<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 11, 1998
---------------
HARBORSIDE HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 01-14358 04-3307188
- ----------------------------------- ------------------ -------------------
State or Other Jurisdiction Commission (IRS Employer
of Incorporation File Number Identification No.)
470 Atlantic Avenue
Boston, Massachusetts 02210
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (617) 556-1515
--------------
Not Applicable.
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1 Changes in Control of Registrant
On April 15, 1998, Harborside Healthcare Corporation ("Harborside") entered
into a Merger Agreement with HH Acquisition Corp. ("MergerCo"), an entity
organized for the sole purpose of effecting a merger on behalf of Investcorp
S.A., certain of its affiliates and certain other international investors (the
"New Investors"). On August 11, 1998, MergerCo merged with and into Harborside,
with Harborside as the surviving corporation. As a result of the transaction,
and pursuant to the Merger Agreement, the New Investors acquired approximately
91% of the post-merger common stock of Harborside. The remaining 9% of the
common stock was retained by existing shareholders, including management. As a
result of the merger, Harborside shares will be de-listed from the New York
Stock Exchange.
The merger was approved by a majority of Harborside's shareholders at a
special meeting held on August 11, 1998. Each share not retained by existing
shareholders was converted into $25 in cash, representing in the aggregate, cash
payments of approximately $184 million. Holders of outstanding stock options of
the Company converted the majority of their options into cash at $25 per
underlying share (less applicable exercise price) with aggregate payments of
approximately $8 million.
In connection with the transaction and prior to the merger, the New
Investors made cash common equity contributions of $165 million to MergerCo, and
MergoCo obtained gross proceeds of $99.5 million through the issuance of 11%
Senior Subordinated Discount Notes ("Discount Notes") due 2008 and $40 million
through the issuance of 13.5% Exchangeable Preferred Stock ("Preferred Stock")
mandatorily redeemable in 2010. In connection with the merger, Harborside also
entered into a new $250 million secured credit facility with Chase Securities
Inc., as Arranger, Morgan Stanley Senior Funding, Inc. and BT Alex. Brown
Incorporated, as Co-Arrangers, Bankers Trust Company, as Documentation Agent,
Morgan Stanley Senior Funding, Inc., as Syndication Agent, The Chase Manhattan
Bank, as Administration Agent and the lenders named therein. The Discount Notes
and the Preferred Stock were privately placed by Morgan Stanley & Co.
Incorporated, Chase Securities Inc. and BT Alex. Brown Incorporated. The Credit
Agreement for the senior credit facility, the Indenture for the Discount Notes
and the Certificate of Designations for the Preferred Stock are included as
exhibits to this Form 8-K.
ITEM 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Unaudited Pro Forma Consolidated Financial Information") is based on the
unaudited historical consolidated financial statements of the Company and the
unaudited historical financial statements of the Briarfield Facilities and the
Rhode Island Facilities.
The unaudited pro forma consolidated statements of operations for the three
months and the six months ended June 30, 1998 have been prepared to give effect
to: (i) the Completed 1998 Acquisitions; and (ii) the Recapitalization, as if
each had occurred on January 1, 1997; and exclude non-recurring items directly
attributable to the Recapitalization. The unaudited pro forma balance sheet as
of June 30, 1998 has been prepared as if the recapitalization had occurred on
that date.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The pro forma
statements of operations do not purport to present what the Company's results
of operations would actually have been had the Recapitalization and the
Completed 1998 Acquisitions in fact occurred on January 1, 1997, or to project
the Company's results of operations for any future period. The pro forma balance
sheet data do not purport to present what the Company's financial position
actually would have been had the Recapitalization in fact occurred on June 30,
1998, or to project the Company's financial position at any future date. The
Issuer expects that the Recapitalization will be treated as a recapitalization
for financial accounting purposes. Accordingly, no pro forma adjustments were
made to the historical basis of the Company's assets and liabilities.
For the purpose of presenting the unaudited pro forma consolidated
statements of operations, "Completed 1998 Acquisitions Combined" refers to the
historical results of operations of the entities acquired as part of the
Completed 1998 Acquisitions, as adjusted.
As used in the Unaudited Pro Forma Consolidated Financial Information, (i)
"Pro Forma Before Recapitalization" gives pro forma effect to the Completed 1998
Acquisitions and (ii) "Pro Forma" gives pro forma effect to each of the
foregoing acquisitions and the Recapitalization.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------------------------------------
HARBORSIDE COMPLETED
HEALTHCARE 1998 RECAPITALIZATION
CORPORATION ACQUISITIONS PRO FORMA BEFORE ADJUSTMENTS PRO FORMA
(A) COMBINED (B) RECAPITALIZATION (C) (M)
----------- ------------ ---------------- ---------------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total net
revenues....... $ 148,640 $ 5,693 $ 154,333 $ 16 (D) $ 154,349
Expenses:
Facility
operating..... 117,030 4,504 121,534 -- 121,534
Management
fees.......... -- 446 446 -- 446
General and
administrative.. 7,475 -- 7,475 -- 7,475
Service charges
paid to
affiliates.... 628 -- 628 600 (E) 1,228
Depreciation
and
amortization.. 2,263 -- 2,263 984 (F) 3,247
Synthetic lease
rent.......... 1,501 761 2,262 (2,262)(G) --
Facility rent.. 10,120 -- 10,120 -- 10,120
--------- ------- -------- ------- ---------
Total
expenses...... 139,017 5,711 144,728 (678) 144,050
--------- ------- -------- ------- ---------
Income from
operations..... 9,623 (18) 9,605 694 10,299
Other:
Interest
expense, net.. (3,202) -- (3,202) (6,925)(H) (10,127)
Loss on
investment in
limited
partnership... (72) -- (72) -- (72)
--------- ------- -------- ------- ---------
Income before
income taxes... 6,349 (18) 6,331 (6,231) 100
Income taxes.... (2,476) 7 (2,469) 2,430 (I) (39)
--------- ------- -------- ------- ---------
Net income...... $ 3,873 $ (11) $ 3,862 $(3,801) $ 61
========= ======= ======== ======= =========
Net income...... $ 3,873 $ 3,862 $ 61
Preferred divi-
dends.......... -- -- (3,135)(J)
--------- -------- ---------
Net income
(loss)
available
(attributable)
to common
stockholders... $ 3,873 $ 3,862 $ (3,074)
========= ======== ==========
Net income (loss) available
(attributable)
to common
stockholders
per share:
Basic.......... $ .48 $ .48 $ (.42)
========= ========= ==========
Diluted........ $ .47 $ .46 $ (.42)
========= ========= ==========
Weighted average
number of com-
mon shares used
in per share
computations:
Basic.......... 8,010,339 8,010,339 7,261,332
Diluted........ 8,327,525 8,327,525 7,261,332
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1998
--------------------------------------------------------------------
COMPLETED
HARBORSIDE 1998
HEALTHCARE ACQUISITIONS PRO FORMA RECAPITALIZATION
CORPORATION COMBINED BEFORE ADJUSTMENTS PRO FORMA
(K) (L) RECAPITALIZATION (C) (M)
----------- ------------ ---------------- ---------------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total net revenues......... $ 76,186 $ 845 $ 77,031 $ 8 (D) $ 77,039
Expenses:
Facility operating........ 59,649 673 60,322 -- 60,322
Management fees........... -- 75 75 -- 75
General and
administrative........... 4,110 -- 4,110 -- 4,110
Service charges paid to
affiliates............... 315 -- 315 300 (E) 615
Depreciation and
amortization............. 1,178 -- 1,178 492 (F) 1,670
Synthetic lease rent...... 1,051 110 1,161 (1,161)(G) --
Facility rent............. 5,014 -- 5,014 -- 5,014
--------- ------- --------- ------- ---------
Total expenses............ 71,317 858 72,175 (369) 71,806
--------- ------- --------- ------- ---------
Income from operations..... 4,869 (13) 4,856 377 5,233
Other:
Interest expense, net..... (1,552) -- (1,552) (3,483)(H) (5,035)
Loss on investment in
limited partnership...... (41) -- (41) -- (41)
--------- ------- --------- ------- ---------
Income before income
taxes..................... 3,276 (13) 3,263 (3,106) 157
Income taxes............... (1,278) 5 (1,273) 1,211 (I) (62)
--------- ------- --------- ------- ---------
Net income................. $ 1,998 $ (8) $ 1,990 $(1,895) $ 95
========= ======= ========= ======= =========
Net income................. $ 1,998 $ 1,990 $ 95
Preferred dividends........ -- -- (1,594)(J)
--------- --------- ---------
Net income (loss) available
(attributable) to common
stockholders.............. $ 1,998 $ 1,990 $ (1,499)
========= ========= =========
Net income (loss) available
(attributable) to common
stockholders per share:
Basic..................... $ .25 $ .25 $ (.21)
========= ========= =========
Diluted................... $ .24 $ .24 $ (.21)
========= ========= =========
Weighted average number of
common shares used in per
share computations:
Basic..................... 8,010,884 8,010,884 7,261,332
Diluted................... 8,350,530 8,350,530 7,261,332
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(A) Represents the historical unaudited consolidated statement of operations of
the Company for the six months ended June 30, 1998.
(B) During 1998, the Company acquired the Briarfield and Rhode Island Facilities
through synthetic lease financings. To reflect the pro forma effect of these
acquisitions on the Company's operations, the schedule below presents the
unaudited historical statements of operations of the Briarfield and Rhode
Island Facilities, which were acquired on April 1, 1998 and May 8, 1998,
respectively, for the period from January 1, 1998 through their respective
acquistion dates.
<TABLE>
<CAPTION>
COMPLETED
BRIARFIELD RHODE ISLAND 1998
FACILITIES FACILITIES PRO FORMA ACQUISITIONS
(1) (2) ADJUSTMENTS COMBINED (6)
-------------- ------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total net revenues...... $2,296 $ 3,261 $ 136 (3) $ 5,693
Expenses:
Facility operating.... 1,786 2,718 -- 4,504
Management fees....... 166 280 -- 446
Depreciation and
amortization......... 87 56 (143)(4) --
Synthetic lease rent.. -- -- 761 (4) 761
------ ------- ------ -------
Total expenses...... 2,039 3,054 618 5,711
------ ------- ------ -------
Income from operations.. 257 207 (482) (18)
Other:
Interest expense,
net.................. (166) (27) 193 (4) --
------ ------- ------ -------
Income before income
taxes.................. 91 180 (289) (18)
Income taxes............ -- -- 7 (5) 7
------ ------- ------ -------
Net income.............. $ 91 $ 180 $ (282) $ (11)
====== ======= ====== =======
</TABLE>
- --------
(1) Reflects the unaudited historical results of operations of the Briarfield
Facilities for the three months ended March 31, 1998.
(2) Reflects the unaudited historical results of operations of the Rhode
Island Facilities for the four months ended April 30, 1998.
(3) In Ohio and Rhode Island, a portion of a facility's Medicaid
reimbursement rate is related to the capital costs incurred to finance
the facility. As facility financing changes as a result of an
acquisition, the reimbursement of such capital costs (and accordingly,
a facility's net revenues) is affected as well. This adjustment
represents the aggregate increase in revenue that is directly
attributable to the Company's acquisition of the Briarfield and Rhode
Island Facilities and the related financings. The adjustment, which can
occur upon a change of facility ownership, is computed in accordance
with the state Medicaid program cost reporting rules and regulations by
substituting the effects of the Company's financing for the amounts
included in the historical Medicaid cost reports.
(4) Reflects the following adjustments: (a) the elimination of historical
combined amounts recorded by the Briarfield and Rhode Island Facilities
for depreciation and amortization expense which had been recorded as a
result of the ownership of the underlying assets; (b) the elimination
of historical combined amounts recorded by the Briarfield and Rhode
Island Facilities for interest expense as the Company did not assume
the related indebtedness; and (c) the synthetic lease rent expense that
the Company would have incurred had the Completed 1998 Acquisitions
occurred on January 1, 1997.
(5) Reflects the adjustment to the provision for federal and state income
taxes which the Company would have recorded (based on the Company's
historical effective tax rate of 39%) had the Completed 1998
Acquisitions occurred on January 1, 1997.
(6) The pro forma financial results exclude the $446 effect of the
elimination of historical management fees paid under contracts with
related parties that were terminated as a condition to closing the
Completed 1998 Acquisitions. Subsequent to the dates of such
acquisitions, no services were provided to the Company by these related
parties.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(C) The recapitalization adjustments give effect to the Merger and the
recapitalization financings which occurred in connection with the Merger.
The recapitalization financings included (but were not limited to) the
following: (i) the receipt of cash equity contributions of $165.0 million;
(ii) the issuance of $40.0 million of Exchangeable Preferred Stock; and
(iii) the issuance of the Discount Notes, yielding gross proceeds of
approximately $99.5 million.
