Hampshire Limited Partnership
Harborside of Ohio Limited Partnership
Harborside Rehabilitation Limited Partnership
Harborside Toledo Limited Partnership
Harborside Toledo Corp.
HHCI Limited Partnership
KHI Corporation
Oakhurst Manor Nursing Center Corp.
Orchard Ridge Nursing Center Corp.
Riverside Retirement Limited Partnership
Sunset Point Nursing Center Corp.
West Bay Nursing Center Corp.
64
<PAGE>
EXHIBIT A
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of March __, 1997 (as
amended and in effect on the date hereof, the "Credit Agreement"), among
Harborside Healthcare Corporation ("HHC"), and the other entities listed on
SCHEDULE I to the Credit Agreement, the Lenders named therein and The Chase
Manhattan Bank, as Administrative Agent for the Lenders. Terms defined in the
Credit Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and assigns, without
recourse, to the Assignee named on the reverse hereof, and the Assignee hereby
purchases and assumes, without recourse, from the Assignor, effective as of the
Assignment Date set forth on the reverse hereof, the interests set forth on the
reverse hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth on the reverse hereof in the Commitment of the Assignor on
the Assignment Date and Revolving Loans owing to the Assignor which are
outstanding on the Assignment Date, together with the participations in Letters
of Credit, LC Disbursements and Swingline Loans held by the Assignor on the
Assignment Date, but excluding accrued interest and fees to and excluding the
Assignment Date. The Assignee hereby acknowledges receipt of a copy of the
Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
This Assignment and Acceptance is being delivered to the Administrative
Agent together with (i) if the Assignee is a Foreign Lender, any documentation
required to be delivered by the Assignee pursuant to Section 2.16(e) of the
Credit Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Administrative Agent, duly completed
by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the
Administrative Agent pursuant to Section 9.04(b) of the Credit Agreement.
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
65
<PAGE>
Effective Date of Assignment
("Assignment Date"):
<TABLE>
<CAPTION>
- ------------------------ -------------------------- ----------------------------------
PERCENTAGE ASSIGNED OF
FACILITY/COMMITMENT (SET
FORTH, TO AT LEAST 8 DECIMALS,
PRINCIPAL AMOUNT ASSIGNED AS A PERCENTAGE OF THE FACILITY
AND THE AGGREGATE
COMMITMENTS OF ALL LENDERS
FACILITY THEREUNDER)
- ------------------------ -------------------------- ----------------------------------
<S> <C> <C>
Commitment Assigned: $ %
Revolving Loans:
- ------------------------ -------------------------- ----------------------------------
</TABLE>
The terms set forth above and on the reverse side hereof are hereby agreed to:
[NAME OF ASSIGNOR], as Assignor
By:
------------------------------
Name:
Title:
[NAME OF ASSIGNEE], as Assignee
By:
------------------------------
Name:
Title:
The undersigned hereby consent to the within assignment:1
[Borrowers]
By:
---------------------------
Name:
Title:
The Chase Manhattan Bank, as
Administrative Agent,
- --------
1 Consents to be included to the extent required by Section 9.04(b) of the
Credit Agreement.
66
<PAGE>
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
The Chase Manhattan Bank, as
Issuing Bank
By:
---------------------------
Name:
Title:
67
<PAGE>
SCHEDULE 2.01
Commitment Percentages
Commitment Maximum Amount of Revolving
LENDER PERCENTAGE CREDIT EXPOSURE
- ------------------------ ---------- ---------------------------
The Chase Manhattan Bank 100% $25,000,000
68
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheet and statement of operations and is qualified in its entirety to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,755
<SECURITIES> 0
<RECEIVABLES> 24,722
<ALLOWANCES> 0
<INVENTORY> 17,757 <F1>
<CURRENT-ASSETS> 41,858
<PP&E> 95,196
<DEPRECIATION> 0
<TOTAL-ASSETS> 145,430
<CURRENT-LIABILITIES> 24,935
<BONDS> 74,113 <F2>
0
0
<COMMON> 80
<OTHER-SE> 46,302 <F3>
<TOTAL-LIABILITY-AND-EQUITY> 145,430
<SALES> 0
<TOTAL-REVENUES> 47,384
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,562
<LOSS-PROVISION> (31) <F4>
<INTEREST-EXPENSE> 1,392
<INCOME-PRETAX> 2,461
<INCOME-TAX> 959
<INCOME-CONTINUING> 1,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,502
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
<FN>
<F1>Includes the following assets: prepaid expenses and other of $7,801, deferred income taxes--current of $1,580,
deferred income taxes--long-term of $376, restricted cash of $3,623, investment in limited partnership of $287, and
intangible assets, net of $4,090.
<F2>Includes the following long-term liabilities: deferred income of $2,855, capital lease obligation of $53,264,
and long-term debt of $17,994.
<F3>Includes the following equity accounts: additional paid-in capital of $48,340 and accumulated deficit of
$(2,038).
<F4>Includes income on investment in limited partnership of $31.
</FN>
</TABLE>