A portion of the net proceeds of the Offering were used to refinance all
borrowings under the Company's previously existing credit facility and to
finance the purchase of the Company's facilities described in note (D) below,
which prior to the Merger were leased through the Company's previously
existing synthetic lease facility.
The unaudited pro forma consolidated statements of operations exclude the
following non-recurring items that were directly attributable to the
recapitalization: (i) $31.2 million of fees and expenses that were incurred by
the Company in connection with the recapitalization, and a related income tax
benefit of $3.4 million; (ii) the write-off of $.9 million of debt issuance
costs related to existing debt retired in connection with the
recapitalization, and a related income tax benefit of $.3 million; and (iii) a
$7.9 million compensation charge resulting from the conversion of outstanding
stock options in connection with the recapitalization, and a related income
tax benefit of $3.1 million.
(D) In connection with the recapitalization, the previously existing synthetic
lease financings related to the Dayton Facilities, the Briarfield Facilities
and the Rhode Island Facilities were eliminated and the Company purchased
these facilities through the exercise of existing purchase options using
cash available to the Company through the recapitalization financings. In
Ohio and Rhode Island, a portion of a facility's Medicaid reimbursement rate
is related to the capital costs incurred to finance the facility. As
facility financing changes as a result of an acquisition, the reimbursement
of such capital costs (and accordingly, a facility's net revenue) is
affected as well. This adjustment represents the following aggregate
increases (decreases) in total net revenues that are directly attributable
to the acquisition and related refinancing of the following facilities at
the time of the recapitalization:
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Dayton Facilities....... $ 44 $ 22
Briarfield Facilities... (43) (22)
Rhode Island
Facilities............. 15 8
---- ----
$ 16 $ 8
==== ====
</TABLE>
(E) Reflects the amortization of prepaid management advisory and consulting
services fees to be paid to Investcorp International Inc.
(F) Depreciation expense related to the purchase of the Dayton Facilities, the
Briarfield Facilities and the Rhode Island Facilities is estimated using the
straight-line method. Had the Dayton Facilities, the Briarfield Facilities
and the Rhode Island Facilities been acquired on January 1, 1997, the
resulting depreciation and amortization would have been approximately $984
and $492 for the six months ended June 30, 1998 and the three months ended
June 30, 1998, respectively. In addition, in conjunction with the
recapitalization, the two principal beneficial stockholders of the Company
prior to the Merger entered into one-year non-compete agreements with the
Company. To reflect the one-year term, none of such amortization is
reflected for the six months or the three months ended June 30, 1998.
(G) Reflects the elimination of synthetic lease rent expense as a result of
the elimination of the previously existing synthetic lease financings for
the Dayton Facilities, the Briarfield Facilities and the Rhode Island
Facilities. In connection with the Merger, the Company purchased these
facilities for $59,250 through the exercise of existing purchase options.
See note (D) above.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(H) In connection with the recapitalization, the Company's borrowings under its
existing credit facility were refinanced using a portion of the proceeds of
the recapitalization financings. The adjustments to the Company's interest
expense, net, to reflect the refinancing of this debt as of January 1, 1997
are as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Elimination of the
historical interest
expense related to the
existing credit
facility and the
historical amortization
of debt issuance costs
related to the
Company's debt and
synthetic lease
arrangements to be
retired in connection
with the
recapitalization....... $ (606) $ (282)
Interest expense related
to the $250.0 million
New Credit Facility
with an assumed
interest rate of LIBOR
(5.65%) plus 2.25%
(7.90%) (1)............ 830 415
Interest expense
resulting from $99.5
million gross proceeds
of the Discount Notes,
at an interest rate of
11.00%................. 6,091 3,045
Amortization of debt
issuance costs of $8.5
million associated with
the recapitalization
financings over the
respective terms of
indebtedness........... 610 305
------ ------
$6,925 $3,483
====== ======
</TABLE>
--------
(1) Interest expense is calculated assuming $5.5 million outstanding under the
new credit facility and a .5% fee on the unused portion.
(I) Reflects the adjustment to the provision for federal and state income
taxes which the Company would have recorded (based on the Company's
historical effective tax rate of 39%) had the matters described in notes
(D) through (H) occurred at January 1, 1997.
(J) Dividends on the Exchangeable Preferred Stock are expected to accrue
quarterly over the first five years (i.e., dividends will not be paid in
cash during this period) at an annual rate of 13.50%.
(K) Represents the unaudited consolidated statement of operations of the
Company for the three months ended June 30, 1998.
(L) During 1998, the Company acquired the Briarfield and Rhode Island Facilities
through synthetic lease financings. To reflect the pro forma effect of the
acquisition of the Rhode Island Facilities on the Company's operations, the
schedule below presents the unaudited historical statements of operations of
the Rhode Island Facilities, which were acquired on May 8, 1998, for the
period from April 1, 1998 through its acquisition.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMPLETED
1998
RHODE ISLAND PRO FORMA ACQUISITIONS
FACILITIES ADJUSTMENTS COMBINED (6)
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total net revenues...... $ 829 $ 16 (1) $ 845
Expenses:
Facility operating.... 673 -- 673
Management fees....... 75 -- 75
Depreciation and
amortization......... 15 (15)(2) --
Synthetic lease rent.. -- 110 (2) 110
------ ----- ------
Total expenses...... 763 95 858
------ ----- ------
Income from operations.. 66 (79) (13)
Other:
Interest expense,
net.................. (7) 7 (3) --
------ ----- ------
Income before income
taxes.................. 59 (72) (13)
Income taxes............ -- 5 (4) 5
------ ----- ------
Net income.............. $ 59 $ (67) $ (8)
====== ===== ======
</TABLE>
--------
(1) In Rhode Island, a portion of a facility's Medicaid reimbursement rate is
related to the capital costs incurred to finance the facility. As facility
financing changes as a result of an acquisition, the reimbursement of such
capital costs (and accordingly, a facility's net revenues) is affected as
well. This adjustment represents the aggregate increase in revenue that is
directly attributable to the Company's acquisition of the Rhode Island
Facilities and the related financings. The adjustment, which can occur
upon a change of facility ownership, is computed in accordance with the
state Medicaid program cost reporting rules and regulations by
substituting the effects of the Company's financing for the amounts
included in the historical Medicaid cost reports.
(2) Reflects the following adjustments: (a) the elimination of historical
combined amounts recorded by the Rhode Island Facilities for depreciation
and amortization expense which had been recorded as a result of the
ownership of the underlying assets; (b) the elimination of historical
combined amounts recorded by the Rhode Island Facilities for interest
expense as the Company did not assume the related indebtedness; and (c)
the synthetic lease rent expense that the Company would have incurred had
the Completed 1998 Acquisitions occurred on January 1, 1997.
(3) Reflects the adjustment to the provision for federal and state income
taxes which the Company would have recorded (based on the Company's
historical effective tax rate of 39%) had the Completed 1998
Acquisitions occurred on January 1, 1997.
(4) The pro forma financial results exclude the $75 effect of the
elimination of historical management fees paid under contracts with
related parties that were terminated as a condition to closing the
Completed 1998 Acquisitions. Subsequent to the dates of such
acquisitions, no services were provided to the Company by these related
parties.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(M) The pro forma financial results exclude the effects of the elimination of
certain contracts terminated as a condition to closing the Completed 1998
Acquisitions. On a pro forma basis, the Company would have realized net cost
reductions of $446 and $75 for the six months ended June 30, 1998 and the
three months ended June 30, 1998, respectively, as a result of the
elimination of these historical contracts. On a pro forma basis, assuming
the elimination of these contracts in connection with such acquisitions on
January 1, 1997, there would have been no management fees for the six months
or the three months ended June 30, 1998.
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
HARBORSIDE
HEALTHCARE
CORPORATION RECAPITALIZATION
(A) ADJUSTMENTS PRO FORMA
----------- ---------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 3,028 $ -- (B) $ 3,028
Accounts receivable,
net................... 41,484 -- 41,484
Prepaid expenses and
other................. 8,466 (336)(C) 8,130
Deferred income
taxes................. 2,150 -- 2,150
-------- -------- --------
Total current
assets.............. 55,128 (336) 54,792
Restricted cash......... 7,116 -- 7,116
Property and equipment,
net.................... 102,048 59,250 (D) 161,298
Intangible assets, net.. 9,673 14,106 (E) 23,779
Note receivable......... 7,487 -- 7,487
Deferred income taxes... 71 -- 71
-------- -------- --------
Total assets......... $181,523 $ 73,020 $254,543
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt........ $ 202 -- $ 202
Current portion of
capital lease
obligation............ 4,204 -- 4,204
Accounts payable....... 7,963 -- 7,963
Employee compensation
and benefits.......... 13,696 -- 13,696
Other accrued
liabilities........... 5,786 -- 5,786
Accrued interest....... 199 -- 199
Current portion of
deferred income....... 803 -- 803
-------- -------- --------
Total current
liabilities......... 32,853 -- 32,853
Long-term portion of
deferred income........ 5,045 -- 5,045
Long-term debt.......... 36,346 85,040 (F) 121,386
Long-term portion of
capital lease
obligation............. 51,594 -- 51,594
-------- -------- --------
Total liabilities.... 125,838 85,040 210,878
-------- -------- --------
Exchangeable preferred
stock, redeemable...... -- 40,000 (G) 40,000
Stockholders' equity:
Common stock........... 80 66 (H) 146
Additional paid-in
capital............... 48,469 164,934 (H) 213,403
Treasury stock, at
cost.................. -- (183,881)(H) (183,881)
Retained earnings...... 7,136 (33,141)(H) (26,005)
-------- -------- --------
Total stockholders'
equity.............. 55,685 (52,020) 3,665
-------- -------- --------
Total liabilities and
stockholders'
equity.............. $181,523 $ 73,020 $254,543
======== ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Represents the historical unaudited consolidated balance sheet
of the Company as of June 30, 1998.
(B) Reflects the following sources and uses of funds in connection
with the recapitalization:
<TABLE>
<S> <C>
Total sources:
Gross proceeds from the issuance of the Discount Notes........... $ 99,493
Proceeds from the issuance of 6,600,000 shares of common stock at
$25.00 per share (1)............................................ 165,000
Gross proceeds from the issuance of the Exchangeable Preferred
Stock........................................................... 40,000
Borrowings under the new credit facility......................... 5,547
--------
310,040
========
Total uses:
Redemption of existing 7,355,245 shares of Harborside Common
Stock at $25.00 per share....................................... $183,881
Conversion to cash of 648,923 options at a weighted average
exercise price of $12.87........................................ 7,871
Exercise of existing purchase options for leased facilities...... 59,250
Refinancing of existing credit facility.......................... 20,000
Transaction fees and expenses of the Recapitalization
(2)............................................................. 39,038
--------
310,040
========
</TABLE>
--------
(1) These shares consist of 5,940,000 shares of Harborside Class B Common
Stock, 640,000 shares of Harborside Class C Common Stock and 20,000
shares of Harborside Class D Common Stock to be exchanged on a one-
for-one basis in the Merger for shares of Class B Stock, Class C
Stock, and Class D Stock, respectively, of the Issuer. Shares of
Harborside Class B Common Stock and Harborside Class C Common Stock
are non-voting, while the shares of Harborside Class D Common Stock have
330 votes per share.
(2) The $39.0 million of fees and expenses includes: $8.5 million of debt
issuance costs associated with the recapitalization financings, $6.0
million of management fees prepaid to III, a $.5 million payment related
to the Non-Compete Agreements and $30.8 million of other fees and
expenses to be paid in connection with the recapitalization, less $6.8
million related to the income tax benefits related to certain of such
fees and expenses, conversion of options, and the write-off of deferred
issuance costs associated with retired debt. The $30.8 million of fees
and expenses paid in connection with the recapitalization include standby
commitment fees, legal and accounting fees, and compensation and other
charges associated with the recapitalization.
(C) Reflects forgiveness of loans associated with the change of control.
(D) Reflects the exercise of existing purchase options for the Dayton
Facilities, the Briarfield Facilities and the Rhode Island Facilities.
(E) Reflects the following:
<TABLE>
<S> <C>
Debt issuance costs related to the recapitalization
financings....................................................... $ 8,503
Management fees prepaid to Investcorp International Inc. ......... 6,000
Payments related to the Non-Compete Agreement..................... 500
Elimination of debt issuance costs related to retired debt........ (897)
-------
$14,106
=======
</TABLE>
<PAGE>
HARBORSIDE HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(F) Reflects the following:
<TABLE>
<S> <C>
Refinancing of existing credit facility........................... $ (20,000)
Borrowings under the new credit facility.......................... 5,547
Gross proceeds from the issuance of the Notes..................... 99,493
---------
$ 85,040
=========
<CAPTION>
(G) Reflects the issuance of the Exchangeable Preferred Stock.
(H) Reflects the following:
<S> <C>
Issuance of 6,600,000 shares of common stock par value $.01....... $ 66
Issuance of 6,600,000 shares of common stock at $25.00 per share,
additional
paid-in-capital.................................................. 164,934
Redemption of existing 7,355,245 shares of Harborside Common Stock
at $25.00 per share.............................................. (183,881)
Conversion to cash of 648,923 options at a weighted average exer-
cise price of $12.87............................................. (7,871)
Certain fees and expenses incurred by the Company in connection
with the Recapitalization (1).................................... (32,123)
Tax benefit of management transaction bonuses, standby commitment
fees, conversion of options, and write-off of deferred issuance
costs associated with retired debt............................... 6,855
---------
$ (52,020)
=========
</TABLE>
--------
(1) Represents $30.8 million in fees and expenses paid in connection with the
Recapitalization, a $.4 million non-cash charge related to the
forgiveness of employee loans, and a $.9 million non-cash charge
associated with the elimination of deferred financing costs related to
retired debt.
(c) Exhibits
4.1 Indenture, dated as of July 31, 1998, including therein the form of
Note, between HH Acquisition Corp. and United States Trust Company of New York,
as Trustee, providing for 11% Senior Subordinated Discount Notes due 2008.
4.2 Certificate of Designations, effective August 11, 1998, of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of 13
1/2% Exchangeable Preferred Stock Due 2010 and Qualifications, Limitations and
Restrictions Thereof.
<PAGE>
10.1 Credit Agreement dated as of August 11, 1998 among Harborside
Healthcare Corporation and Chase Securities Inc., as Arranger, Morgan Stanley
Senior Funding, Inc. and BT Alex Brown Incorporated, as Documentation Agent,
Morgan Stanley Senior Funding, Inc., as Syndication Agent, The Chase Manhattan
Bank, as Administrative Agent and the lenders named therein.
99.1 Press release dated August 11, 1998 announcing the closing of the
merger and recapitalization transaction.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
HARBORSIDE HEALTHCARE CORPORATION
(Registrant)
By: /s/Stephen Guillard
---------------------------
Name: Stephen Guillard
Title: Chairman, President, and Chief
Executive Officer
Dated: August 26, 1998
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
================================================================================
HH ACQUISITION CORP.,
AS ISSUER
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
AS TRUSTEE,
______________________
INDENTURE
DATED AS OF JULY 31, 1998
_______________________
11% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2008
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture
----------- ---------
<S> <C>
310 (a) (1) ...................................... 7.10
(a) (2) ...................................... 7.10
(a) (3) ...................................... N.A.
(a) (4) ...................................... N.A.
(b) ...................................... 7.08; 7.10
(c) ...................................... N.A.
311 (a) ...................................... 7.11
(b) ...................................... 7.11
(c) ...................................... N.A.
312 (a) ...................................... 2.04
(b) ...................................... 13.03
(c) ...................................... 13.03
313 (a) ...................................... 7.06
(b) (1) ...................................... N.A.
(b) (2) ...................................... 7.06
(c) ...................................... 13.02
(d) ...................................... 7.06
314 (a) ...................................... 4.02; 4.09
(b) ...................................... N.A.
(c) (1) ...................................... 13.04
(c) (2) ...................................... 13.04
(c) (3) ...................................... 13.04
(d) ...................................... N.A.
(e) ...................................... 13.05
(f) ...................................... N.A.
315 (a) ...................................... 7.01
(b) ...................................... 7.05; 13.02
(c) ...................................... 7.01
(d) ...................................... 7.01
(e) ...................................... 6.11
316 (a) (last sentence) ...................................... 13.06
(a) (1) (A) ...................................... 6.05
(a) (1) (B) ...................................... 6.04
(a) (2) ...................................... N.A.
(b) ...................................... 6.07
317 (a) (1) ...................................... 6.08
(a) (2) ...................................... 6.09
(b) ...................................... 2.05
318 (a) ...................................... 13.01
</TABLE>
N.A. means Not Applicable
______________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. Definitions............................................................................. 1
SECTION 1.02. Other Definitions....................................................................... 26
SECTION 1.03. Incorporation by Reference of Trust Indenture Act....................................... 27
SECTION 1.04. Rules of Construction................................................................... 27
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating......................................................................... 28
SECTION 2.02. Restrictive Legends..................................................................... 29
SECTION 2.03. Execution, Authentication and Denominations............................................. 31
SECTION 2.04. Registrar and Paying Agent.............................................................. 32
SECTION 2.05. Paying Agent to Hold Money in Trust..................................................... 33
SECTION 2.06. Transfer and Exchange................................................................... 33
SECTION 2.07. Book-Entry Provisions for Global Securities............................................. 34
SECTION 2.08. Special Transfer Provisions............................................................. 36
SECTION 2.09. Replacement Securities.................................................................. 40
SECTION 2.10. Outstanding Securities.................................................................. 40
SECTION 2.11. Temporary Securities.................................................................... 40
SECTION 2.12. Cancellation............................................................................ 41
SECTION 2.13. CUSIP Numbers........................................................................... 41
SECTION 2.14. Defaulted Interest...................................................................... 41
SECTION 2.15. Issuance of Additional Securities....................................................... 42
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee...................................................................... 42
SECTION 3.02. Selection and Notice.................................................................... 42
SECTION 3.03. Notice.................................................................................. 42
SECTION 3.04. Effect of Notice of Redemption.......................................................... 43
SECTION 3.05. Deposit of Redemption Price............................................................. 44
SECTION 3.06. Securities Redeemed in Part............................................................. 44
SECTION 3.07. Optional Redemption..................................................................... 44
SECTION 3.08. Special Mandatory Redemption............................................................ 45
SECTION 3.09. Repurchase Offers....................................................................... 45
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.10. No Sinking Fund......................................................................... 48
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities................................................................... 48
SECTION 4.02. Reports................................................................................. 49
SECTION 4.03. Incurrence of Debt and Issuance of Preferred Stock...................................... 49
SECTION 4.04. Restricted Payments..................................................................... 51
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries............................................................... 55
SECTION 4.06. Asset Sales............................................................................. 57
SECTION 4.07. Transactions with Affiliates............................................................ 58
SECTION 4.08. Change of Control....................................................................... 59
SECTION 4.09. Compliance Certificate.................................................................. 59
SECTION 4.10. Liens................................................................................... 60
SECTION 4.11. Additional Security Guarantees.......................................................... 60
SECTION 4.12. Restriction on Senior Subordinated Debt................................................. 60
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. Merger, Consolidation or Sale of All or Substantially
All Assets of the Company............................................................. 60
SECTION 5.02. Merger, Consolidation or Sale of All or Substantially
All Assets of a Guarantor............................................................. 62
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default and Remedies.......................................................... 62
SECTION 6.02. Acceleration............................................................................ 64
SECTION 6.03. Other Remedies.......................................................................... 64
SECTION 6.04. Waiver of Past Defaults................................................................. 65
SECTION 6.05. Control by Majority..................................................................... 65
SECTION 6.06. Limitation on Suits..................................................................... 65
SECTION 6.07. Rights of Holders to Receive Payment.................................................... 66
SECTION 6.08. Collection Suit by Trustee.............................................................. 66
SECTION 6.09. Trustee May File Proofs of Claim........................................................ 66
SECTION 6.10. Priorities.............................................................................. 66
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 6.11. Undertaking for Costs................................................................... 67
SECTION 6.12. Waiver of Stay or Extension Laws........................................................ 67
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee....................................................................... 67
SECTION 7.02. Rights of Trustee....................................................................... 68
SECTION 7.03. Individual Rights of Trustee............................................................ 70
SECTION 7.04. Trustee's Disclaimer.................................................................... 70
SECTION 7.05. Notice of Defaults...................................................................... 70
SECTION 7.06. Reports by Trustee to Holders........................................................... 70
SECTION 7.07. Compensation and Indemnity.............................................................. 70
SECTION 7.08. Replacement of Trustee.................................................................. 72
SECTION 7.09. Successor Trustee by Merger............................................................. 73
SECTION 7.10. Eligibility; Disqualification........................................................... 73
SECTION 7.11. Preferential Collection of Claims Against Company....................................... 73
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Legal Defeasance and Covenant Defeasance................................................ 73
SECTION 8.02. Conditions to Legal or Covenant Defeasance.............................................. 74
SECTION 8.03. Deposited Money and Government Securities to
Be Held in Trust; Other Miscellaneous Provisions....................................... 76
SECTION 8.04. Repayment to Company.................................................................... 76
SECTION 8.05. Reinstatement........................................................................... 77
SECTION 8.06. Satisfaction and Discharge of Indenture................................................. 77
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders.............................................................. 78
SECTION 9.02. With Consent of Holders................................................................. 79
SECTION 9.03. Compliance with Trust Indenture Act..................................................... 80
SECTION 9.04. Revocation and Effect of Consents and Waivers........................................... 80
SECTION 9.05. Notation on or Exchange of Securities................................................... 81
SECTION 9.06. Trustee to Sign Amendments.............................................................. 81
</TABLE>
ARTICLE X
-iii-
<PAGE>
<TABLE>
SUBORDINATION
<S> <C>
SECTION 10.01. Agreement To Subordinate............................................................... 81
SECTION 10.02. Liquidation, Dissolution, Bankruptcy................................................... 82
SECTION 10.03. Default on Senior Debt................................................................. 82
SECTION 10.04. Acceleration of Payment of Securities.................................................. 83
SECTION 10.05. When Distribution Must Be Paid Over.................................................... 83
SECTION 10.06. Subrogation............................................................................ 83
SECTION 10.07. Relative Rights........................................................................ 83
SECTION 10.08. Subordination May Not Be Impaired by Company........................................... 84
SECTION 10.09. Rights of Trustee and Paying Agent..................................................... 84
SECTION 10.10. Distribution or Notice to Representative............................................... 84
SECTION 10.11. Article X Not to Prevent Events of Default or Limit
Right to Accelerate................................................................... 84
SECTION 10.12. Trust Moneys Not Subordinated.......................................................... 84
SECTION 10.13. Trustee Entitled to Rely............................................................... 85
SECTION 10.14. Trustee to Effectuate Subordination.................................................... 85
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt....................................... 85
SECTION 10.16. Reliance by Holders of Senior Debt on
Subordination Provisions.............................................................. 85
SECTION 10.17. Trustee's Compensation Not Prejudiced.................................................. 86
ARTICLE XI
SECURITY GUARANTEES
SECTION 11.01. Security Guarantees.................................................................... 86
SECTION 11.02. Limitation on Liability................................................................ 88
SECTION 11.03. Successors and Assigns................................................................. 88
SECTION 11.04. No Waiver.............................................................................. 88
SECTION 11.05. Modification........................................................................... 89
ARTICLE XII
SUBORDINATION OF THE SECURITY GUARANTEES
SECTION 12.01. Agreement to Subordinate............................................................... 89
SECTION 12.02. Liquidation, Dissolution, Bankruptcy................................................... 89
SECTION 12.03. Default on Senior Debt of a Guarantor.................................................. 89
SECTION 12.04. Demand for Payment..................................................................... 90
SECTION 12.05. When Distribution Must Be Paid Over.................................................... 90
SECTION 12.06. Subrogation............................................................................ 91
SECTION 12.07. Relative Rights........................................................................ 91
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor....................................... 91
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
SECTION 12.09. Rights of Trustee and Paying Agent..................................................... 91
SECTION 12.10. Distribution or Notice to Representative............................................... 92
SECTION 12.11. Article XII Not to Prevent Events of Default or
Limit Right to Accelerate............................................................. 92
SECTION 12.12. Trustee Entitled to Rely............................................................... 92
SECTION 12.13. Trustee to Effectuate Subordination.................................................... 92
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Debt
of a Guarantor........................................................................ 92
SECTION 12.15. Reliance by Holders of Senior Debt of a Guarantor
on Subordination Provisions........................................................... 93
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls........................................................... 93
SECTION 13.02. Notices................................................................................ 93
SECTION 13.03. Communication by Holders with Other Holders............................................ 95
SECTION 13.04. Certificate and Opinion as to Conditions Precedent..................................... 95
SECTION 13.05. Statements Required in Certificate or Opinion.......................................... 95
SECTION 13.06. When Securities Disregarded............................................................ 96
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar........................................... 96
SECTION 13.08. Legal Holidays......................................................................... 96
SECTION 13.09. GOVERNING LAW.......................................................................... 96
SECTION 13.10. No Recourse Against Others............................................................. 96
SECTION 13.11. Successors............................................................................. 97
SECTION 13.12. Multiple Originals..................................................................... 97
SECTION 13.13. Table of Contents; Headings............................................................ 97
</TABLE>
-v-
<PAGE>
INDENTURE dated as of July 31, 1998, among HH ACQUISITION CORP., a
Delaware corporation (the "Company"), and UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (i) the Company's 11% Senior
Subordinated Discount Notes due 2008 issued on the date hereof, (ii) any
Additional Securities that may be issued on any other Issue Date (all such
Securities in clauses (i) and (ii) being referred to collectively as the
"Initial Securities") and (iii) if and when issued as provided in a Registration
Rights Agreement of the Company's 11% Senior Subordinated Discount Notes due
2008 issued in a Registered Exchange Offer in exchange for any Initial
Securities (the "Exchange Securities", and together with the Initial Securities
and any Exchange Securities issued hereunder, the "Securities"). The Securities
issued on the date hereof will be limited to $170,000,000 in aggregate principal
amount at maturity. Subject to the conditions set forth herein, the Company may
issue Additional Securities.
WHEREAS, as of the date hereof, Harborside and the Guarantors are not
parties to this Indenture. However, upon consummation of the Recapitalization,
Harborside, each of the Guarantors and the Trustee will execute and deliver a
supplemental indenture providing for (i) the assumption by Harborside of the
Company's obligations under this Indenture and (ii) each of the Guarantors to
become a party to this Indenture as a Guarantor.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.01. Definitions.
-----------
"Accreted Value" means, for any date, the amount calculated pursuant
to clauses (i), (ii), (iii) or (iv) for each $1,000 principal amount at maturity
of Securities:
(i) if the date occurs on one of the following dates (each a "Semi-
Annual Accrual Date"), the Accreted Value will equal the amount set forth
below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------------ --------------
<S> <C>
February 1, 1999...................... $ 617.62
August 1, 1999...................... $ 651.59
February 1, 2000...................... $ 687.43
August 1, 2000...................... $ 725.24
February 1, 2001...................... $ 765.13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
August 1, 2001...................... $ 807.21
February 1, 2002...................... $ 851.61
August 1, 2002...................... $ 898.45
February 1, 2003...................... $ 947.86
August 1, 2003...................... $1000.00
</TABLE>
(ii) if the date occurs before the first Semi-Annual Accrual Date,
the Accreted Value will equal the sum of (a) the original issue price of
the Securities per $1,000 principal amount and (b) an amount equal to the
product of (1) the Accreted Value for the first Semi-Annual Accrual Date
less the original issue price multiplied by (2) a fraction, the numerator
of which is the number of days from the first Issue Date to the date, using
a 360-day year of twelve 30-day months, and the denominator of which is the
number of days from the first Issue Date to the first Semi-Annual Accrual
Date, using a 360-day year of twelve 30-day months;
(iii) if the date occurs between two Semi-Annual Accrual Dates, the
Accreted Value will equal the sum of (a) the Accreted Value for the Semi-
Annual Accrual Date immediately preceding such date and (b) an amount equal
to the product of (1) Accreted Value for the immediately following Semi-
Annual Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date multiplied by (2) a fraction, the numerator of
which is the number of days from the immediately preceding Semi-Annual
Accrual Date to the date, using a 360-day year of twelve 30-day months, and
the denominator of which is 180; or
(iv) if the date occurs after the last Semi-Annual Accrual Date, the
Accreted Value will equal $1,000.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such other Person is merged with or
into or became a Restricted Subsidiary of such specified Person, (ii) Debt
incurred by such specified Person, its Restricted Subsidiaries or such other
Person for the purpose of financing the acquisition of such other Person or its
assets, provided that such other Person becomes or, in the case of an asset
--------
purchase, the Person acquiring such assets is, a Restricted Subsidiary, and
(iii) Debt secured by a Lien encumbering any asset acquired by such specified
Person.
"Additional Securities" shall mean Initial Securities initially issued
subsequent to the date hereof pursuant to Article II and in compliance with
Section 4.03.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person, (ii) any other Person that owns,
directly or indirectly, 5% or more of such specified Person's Voting Stock or
(iii) any Person who is a director or officer (a) of such Person, (b) of any
Subsidiary of such Person or (c) of any Person described in clause (i) or (ii)
2
<PAGE>
above. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or Co-registrar.
"Applicable Premium" means, with respect to a Security at any
redemption date prior to August 1, 2003, the greater of (i) 1.0% of the Accreted
Value of such Security or (ii) the excess of (A) the present value at such time
of the redemption price of such Security at August 1, 2003 (such redemption
price being set forth in the table in Section 3.07(a)), computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
Accreted Value of such Security on the redemption date.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including by way of a sale and leaseback)
(provided that the sale, lease, conveyance or other disposition of all or
--------
substantially all of the assets of the Company will be governed by Article V and
not by the provisions of Section 4.06), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of any of the
Company's Subsidiaries (other than director's qualifying shares), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of 2.5% of
Total Assets or (b) for net proceeds in excess of 2.5% of Total Assets.
Notwithstanding the foregoing, the following will not be Asset Sales: (i) a
transfer of assets by the Company to a Restricted Subsidiary or by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary, (ii) an issuance
of Equity Interests by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary, (iii) a Restricted Payment or Permitted Investment that
is permitted by Section 4.04 (including any formation of or contribution of
assets to a Subsidiary or joint venture), (iv) leases or subleases, in the
ordinary course of business, to third parties of real property owned in fee or
leased by the Company or its Subsidiaries, (v) a disposition, in the ordinary
course of business, of a lease of real property, (vi) any disposition of
property of the Company or any of its Subsidiaries that, in the reasonable
judgment of the Company, has become uneconomic, obsolete or worn out, (vii) any
disposition of property or assets (including any disposition of inventory,
accounts receivable and any licensing agreements) in the ordinary course of
business, (viii) the sale of Cash Equivalents and Investment Grade Securities or
any disposition of cash, (ix) any exchange of property or assets by the Company
or a Restricted Subsidiary in exchange for cash or Cash Equivalents or property
or assets that will be used or useful in the business conducted by the Company
or any of its Restricted Subsidiaries, provided any such cash and Cash
--------
Equivalents are applied as if they were Net Proceeds of an Asset Sale, and (x)
the sale or factoring of receivables on customary market terms pursuant to
Credit Facilities but only if the proceeds thereof received by the Company and
its Restricted Subsidiaries represent the fair market value of such receivables.
3
<PAGE>
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of the Board of Directors
of such Person.
"Board Resolution" means a copy of a resolution certified by an
Officer of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means a day other than a Saturday, Sunday or other day
on which banking institutions in New York State are authorized or required by
law to close.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any similar participation in profits and losses or equity of a
Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank or trust company
having capital and surplus in excess of $300.0 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. ("S&P"), and in each case maturing
within one year after the date of acquisition, (vi) investment funds investing
95% of their assets in securities of the types described in clauses (ii)-(v)
above, (vii) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's or S&P and (viii)
Debt with a rating of "A" or higher from S&P or "A2" or higher from Moody's and
having a maturity of not more than one year from the date of acquisition.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the first public offering of Voting Stock of the Company,
the Initial Control Group ceases to be the "beneficial owner" (as defined
in Rules 13d-3 and
4
<PAGE>
13d-5 under the Exchange Act), directly or indirectly, of more than 50% of
the total voting power of the Voting Stock of the Company, whether as a
result of the issuance of securities of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by the Initial Control Group or otherwise
(for purposes of this clause (i), the Initial Control Group shall be deemed
to beneficially own all Voting Stock of an entity (the "specified entity")
held by any other entity (the "parent entity") so long as the Initial
Control Group beneficially owns (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting Stock of the
parent entity);
(ii) following the first public offering of Voting Stock of the
Company (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more members of the Initial Control
Group, is or becomes the beneficial owner (as defined in clause (i) above),
directly or indirectly, of more than 40% of the total voting power of the
Voting Stock of the Company and (B) the Initial Control Group "beneficially
owns" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company, than such other person and does not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company (for purposes
of this clause (ii), such other person shall be deemed to beneficially own
all Voting Stock of a specified entity held by a parent entity, if such
other person "beneficially owns" (as defined in clause (i) above), directly
or indirectly, in the aggregate more than 40% of the voting power of the
Voting Stock of such parent entity and the Initial Control Group
"beneficially owns" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent entity and does not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent entity); or
(iii) at any time after the first public offering of common stock of
the Company, any person other than the Initial Control Group (or their
designated board members), (A) (I) nominates one or more individuals for
election to the Board of Directors of the Company and (II) solicits
proxies, authorizations or consents in connection therewith and (B) such
number of nominees elected to serve on the Board of Directors in such
election and all previous elections after the Closing Date represents a
majority of the Board of Directors of the Company following such election.
"Closing Date" means the date on which the Company is merged with and
into Harborside Healthcare Corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means United States Trust Company of New York.
5
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"Commodity Hedging Agreements" means any futures contract or other
similar agreement or arrangement designed to protect the Company or any
Restricted Subsidiary against fluctuations in commodities prices.
"Company" means HH Acquisition Corp. and, upon consummation of the
Recapitalization, Harborside, until a successor replaces it pursuant to this
Indenture and thereafter shall mean such successor corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period (A) plus
(without duplication), to the extent deducted in computing such Consolidated Net
Income, (i) Consolidated Interest Expense and the amortization of debt issuance
costs, commissions, fees and expenses of such Person and its Restricted
Subsidiaries for such period, (ii) provision for taxes based on income or
profits (including franchise taxes) of such Person and its Restricted
Subsidiaries for such period, (iii) depreciation and amortization expense,
including amortization of inventory write-up under APB 16, amortization of
intangibles (including goodwill and the noncash costs of Interest Rate
Agreements, Commodity Hedging Agreements or Currency Agreements, license
agreements and non-competition agreements), noncash amortization of Capital
Lease Obligations, and organization costs, (iv) noncash expenses related to the
amortization of management fees paid on or prior to the Closing Date, (v)
expenses and charges related to any equity offering or Incurrence of Debt
permitted to be Incurred by this Indenture (including any such expenses or
charges relating to the Recapitalization), (vi) the amount of any restructuring
charge or reserve, (vii) unrealized gains and losses from hedging, foreign
currency or commodities translations and transactions, (viii) expenses
consisting of internal software development costs that are expensed during the
period but could have been capitalized in accordance with GAAP, (ix) any write-
downs, write-offs, and other noncash charges, items and expenses, (x) the amount
of expense relating to any minority interest in a Restricted Subsidiary, and
(xi) costs of surety bonds in connection with financing activities, and (B)
minus any cash payment for which a reserve or charge of the kind described in
clauses (vi), (ix) or (x) of subclause (A) above was taken previously during
such period.
"Consolidated Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period. In the event that
the Company or any of its Restricted Subsidiaries Incurs, assumes, Guarantees,
redeems or repays any Debt (other than revolving credit borrowings) or issues or
redeems Preferred Stock subsequent to the commencement of the period for which
the Consolidated Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Consolidated Coverage Ratio is
made (the "Calculation Date"), then the Consolidated Coverage Ratio shall be
calculated giving pro forma effect to such Incurrence, assumption, Guarantee,
---------
redemption or repayment of Debt, or such issuance or redemption of Preferred
Stock, as if the same had occurred at the beginning of the applicable four-
quarter reference period. For purposes of making the computation
6
<PAGE>
referred to above, Investments, acquisitions, dispositions, mergers and
consolidations that have been made by the Company or any of its Restricted
Subsidiaries during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date, and discontinued
operations determined in accordance with GAAP on or prior to the Calculation
Date, shall be given effect on a pro forma basis assuming that all such
---------
Investments, acquisitions, dispositions, mergers and consolidations or
discontinued operations (and the reduction or increase of any associated
Consolidated Interest Expense, and the change in Consolidated Cash Flow,
resulting therefrom, including because of reasonably anticipated cost savings)
had occurred on the first day of the four-quarter reference period. If since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Investment, acquisition,
disposition, merger or consolidation or determined a discontinued operation,
that would have required adjustment pursuant to this definition, then the
Consolidated Coverage Ratio shall be calculated giving pro forma effect thereto
---------
for such period as if such Investment, acquisition, disposition, merger or
consolidation or discontinued operations had occurred at the beginning of the
applicable four-quarter period. For purposes of this definition, whenever pro
---
forma effect is to be given to a transaction, the pro forma calculations shall
- ----- ---------
be made in good faith by a financial or accounting officer of the Company. If
any Debt to which pro forma effect is given bears interest at a floating rate,
---------
the interest expense on such Debt shall be calculated as if the rate in effect
on the Calculation Date had been the applicable interest rate for the entire
period (taking into account any Interest Rate Agreement in effect on the
Calculation Date). Interest on a Capital Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by a responsible financial or
accounting officer of the Company to be the rate of interest implicit in such
Capital Lease Obligation in accordance with GAAP. Interest on Debt that may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as the Company may designate.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum, without duplication, of (i) the consolidated net interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including amortization of original issue discount, noncash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges Incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations relating to Interest Rate Agreements or
Currency Agreements with respect to Debt, excluding, however, (A) amortization
--------- -------
of debt issuance costs, commissions, fees and expenses, (B) customary
commitment, administrative and transaction fees and charges and (C) expenses
attributable to letters of credit or similar arrangements supporting insurance
certificates issued to customers in the ordinary course of business), (ii) any
interest expense on Debt of another Person that is Guaranteed by or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (but only to
the extent such Guarantee or Lien has then been called
7
<PAGE>
upon), and (iii) cash dividends paid in respect of any Preferred Stock of such
Person or any Restricted Subsidiary of such Person held by Persons other than
the Company or a Subsidiary, in each case, on a consolidated basis and in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income of any Person that is not a
--------
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary of
such Person, (ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, prohibited by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders unless such restriction with respect to the
payment of dividends has been permanently waived, (iii) except for purposes of
calculating "Consolidated Cash Flow," the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded (effected either through cumulative
effect adjustment or a retroactive application, in each case, in accordance with
GAAP), (v) to the extent deducted in determining Net Income, the fees, expenses
and other costs Incurred in connection with the Recapitalization, including
payments to management contemplated by the Recapitalization Agreement, shall be
excluded, and (vi) to the extent deducted in determining Net Income, any noncash
charges resulting from any write-up, write-down or write-off of assets, of the
Company and its Restricted Subsidiaries in connection with the Recapitalization,
shall be excluded.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including the New Credit Facility) or commercial paper
facilities with banks, insurance companies or other institutional lenders
providing for revolving credit loans, term loans, synthetic lease financing,
notes, receivables factoring or other financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
or issue securities to such lenders against such receivables) or letters of
credit or other credit facilities, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement to which the Company or
any Restricted Subsidiary is a party or of which it is a beneficiary.
"Debt" means, with respect to any Person (without duplication), (i)
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or
8
<PAGE>
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property, which purchase price is due more than six
months after the date of placing such property in final service or taking final
delivery thereof, or representing any Hedging Obligations, except any such
balance that constitutes an accrued expense or trade payable, if and to the
extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (ii) all indebtedness under clause (i)
of other Persons secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person), provided that the amount of
--------
indebtedness of such Person shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such indebtedness
of such other Persons, and (iii) to the extent not otherwise included, the
Guarantee by such Person of any Debt under clause (i) of any other Person;
provided, however, that Debt shall not include (a) obligations of the Company or
- -------- -------
any of its Restricted Subsidiaries arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, Incurred or assumed in connection
with the disposition of any business, assets or a Subsidiary, other than
guarantees of Debt Incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
provided, however, that (x) such obligations are not reflected on the balance
- -------- -------
sheet of the Company or any Restricted Subsidiary (contingent obligations
referred to in a footnote to financial statements and not otherwise reflected on
the balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (x)) and (y) the maximum assumable liability in respect
of all such obligations shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being measured
at the time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries in
connection with such disposition, (b) (A) obligations under (or constituting
reimbursement obligations with respect to) letters of credit, performance bonds,
surety bonds, appeal bonds, completion guarantees or similar instruments issued
in connection with the ordinary course of business conducted by the Company,
including letters of credit in respect of workers' compensation claims, security
or lease deposits and self-insurance; provided, however, that upon the drawing
-------- -------
of such letters of credit or other instrument, such obligations are reimbursed
within 30 days following such drawing, and (B) obligations arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of day-light overdrafts) drawn
against insufficient funds in the ordinary course of business; provided,
--------
however, that such obligations are extinguished within three Business Days of
- -------
Incurrence, or (c) retentions in connection with purchasing assets in the
ordinary course of business of the Company and its Restricted Subsidiaries. The
amount of any Debt outstanding as of any date shall be the lesser of (i) the
accreted value thereof, and (ii) the principal amount thereof, provided that the
--------
amount of Permitted Debt under clause (i) or (x) of the definition thereof, at
the Company's election, but without duplication, may be reduced by the principal
amount (not to exceed $7.5 million)
9
<PAGE>
of the note receivable issued to Harborside before the Issue Date in connection
with the leasing of certain nursing home facilities in the State of Connecticut.
"Default" means any event that, with the passage of time or the giving
of notice or both, would be an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors.
"Designated Senior Debt" means (i) any Debt outstanding under the New
Credit Facility and (ii) any other Senior Debt permitted under this Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than as a result of a
Change of Control), matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date on which the Securities mature;
provided, however, that if such Capital Stock is issued to any plan for the
- -------- -------
benefit of employees of the Company or its Subsidiaries or by any such plan to
such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations. For the avoidance of
doubt, Exchangeable Preferred Stock shall not be considered "Disqualified
Stock."
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Debentures" means the Exchange Debentures of the Company due
2010 issued in exchange for the Exchangeable Preferred Stock and any Exchange
Debentures issued as payments in kind interest thereon.
"Exchange Debenture Indenture" means the indenture pursuant to which
the Exchange Debentures are to be issued, as it may from time to time be amended
or supplemented.
"Exchangeable Preferred Stock" means the Exchangeable Preferred Stock
of the Company Due 2010 issued on the first Issue Date, any Exchangeable
Preferred Stock issued as payment of dividends thereon and any Preferred Stock
containing terms substantially identical
10
<PAGE>
to the Exchangeable Preferred Stock that are issued in exchange for the
Exchangeable Preferred Stock.
"Existing Debt" means Debt of the Issuer and its Restricted
Subsidiaries (other than Debt under the New Credit Facility) in existence on the
first Issue Date, until such amounts are repaid.
"Exchange Securities" means any securities of the Company containing
terms identical to the Securities (except that such Exchange Securities shall be
registered under the Securities Act) that are issued and exchanged for the
Initial Securities pursuant to a Registration Rights Agreement and this
Indenture.
"Foreign Subsidiary" means any Subsidiary of the Company formed under
the laws of any jurisdiction other than the United States or any political
subdivision thereof substantially all of the assets of which are located outside
of the United States or that conducts substantially all of its business outside
of the United States.
"Full Accretion Date" means August 1, 2003.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP as in
effect as of the first Issue Date.
"Government Securities" means non-callable direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Debt.
"Guarantors" means, at any time after the Closing Date, (i) each of
the Company's Subsidiaries on the Closing Date, other than the Subsidiary Non-
Guarantors on such date and (ii) each Restricted Subsidiary that executes and
delivers a Security Guarantee after the Closing Date, and their respective
successors and assigns, in each case until released from its Security Guarantee
in accordance with the terms of this Indenture.
11
<PAGE>
"Harborside" means Harborside Healthcare Corporation.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under Interest Rate Agreements, Currency Agreements
or Commodity Hedging Agreements.
"Holder" or "Securityholder" means a Person in whose name a Security
is registered in the register for the Securities.
"HRI" means Harborside of Rhode Island L.P., a Massachusetts limited
partnership, or its successor.
"Incur", "Incurring" and "Incurred" means to, directly or indirectly,
create, Incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise; provided, however, that any Debt
-------- -------
or Capital Stock of a Person existing at the time such Person becomes a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Initial Control Group" means Investcorp, its Affiliates, any Person
acting in the capacity of an underwriter or initial purchaser in connection with
a public or private offering of the Company's Capital Stock, any employee
benefit plan of the Company or any of its Subsidiaries or any participant
therein, a trustee or other fiduciary holding securities under any such employee
benefit plan or any Permitted Transferee of any of the foregoing Persons.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated, Chase
Securities Inc. and BT Alex.Brown Incorporated.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, repurchase agreement, futures contract or other
financial agreement or arrangement designed to protect the Company or any
Restricted Subsidiary against fluctuations in interest rates.
"Investcorp" means Investcorp S.A. and certain affiliates thereof.
"Investment Grade Securities" means (i) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality
12
<PAGE>
thereof (other than Cash Equivalents) having maturities of not more than one
year from the date of acquisition, (ii) debt securities or debt instruments with
a rating of BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent
of such rating by such rating organization, or, if no rating of S&P or Moody's
then exists, the equivalent of such rating by any other nationally recognized
securities rating agency, but excluding any debt securities or instruments
constituting loans or advances among the Company and its Subsidiaries having
maturities of not more than one year from the date of acquisition, and (iii)
investments in any fund that invests exclusively in investments of the type
described in clauses (i) and (ii), which fund may also hold immaterial amounts
of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Debt or other obligations, but excluding
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advances or capital
contributions (excluding commission, travel, payroll, entertainment, relocation
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Debt, Equity
Interests or other securities. If the Company or any Restricted Subsidiary of
the Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of, in an amount determined as provided in the
third to last paragraph of Section 4.04.
"Investors" shall mean Investcorp and certain other international
investors organized by Investcorp.
"Issue Date" means the date on which any Securities are originally
issued.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement or any lease
in the nature thereof); provided that in no event shall an operating lease be
--------
deemed to constitute a Lien.
"Liquidated Damages" shall have the meaning set forth in a
Registration Rights Agreement.
"Net Income" means, with respect to any Person and any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of Preferred Stock dividends,
excluding, however, (i) any extraordinary or non-recurring gains or losses or
charges and gains or losses or charges from the sale of assets
13
<PAGE>
outside the ordinary course of business, together with any related provision for
taxes on such gain or loss or charges and (ii) deferred financing costs written
off in connection with the early extinguishment of Debt; provided, however, that
-------- -------
Net Income shall be deemed to include any increases during such period to
shareholder's equity of such Person attributable to tax benefits from net
operating losses and the exercise of stock options that are not otherwise
included in Net Income for such period.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including any cash received upon the sale or other disposition of any noncash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including legal, accounting and investment banking fees, and
brokerage and sales commissions) and any relocation, redundancy and closing
costs Incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts applied to the repayment of principal, premium
(if any) and interest on Debt that is not subordinated to the Securities
required (other than required by clause (a) of the second paragraph of Section
4.06) to be paid as a result of such transaction, all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Sale, and any deduction of appropriate
amounts to be provided by the Company as a reserve, in accordance with GAAP,
against any liabilities associated with the asset disposed of in such
transaction and retained by the Company after such sale or other disposition
thereof, including pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such transaction.
"New Credit Facility" means the collective reference to (a) the Credit
Agreement among the Issuer and certain Subsidiaries of the Issuer named therein
and the financial institutions named therein, any Credit Documents (as defined
therein) and any related notes, collateral documents, letters of credit,
participation agreements, guarantees and other documents part of or relating to
the Credit Documents, including any appendices, exhibits or Schedules to any of
the foregoing (as the same may be in effect from time to time), and (b) the
Synthetic Lease Facility described in the Credit Agreement, including the Lease
between a Subsidiary of the Issuer, as lessee, and the Delaware business trust
named therein, as lessor (the "Lessor"), the Credit Agreement among the Lessor
and the financial institutions named therein, the Participation Agreement among
the parties to the Lease, the parties to the Credit Agreement, the Trustee of
Lessor, and the Investors in Lessor, and the additional Operative Agreements
described in the Participation Agreement, including any appendices, exhibits or
schedules to any of the foregoing (as the same may be in effect from time to
time), in each case, as such agreements may be amended, modified, supplemented
or restated from time to time, or refunded, refinanced, restructured, replaced,
renewed, repaid or extended from time to time (whether with the original agents
and lenders or other agents or lenders or otherwise, and whether provided under
the original credit agreements or other credit agreements or otherwise). For
purposes of
14
<PAGE>
this definition, capitalized terms used in this definition and not defined have
the meanings given in the New Credit Facility.
"Non-U.S. Person" means a Person who is not a "U.S. person" (as
defined in Regulation S).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, Guarantees and other liabilities
payable under the documentation governing any Debt, in each case whether now or
hereafter existing, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or Incurred, whether or
not arising on or after the commencement of a proceeding under Title 11, U.S.
Code or any similar federal or state law for the relief of debtors (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
"Offering" means the Security Offering and the offering of the
Company's Exchangeable Preferred Stock.
"Offering Memorandum" shall mean the offering memorandum dated July
29, 1998, relating to the sale by the Issuer of $170,000,000 aggregate principal
amount at maturity of the Initial Securities and 40,000 shares of Exchangeable
Preferred Stock.
"Officers" means any of the following: Chairman, President, Chief
Executive Officer, Treasurer, Chief Financial Officer, Executive Vice President,
Senior Vice President, Vice President, Assistant Vice President, Secretary,
Assistant Secretary or any other officer reasonably acceptable to the Trustee.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Pari Passu Debt" means any Debt of the Company or any Guarantor that
ranks pari passu with the Securities or the relevant Security Guarantee.
---- -----
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Payment" means, with respect to the Securities, any payment, whether
in cash or other assets or property, of interest, principal (including
redemption price and purchase price), premium, Liquidated Damages or any other
amount on, of or in respect of the
15
<PAGE>
Securities, any other acquisition of Securities and any deposit into the trust
described in Article VIII. The verb "pay" has a correlative meaning.
"Permitted Investments" means (a) any Investment in the Company or in
a Restricted Subsidiary (including in any Equity Interests of a Restricted
Subsidiary); (b) any Investment in cash, Cash Equivalents or Investment Grade
Securities; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary or (ii) such Person, in one transaction or a
series of substantially concurrent related transactions, is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary; (d)
any securities or other assets received or other Investments made as a result of
the receipt of noncash consideration from an Asset Sale that was made pursuant
to and in compliance with Section 4.06 or in connection with any other
disposition of assets not constituting an Asset Sale; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) loans or advances to employees (or
guarantees of third party loans to employees) in the ordinary course of
business; (g) stock, obligations or securities received in satisfaction of
judgments, foreclosure of liens or settlement of debts (whether pursuant to a
plan of reorganization or similar arrangement); (h) receivables owing to the
Company or any Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms (including such concessionary terms as the Company or such
Restricted Subsidiary deems reasonable); (i) any Investment existing on the
first Issue Date or made pursuant to legally binding written commitments in
existence on the first Issue Date; (j) Investments in Interest Rate Agreements,
Currency Agreements and Commodity Hedging Agreements otherwise permitted under
this Indenture; and (k) additional Investments having an aggregate fair market
value, taken together with all other Investments made pursuant to this clause
(k) that are at that time outstanding, not to exceed 15.0% of Total Assets at
the time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value).
"Permitted Junior Securities" shall mean debt or equity securities of
the Company or any successor corporation issued pursuant to a plan of
reorganization or readjustment of the Company that are subordinated to the
payment of all Senior Debt at least to the same extent that the Securities are
subordinated to the payment of all Senior Debt on the first Issue Date, so long
as (i) the effect of the use of this defined term in the subordination
provisions described in Article X is not to cause the Securities to be treated
as part of (a) the same class of claims as the Senior Debt or (b) any class of
claims pari passu with, or senior to, the Senior Debt for any payment or
distribution in any case or proceeding or similar event relating to the
liquidation, insolvency, bankruptcy, dissolution, winding-up or reorganization
of the Company and (ii) to the extent that any Senior Debt outstanding on the
date of consummation of any such plan of reorganization or readjustment is not
paid in full in cash on such date, either (a) the holders of any such Senior
Debt not so paid in full in cash have consented to the terms of such plan of
reorganization or readjustment or (b) such holders
16
<PAGE>
receive securities that constitute Senior Debt and that have been determined by
the relevant court to constitute satisfaction in full in money or money's worth
of any Senior Debt not paid in full in cash.
"Permitted Liens" means (i) Liens securing Senior Debt of the Company
and Guarantors and unsubordinated Debt of a Subsidiary Non-Guarantor (in each
case including related Obligations) that was permitted by the terms of this
Indenture to be Incurred; (ii) Liens in favor of the Company or any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company, provided that such Liens were in existence prior to the
--------
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company or a
Restricted Subsidiary, as the case may be; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Restricted Subsidiary of
the Company, provided that such Liens were in existence prior to the
--------
contemplation of such acquisition and do not extend to any assets other than
those acquired; (v) banker's Liens, rights of setoff and Liens to secure the
performance of bids, tenders, trade or government contracts (other than for
borrowed money), leases, licenses, statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature Incurred in the
ordinary course of business; (vi) without limitation of clause (i), Liens to
secure Acquired Debt; (vii) Liens existing on the Closing Date; (viii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings, provided
--------
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens Incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to obligations that do not exceed $5.0 million at any one
time outstanding and that (a) are not Incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (x)
carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business in respect of
obligations that are not yet due or that are bonded or that are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company or such Restricted
Subsidiary, as the case may be, in accordance with GAAP; (xi) pledges or
deposits in connection with workmen's compensation, unemployment insurance and
other social security legislation; (xii) easements (including reciprocal
easement agreements), rights-of-way, building, zoning and similar restrictions,
utility agreements, covenants, reservations, restrictions, encroachments,
changes, and other similar encumbrances or title defects Incurred, or leases or
subleases granted to others, in the ordinary course of business, that do not in
the aggregate materially detract from the aggregate value of the properties of
the Company and its Subsidiaries, taken as a whole, or in the aggregate
materially interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Company and its Subsidiaries on the
properties subject
17
<PAGE>
thereto, taken as a whole; (xiii) Liens on goods (and the proceeds thereof) and
documents of title and the property covered thereby securing Debt in respect of
commercial letters of credit; (xiv) (A) mortgages, Liens, security interests,
restrictions, encumbrances or any other matters of record that have been placed
by any developer, landlord or other third party on property over which the
Company or any Restricted Subsidiary of the Company has easement rights or on
any real property leased by the Company or any Restricted Subsidiary on the
first Issue Date and subordination or similar agreements relating thereto and
(B) any condemnation or eminent domain proceedings affecting any real property;
(xv) leases or subleases to third parties; (xvi) Liens in connection with
workmen's compensation obligations and general liability exposure of the Company
and its Restricted Subsidiaries; (xvii) Liens arising by reason of a judgment,
decree or court order, to the extent not otherwise resulting in an Event of
Default; (xviii) Liens securing Hedging Obligations entered into in the ordinary
course of business; (xix) without limitation of clause (i), Liens securing
Permitted Refinancing Debt permitted to be Incurred under this Indenture or
amendments or renewals of Liens that were permitted to be Incurred, provided, in
each case, that (A) such Liens do not extend to an additional property or asset
of the Company or a Restricted Subsidiary and (B) such Liens do not secure Debt
in excess of the amount of Permitted Refinancing Debt permitted to be Incurred
under this Indenture or the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Debt (plus the amount of reasonable
premium and fees and expenses Incurred in connection therewith) secured by the
Lien being amended or renewed, as the case may be; (xx) Liens that secure Debt
of a Person existing at the time such Person becomes a Restricted Subsidiary of
the Company, provided that such Liens do not extend to any assets other than
--------
those of the Person that became a Restricted Subsidiary of the Company, and
(xxi) any provision for the retention of title to an asset by the vendor or
transferor of such asset, which asset is acquired by the Company or any
Restricted Subsidiary in a transaction entered into in the ordinary course of
business of the Company or such Restricted Subsidiary and for which kind of
transaction it is normal market practice for such retention of title provision
to be included.
"Permitted Refinancing Debt" means any Debt of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other Debt of
the Company or any of its Restricted Subsidiaries Incurred in compliance with
this Indenture, provided that: (i) the principal amount (or accreted value, if
--------
applicable) of such Permitted Refinancing Debt does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest on, the Debt
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable premium and fees and expenses Incurred in connection
therewith); (ii) in the case of term Debt, (1) principal payments required under
such Permitted Refinancing Debt have a Stated Maturity no earlier than the
earlier of (A) the Stated Maturity of those under the Debt being refinanced and
(B) the maturity date of the Securities and (2) such Permitted Refinancing Debt
has a Weighted Average Life to Maturity equal to or greater than the lesser of
the Weighted Average Life to Maturity of the Debt being extended, refinanced,
renewed, replaced, defeased or refunded and the Weighted Average Life to
Maturity of the Securities; (iii) if the
18
<PAGE>
Debt being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Securities, such Permitted Refinancing
Debt has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Securities on terms at least as
favorable to the Holders of Securities as those contained in the documentation
governing the Debt being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Debt is Incurred either by the Company or by its
Restricted Subsidiary who is the obligor on the Debt being extended, refinanced,
renewed, replaced, defeased or refunded. The Company may Incur Permitted
Refinancing Debt not more than six months prior to the application of the
proceeds thereof to repay the Debt to be refinanced; provided that, upon the
--------
Incurrence of such Permitted Refinancing Debt, the Company shall provide written
notice thereof to the Trustee, specifically identifying the Debt to be
refinanced with Permitted Refinancing Debt.
"Permitted Transferee" means, with respect to any Person, (i) any
other Person, directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) the spouse,
former spouse, lineal descendants, heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such Person, (iii) a
trust, the beneficiaries of which, or a corporation or partnership or limited
liability company, the stockholders, general or limited partners or members of
which, include only such Person or his or her spouse, lineal descendants or
heirs, in each case to whom such Person has transferred, or through which it
holds, the beneficial ownership of any securities of the Issuer and (iv) any
investment fund or investment entity that is a subsidiary of such Person or a
Permitted Transferee of such Person.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Placement Agreement" means (i) with respect to the Initial Securities
issued on the date hereof, the Placement Agreement dated July 29, 1998, for the
purchase of $170,000,000 principal amount at maturity of Initial Securities
between the Company and the Initial Purchasers as such agreement may be amended,
modified or supplemented from time to time in accordance with the terms thereof
and (ii) with respect to any Additional Securities, any purchase or underwriting
agreement entered into by the Company, any Guarantors and the initial purchasers
or underwriters with respect thereto, as such agreement may be amended, modified
or supplemented from time to time in accordance with the terms thereof.
"Pledge Agreement" means the collateral pledge and security agreement
dated as of the first Issue Date between the Company and the Collateral Agent.
"Preferred Equity Interests" means Preferred Stock and all warrants,
options or other rights to acquire Preferred Stock (but excluding any debt
security that is convertible into, or exchangeable for, Preferred Stock).
19
<PAGE>
"Preferred Stock" means, with respect to any Person, any Capital Stock
of such Person (however designated) that is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person. With respect to the Company,
"Preferred Stock" includes the Exchangeable Preferred Stock.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Section 2.02.
"Recapitalization" means the recapitalization of Harborside pursuant
to which the Company will be merged with and into Harborside and the financing
transactions related thereto.
"Recapitalization Agreement" means the Agreement and Plan of Merger
dated as of April 15, 1998 by and between the Company and Harborside Healthcare
Corporation, as amended through the Closing Date.
"Registered Exchange Offer" shall mean an offer made by the Company
pursuant to a Registration Rights Agreement and under an effective registration
statement under the Securities Act to exchange Exchange Securities for
outstanding Initial Securities substantially identical in all material respects
to such Initial Securities (except for the differences provided for therein).
"Registration Statement" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"Registration Rights Agreement" means (i) with respect to the Initial
Securities issued on the date hereof, the Registration Rights Agreement dated
July 31, 1998, among the Company, the Guarantors and the Initial Purchasers, as
such agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof and (ii) with respect to any Additional
Securities, any registration rights agreement entered into among the Company,
any Guarantors and the relevant initial purchasers or underwriters, as the same
may be amended, modified or supplemented from time to time in accordance with
the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means any agent or representative in respect of any
Designated Senior Debt; provided that if, and for so long as, any Designated
--------
Senior Debt lacks such a representative, then the Representative for such
Designated Senior Debt shall at all times
20
<PAGE>
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Secured Debt" means any Debt of the Company or any Subsidiary secured
by a Lien.
"Securities" has the meaning stated in the recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Exchange Securities to be issued and exchanged for any Initial
Securities pursuant to a Registration Rights Agreement and this Indenture. From
and after the issuance of any Additional Securities (but not for purposes of
determining whether such issuance is permitted hereunder), "Securities" shall
include such Additional Securities for purposes of this Indenture and all
Exchange Securities from time to time issued with respect to any Initial
Securities that constitute such Additional Securities. All Securities,
including any such Additional Securities, shall vote together as one series of
Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" or "Custodian" means the custodian with respect
to any Global Security (as appointed by the Depository), or any successor entity
thereto covered in Section 2.03.
"Security Offering" means the offering of the Company's 11% Senior
Subordinated Discount Notes due 2008 as described in the Offering Memorandum.
"Security Guarantee" means, upon consummation of the Recapitalization,
the Guarantee by each Guarantor of the Company's Obligations under the
Securities pursuant to Article XI.
"Senior Debt" means (i) all Debt of the Company or any Guarantor
outstanding under the New Credit Facility and all Hedging Obligations with
respect thereto, (ii) any other Debt (including Acquired Debt) permitted to be
Incurred by the Company or any Guarantor pursuant to Section 4.03, unless the
instrument under which such Debt is Incurred expressly
21
<PAGE>
provides that it is on a parity with or subordinated in right of payment to the
Securities or the relevant Security Guarantee and (iii) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (v) any liability for federal, state,
local or other taxes owed or owing by the Company, (w) any Debt of the Company
or any Guarantor to any of its Subsidiaries, officers, employees or other
Affiliates (other than Debt under any Credit Facility to any such Affiliate),
(x) any trade payables, (y) that portion of Debt Incurred in violation of
Section 4.03 (but as to any such Debt under any Credit Facility, such violation
shall be deemed not to exist for purposes of this clause (y) if the lenders have
obtained a representation from a Senior Officer of the Company to the effect
that the issuance of such Debt does not violate such covenant) or (z) any Debt
or obligation of the Company or any Guarantor that is expressly subordinated in
right of payment to any other Debt or obligation of the Company or such
Guarantor, as applicable, including any Subordinated Debt of the Company.
"Senior Officer" means the Chief Executive Officer or the Chief
Financial Officer of the Company.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the first Issue Date.
"Specified Affiliate Payments" means:
(i) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any future, present or former employee, director,
officer or consultant of the Company (or any of its Restricted
Subsidiaries) pursuant to any management equity subscription agreement,
stock option agreement, put agreement, stockholder agreement or similar
agreement that may be in effect from time to time; provided that the
--------
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $3.0 million in any calendar year
(with unused amounts in any calendar year being carried over to succeeding
calendar years, subject to a maximum amount of repurchases, redemptions or
other acquisitions pursuant to this clause (i) (without giving effect to
the immediately following proviso) of $10.0 million in any calendar year)
and no payment default on Senior Debt or the Securities shall have occurred
and be continuing; provided further that such amount in any calendar year
-------- -------
may be increased by an amount not to exceed (A) the cash proceeds received
by the Company (including by way of capital contribution) since the Issue
Date from the sale of Equity Interests of the Company to employees,
directors, officers or consultants of the Company or its Subsidiaries that
occurs in such calendar year (it being understood that such cash proceeds
shall be excluded from clause (c)(ii) of Section 4.04(a)) plus (B) the cash
proceeds from key man life insurance policies received by the Company and
its Restricted Subsidiaries in such calendar year (including proceeds from
22
<PAGE>
the sale of such policies to the person insured thereby); and provided
--------
further that cancellation of Debt owing to the Company from employees,
-------
directors, officers or consultants of the Company or any of its
Subsidiaries in connection with a repurchase of Equity Interests of the
Company will not be deemed to constitute a Restricted Payment for purposes
of this Indenture;
(ii) repurchases of Equity Interests deemed to occur upon exercise
of stock options or warrants as a result of the payment of all or a portion
of the exercise price of such options or warrants with Equity Interests;
(iii) payments by the Company to shareholders or members of
management of the Company and its Subsidiaries in connection with the
Recapitalization; and
(iv) payments or transactions permitted under clause (5) of Section
4.07(b);
"Stated Maturity" means, with respect to any installment of interest
on or principal of, or any other amount payable in respect of, any series of
Debt, the date on which such interest, principal or other amount was scheduled
to be paid in the documentation governing such Debt, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest,
principal or other amount prior to the date scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Company or any Guarantor
(whether outstanding on the first Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities or the applicable
Security Guarantee pursuant to written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof). Unless the context
otherwise requires, "Subsidiary" refers to a Subsidiary of the Company.
"Subsidiary Non-Guarantors" means (i) each of the Subsidiaries of the
Company on the Closing Date that do not issue or are released from a Security
Guarantee, (ii) each Unrestricted Subsidiary, and (iii) each Restricted
Subsidiary formed or acquired after the Closing Date that does not execute and
deliver or is released from a Security Guarantee.
23
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the date of this Indenture; provided, however, that, in
-------- -------
the event the Trust Indenture Act of 1939 is amended after such date, "TIA"
means, to the extent required by any such amendments, the Trust Indenture Act of
1939 as so amended.
"Temporary Offshore Global Notes" has the meaning provided in Section
2.01.
"Total Assets" means, at any time, the total consolidated assets of
the Company and its Restricted Subsidiaries at such time.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the redemption date to August 1, 2003, provided, however, that if the period
-------- -------
from the redemption date to August 1, 2003 is not equal to the constant maturity
of a United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from the redemption date to August 1, 2003 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, and (ii) any Subsidiary of an Unrestricted Subsidiary; but in the
case of any Subsidiary referred to in clause (i) (or any Subsidiary of any such
Subsidiary) only to the extent that such Subsidiary: (a) is not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; and (b) except in the case of a
Foreign Subsidiary, is a Person with respect to which neither the Company nor
any of its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
24
<PAGE>
Person's financial condition or to cause such Person to achieve any specified
levels of operating results. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by Section 4.04. If, at any time, any Unrestricted
Subsidiary referred to in clause (ii) of the first sentence of this definition
(or any Subsidiary thereof) would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Debt of such Subsidiary shall
be deemed to be Incurred by a Restricted Subsidiary of the Company as of such
date (and, if such Debt is not permitted to be Incurred as of such date pursuant
to Section 4.03, the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
--------
be deemed to be an Incurrence of Debt by a Restricted Subsidiary of the Company
of any outstanding Debt of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Debt is permitted by Section 4.03,
calculated on a pro forma basis as if such designation had occurred at the
---------
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the Company's option.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person, excluding, however, Exchangeable Preferred Stock.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
25
<PAGE>
SECTION 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction"............................ 4.07
"Agent Members".................................... 2.07(a)
"Asset Sale Offer"................................. 4.06
"Bankruptcy Law"................................... 6.01
"Change of Control Offer".......................... 3.09(a)
"Change of Control Payment"........................ 4.08(a)
"Covenant Defeasance".............................. 8.01(c)
"Custodian"........................................ 6.01
"estate"........................................... 8.02(f)
"Event of Default"................................. 6.01
"Excess Proceeds".................................. 4.06
"Excess Proceeds Offer"............................ 3.09(a)
"Global Securities"................................ 2.01
"Guaranteed Obligations"...........................11.01
"Guarantor non-payment default"....................12.03
"Guarantor Payment Blockage Notice"................12.03
"Guarantor payment default"........................12.03
"Indemnified Party"................................ 7.07
"Legal Defeasance"................................. 8.01(b)
"Legal Holiday"....................................13.08
"non-payment default"..............................10.03
"Notice of Default"................................ 6.01
"Offer Amount"..................................... 3.09(a)
"Offer Period"..................................... 3.09(a)
"Offshore Global Security.......................... 2.01
"Offshore Physical Securities...................... 2.01
"Option of Holder to Elect Purchase"............... 3.09
"Payment Blockage Notice"..........................10.03
"payment default"..................................10.03
"Permanent Offshore Global Securities"............. 2.01
"Permitted Debt"................................... 4.03(b)
"Physical Securities".............................. 2.01
"Purchase Date".................................... 3.09(a)
"Registrar......................................... 2.04
"Repurchase Offer"................................. 3.09(a)
"Restricted Payments".............................. 4.04(a)
"Rule 144A"........................................ 2.01(b)
"Security Register"................................ 2.04
"Trustee".......................................... 8.03
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
"U.S. Global Securities"........................... 2.01
"U.S. Physical Securities"......................... 2.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Security holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on this Indenture securities means the Company, each
Guarantor and any other obligor under this Indenture.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Debt shall not be deemed to be subordinate or junior to
Secured Debt merely by virtue of its nature as unsecured Debt;
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(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the Company dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Debt; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
THE SECURITIES
--------------
SECTION 2.01. Form and Dating. The Securities and the Trustee's
---------------
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture. The Securities
may have notations, legends or endorsements required by law, stock exchange
agreements to which the Company is subject or usage. The Company shall approve
the form of the Securities and any notation, legend or endorsement on the
Securities. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Securities in registered
form, substantially in the form set forth in Exhibit A (the "U.S. Global
-----------
Securities"), registered in the name of the nominee of the Depositary, deposited
- ----------
with the Trustee, as custodian for the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount at maturity of the U.S. Global Securities may from time to time
be increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, in accordance with the instructions
given by the Holder thereof, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more temporary
global Securities in registered form substantially in the form set forth in
Exhibit A (the "Temporary Offshore Global Securities"), registered in the name
------------------------------------
of the nominee of the Depositary, deposited with the Trustee, as custodian for
the Depositary, duly executed by the Company and authenticated by
28
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the Trustee as hereinafter provided. At any time on or after September 10, 1998,
upon receipt by the Trustee and the Company of a certificate substantially in
the form of Exhibit B hereto, one or more permanent global Securities in
registered form substantially in the form set forth in Exhibit A (the "Permanent
---------
Offshore Global Securities"; and together with the Temporary Offshore Global
- --------------------------
Securities, the "Offshore Global Securities") duly executed by the Company and
--------------------------
authenticated by the Trustee as hereinafter provided, shall be deposited with
the Trustee, as custodian for the Depositary or its nominee, and the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount at maturity of the Temporary Offshore Global Securities in an amount
equal to the principal amount at maturity of the beneficial interest in the
Temporary Offshore Global Securities transferred.
Securities may not be originally offered or sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. Persons).
Securities resold or otherwise transferred to Institutional Accredited Investors
as provided in Section 2.08(a) shall be issued in the form of permanent
certificated Securities in registered form in substantially the form set forth
in A (the "U.S. Physical Securities").
------------------------
Securities issued pursuant to Section 2.07 in exchange for interests
in the Offshore Global Securities shall be in the form of permanent certificated
Securities in registered form substantially in the form set forth in A (the
"Offshore Physical Securities").
- -----------------------------
The Offshore Physical Securities and U.S. Physical Securities are
sometimes collectively herein referred to as the "Physical Securities." The
-------------------
U.S. Global Securities and the Offshore Global Securities are sometimes referred
to herein as the "Global Securities."
-----------------
The definitive Securities shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the Officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Restrictive Legends. Unless and until a Security is
-------------------
exchanged for an Exchange Security or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, (i) the
U.S. Global Securities and U.S. Physical Securities shall bear the legend set
forth below on the face thereof and (ii) the Offshore Physical Securities, until
at least the 41st day after the Closing Date and receipt by the Company and the
Trustee of a certificate substantially in the form of B hereto, and the
Temporary Offshore Global Securities shall bear the legend set forth below on
the face thereof.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH
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IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS
IN EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES AT THE TIME
OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED
TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE
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<PAGE>
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Security, whether or not an Exchange Security, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. Subject
-------------------------------------------
to Section 4.03, the aggregate principal amount at maturity of Securities which
may be authenticated and delivered under this Indenture is unlimited. The
Securities shall be executed by one or more Officers of the Company. The
signature of these Officers on the Securities may be by facsimile or manual
signature in the name and on behalf of the Company.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
written order of the Company
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authenticate for original issue Securities in the aggregate principal amount at
maturity specified in such order; provided that the Trustee shall be entitled to
--------
receive an Officers' Certificate and an Opinion of Counsel of the Company in
connection with such authentication of Securities. Such written order of the
Company shall specify the amount of Securities to be authenticated and the date
on which the original issue of Securities is to be authenticated and, in case of
an issuance of Securities pursuant to Section 2.15, shall certify that such
issuance is in compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate
Securities. Any such appointment shall be evidenced by an instrument signed by
the Trustee, a copy of which shall be furnished to the Company. An
authenticating agent may authenticate Securities whenever the Trustee may do so
unless limited by the terms of such appointment. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
authenticating agent. An authenticating agent has the same rights as an Agent
to deal with the Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount at maturity and
any integral multiple thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
--------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency where Securities
---------
may be presented for payment (the "Paying Agent") and an office or agency where
------------
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served, which shall be in the Borough of Manhattan, The City of
New York. The Company shall cause the Registrar to keep a register of the
Securities and of their transfer and exchange (the "Security Register"). The
-----------------
Security Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. The Company may have one
or more co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become effective
--------
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company,
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any domestically organized Wholly Owned Restricted Subsidiary of the Company, or
any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar,
and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notice and demands. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders and shall otherwise comply with TIA (S)
312(a). If the Trustee is not the Registrar, the Company shall furnish to the
Trustee as of each regular record date and at such other times as the Trustee
may reasonably request the names and addresses of Holders as they appear in the
Security Register, including the aggregate principal amount at maturity of
Securities held by each Holder.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than
-----------------------------------
11:00 a.m. (New York City time) on each due date of the principal, premium and
Liquidated Damages, if any, and interest on any Securities, the Company shall
deposit with the Paying Agent money in immediately available funds sufficient to
pay such principal, premium and Liquidated Damages, if any, and interest so
becoming due. The Company shall require each Paying Agent other than the
Trustee to agree in writing that such Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium and Liquidated Damages, if any, and interest on
the Securities (whether such money has been paid to it by the Company or any
other obligor on the Securities), and such Paying Agent shall promptly notify
the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed, and the Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent, require such Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed. Upon doing so, the Paying Agent shall have no further liability for
the money so paid over to the Trustee. If the Company or any Subsidiary of the
Company or any Affiliate of any of them acts as Paying Agent, it will, on or
before each due date of any principal of, premium and Liquidated Damages, if
any, or interest on the Securities, segregate and hold in a separate trust fund
for the benefit of the Holders a sum of money sufficient to pay such principal,
premium and Liquidated Damages, if any, or interest so becoming due until such
sum of money shall be paid to such Holders or otherwise disposed of as provided
in this Indenture, and will promptly notify the Trustee of its action or failure
to act.
SECTION 2.06. Transfer and Exchange. The Securities are issuable
---------------------
only in registered form. A Holder may register the transfer of a Security only
by written application to the Registrar stating the name of the proposed
transferee and otherwise complying with the terms of this Indenture. No such
registration of transfer shall be effected until, and such transferee shall
succeed to the rights of a Holder only upon, final acceptance and registration
of the transfer by the Registrar in the Security Register. Prior to the
registration of any
33
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transfer by a Holder as provided herein, the Company, the Trustee, and any agent
of the Company or the Trustee shall treat the Person in whose name the Security
is registered as the owner thereof for all purposes whether or not the Security
shall be overdue, and neither the Company, the Trustee, nor any such agent shall
be affected by notice to the contrary. Furthermore, any Holder of a Global
Security shall, by acceptance of such Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a book
entry system maintained by the Holder of such Global Security (or its agent) and
that ownership of a beneficial interest in the Security shall be required to be
reflected in a book entry. When Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer or to exchange them for an
equal principal amount at maturity of Securities of other authorized
denominations (including an exchange of Securities for Exchange Securities), the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transactions are met (including that such Securities are
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and Registrar duly executed by the Holder thereof or
by an attorney who is authorized in writing to act on behalf of the Holder);
provided that no exchanges of Securities for Exchange Securities shall occur
until a Registration Statement shall have been declared effective by the
Commission and that any Securities that are exchanged for Exchange Securities
shall be cancelled by the Trustee. To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange or redemption of the Securities, but the
Company may require payment of a sum sufficient to cover any transfer tax
assessments or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.11, 3.06 or 9.05).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption and ending at the close of business on the
day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities. (a) The
-------------------------------------------
U.S. Global Securities and Offshore Global Securities initially shall (i) be
registered in the name of the Depositary for such Global Securities or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as
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the absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in
Global Securities may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 2.08. In addition, U.S.
Physical Securities and Offshore Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in the U.S. Global
Securities or the Offshore Global Securities, as the case may be, if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Securities or the Offshore Global Securities, as
the case may be, and a successor depositary is not appointed by the Company
within 90 days of such notice, (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary or (iii)
in accordance with the rules and procedures of the Depositary and the provisions
of Section 2.08.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a Person who takes delivery in the form of an interest in another
Global Security will, upon transfer, cease to be an interest in such Global
Security and become an interest in such other Global Security and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a Global Security to beneficial owners pursuant to paragraph (b) of
this Section 2.07, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount at maturity of such Global Security in an
amount equal to the principal amount at maturity of the beneficial interest in
such Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Securities or
Offshore Physical Securities, as the case may be, of like tenor and amount.
(e) In connection with the transfer of the U.S. Global Securities or
the Offshore Global Securities, in whole, to beneficial owners pursuant to
paragraph (b) of this Section 2.07, the U.S. Global Securities or Offshore
Global Securities, as the case may be, shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the U.S. Global Securities or
Offshore Global Securities, as the case may be, an equal aggregate principal
amount at maturity of U.S.
35
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Physical Securities or Offshore Physical Securities, as the case may be, of
authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Securities pursuant to paragraph (b), (d) or (e) of this
Section 2.07 shall, except as otherwise provided by paragraph (f) of Section
2.08, bear the legend regarding transfer restrictions applicable to the U.S.
Physical Security set forth in Section 2.02.
(g) Any Offshore Physical Security delivered in exchange for an
interest in the Offshore Global Securities pursuant to paragraph (b), (d) or (e)
of this Section 2.07 shall, except as otherwise provided by paragraph (f) of
Section 2.08, bear the legend regarding transfer restrictions applicable to the
Offshore Physical Security set forth in Section 2.02.
(h) The registered holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.08. Special Transfer Provisions. Unless and until a
---------------------------
Security is exchanged for an Exchange Security or sold in connection with an
effective Registration Statement pursuant to the Registration Rights Agreement,
the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor
which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if
(x) the requested transfer is after the time period referred to in
Rule 144(k) under the Securities Act or (y) the proposed transferee
has delivered to the Registrar (A) a certificate substantially in the
form of C hereto and (B) if the aggregate Accreted Value at the time
of transfer of the Securities being transferred is less than $250,000,
an Opinion of Counsel acceptable to the Company that such transfer is
in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Securities, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount at
maturity of the U.S. Global Securities in an amount equal to the
principal amount at maturity of the beneficial interest in the U.S.
Global
36
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Securities to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical
Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Security to a QIB
(excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of (x) either
Offshore Physical Securities prior to the removal of the Private
Placement Legend or U.S. Physical Securities, the Registrar shall
register the transfer if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of
Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A or (y) an
interest in the U.S. Global Securities, the transfer of such interest
may be effected only through the book entry system maintained by the
Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in paragraph (i)
above and instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount at
maturity of U.S. Global Securities in an amount equal to the principal
amount at maturity of the U.S. Physical Securities to be transferred,
and the Trustee shall cancel the U.S. Physical Securities so
transferred.
(c) Transfers of Interests in the Temporary Offshore Global
-------------------------------------------------------
Securities. The following provisions shall apply with respect to
registration of any proposed transfer of an interest in a Temporary
Offshore Global Securities:
(i) The Registrar shall register the transfer of any Security (x)
if the proposed transferee is a Non-U.S. Person and the proposed
transferor has
37
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delivered to the Registrar a certificate substantially in the form of
D hereto or (y) if the proposed transferee is a QIB and the proposed
transferor has checked the box provided for on the form of Security
stating, or has otherwise advised the Company and the Registrar in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Registrar of the documents referred to in clause (i)(y) above
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity
of the U.S. Global Securities in an amount equal to the principal
amount at maturity of the Temporary Offshore Global Securities to be
transferred, and the Trustee shall decrease the amount of the
Temporary Offshore Global Securities.
(d) Transfers of Interests in the Permanent Offshore Global Securities
------------------------------------------------------------------
or Unlegended Offshore Physical Securities. The following provisions shall
------------------------------------------
apply with respect to any transfer of interests in Permanent Offshore
Global Securities or unlegended Offshore Physical Securities. The
Registrar shall register the transfer of any such Security without
requiring any additional certification.
(e) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to any transfer of a Security to a Non-
U.S. Person:
(i) Prior to September 10, 1998, the Registrar shall register any
proposed transfer of a Security to a Non-U.S. Person upon receipt of a
certificate substantially in the form of D hereto from the proposed
transferor.
(ii) On and after September 10, 1998, the Registrar shall
register any proposed transfer to any Non-U.S. Person if the Security
to be transferred is a U.S. Physical Security or an interest in U.S.
Global Securities, upon receipt of a certificate substantially in the
form of D hereto from the proposed transferor.
38
<PAGE>
(iii) (a) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Securities, upon receipt by
the Registrar of (x) the documents, if any, required by paragraph (ii)
and (y) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount at maturity of
the U.S. Global Securities in an amount equal to the principal amount
at maturity of the beneficial interest in the U.S. Global Securities
to be transferred, and (b) if the proposed transferee is an Agent
Member, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount at maturity of the Offshore Global
Securities in an amount equal to the principal amount at maturity of
the U.S. Physical Securities or the U.S. Global Securities, as the
case may be, to be transferred, and the Trustee shall cancel the
Physical Security, if any, so transferred or decrease the amount of
the U.S. Global Securities.
(f) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement
Legend, the Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the registration of transfer, exchange or
replacement of Securities bearing the Private Placement Legend, the
Registrar shall deliver only Securities that bear the Private Placement
Legend unless (i) the Private Placement Legend is no longer required by
Section 2.02, (ii) the circumstances contemplated by paragraph (a)(i)(x) of
this Section 2.08 exist or (iii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee
to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions
of the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture. The Registrar shall not
register a transfer of any Security unless such transfer complies with the
restrictions on transfer of such Security set forth in this Indenture. In
connection with any registration of transfer of Securities, each Holder
agrees by its acceptance of the Securities to furnish the Registrar or the
Company such certifications, legal opinions or other information as either
of them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the
--------
Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
39
<PAGE>
The Registrar shall retain in accordance with its customary procedures
copies of all letters, notices and other written communications received
pursuant to Section 2.07 or this Section 2.08. The Company shall have the right
to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
SECTION 2.09. Replacement Securities. If a mutilated Security is
----------------------
surrendered to the Trustee or if the Holder claims that the Security has been
lost, destroyed or wrongfully taken, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding; provided that the requirements of this Section
--------
2.09 are met. If required by the Trustee or the Company, an indemnity bond must
be furnished that is sufficient in the judgment of both the Trustee and the
Company to protect the Company, the Trustee or any Agent from any loss that any
of them may suffer if a Security is replaced. The Company may charge such
Holder for its expenses and the expenses of the Trustee in replacing a Security.
In case any such mutilated, lost, destroyed or wrongfully taken Security has
become or is about to become due and payable, the Company in its discretion may
pay such Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding at any
----------------------
time are all Securities that have been authenticated by the Trustee except for
those cancelled by it, those delivered to it for cancellation and those
described in this Section 2.10 as not outstanding.
If a Security is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a protected
purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Securities payable
on that date, then on and after that date such Securities cease to be
outstanding and interest on them shall cease to accrue.
A Security does not cease to be outstanding because the Company or one
of its Affiliates holds such Security.
SECTION 2.11. Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Company may prepare and execute and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have insertions, substitutions,
omissions and other variations determined to be appropriate
40
<PAGE>
by the Officers executing the temporary Securities, as evidenced by their
execution of such temporary Securities. If temporary Securities are issued, the
Company will cause definitive Securities to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 2.04, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount at maturity of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall be entitled to
the same benefits under this Indenture as definitive Securities.
SECTION 2.12. Cancellation. The Company at any time may deliver to
------------
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Securities surrendered for transfer, exchange, payment
or cancellation and shall destroy them in accordance with its normal procedure.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities
-------------
may use "CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the
Company and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may
be, in notices of redemption or exchange as a convenience to Holders; provided
--------
that any such notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of redemption or exchange and that reliance may be placed only on
the other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers
for the Securities.
SECTION 2.14. Defaulted Interest. If the Company defaults in a
------------------
payment of interest on the Securities, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay, the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. The Company shall fix or cause to be fixed any such special record
date and payment date to the reasonable satisfaction of the Trustee and shall
promptly mail or cause to be mailed to each Securityholder a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid. The Company may make payment of any defaulted interest in any other
lawful manner not inconsistent with the requirements (if applicable) of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this paragraph, such manner of
payment shall be deemed practicable by the Trustee.
41
<PAGE>
SECTION 2.15. Issuance of Additional Securities. The Company may,
---------------------------------
subject to Section 4.03 of this Indenture and applicable law, issue Additional
Securities under this Indenture. The Initial Securities issued on the Closing
Date and any Additional Securities subsequently issued shall be treated as a
single class for all purposes under this Indenture.
ARTICLE III
REDEMPTION
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
------------------
Securities pursuant to Section 3.07, it shall notify the Trustee in writing of
the redemption date, the principal amount of Securities to be redeemed and the
paragraph of the Securities pursuant to which the redemption will occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection and Notice. If less than all of the
--------------------
Securities are to be redeemed at any time, selection of Securities for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Securities are
listed, or, if the Securities are not so listed, on a pro rata basis (among the
Securities and any Additional Securities as one class), by lot or by such method
as the Trustee shall deem fair and appropriate; provided that no Securities in a
--------
principal amount at maturity of $1,000 or less shall be redeemed in part. If
any Security is to be redeemed in part only, the notice of redemption that
relates to such Security shall state the portion of the principal amount thereof
to be redeemed. On and after the redemption date, interest and Liquidated
Damages, if any, cease to accrue on Securities or portions of them called for
redemption (or, if such redemption date is prior to the Full Accretion Date,
Accreted Value of the Securities will cease to accrete).
SECTION 3.03. Notice. Notices of redemption shall be mailed by first
------
class mail at least 30 (or in the case of a "Special Mandatory Redemption"
described in Section 3.08, 15 days), but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at its registered
address. Notices of redemption may not be conditional. The Trustee shall
notify the Company promptly of the Securities or portions of Securities to be
redeemed.
42
<PAGE>
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request (which may be revoked at any time in writing
prior to the time at which the Trustee shall have given such notice to the
Holders), the Trustee shall give the notice of redemption in the Company's name
and at the Company's expense. In such event, the Company shall provide the
Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest and Liquidated Damages, if
any, to the redemption date; provided that if the redemption date is after a
--------
regular record date and on or prior to the interest payment date, the accrued
interest shall be payable to the Securityholder of the redeemed Securities
registered on the relevant record date. If mailed in the manner herein, the
notice shall be conclusively presumed to have been given whether or not the
Holder receives such notice. Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
43
<PAGE>
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m., New
---------------------------
York City time, on the redemption date, the Company shall deposit with the
Paying Agent (or, if the Company or a Wholly Owned Restricted Subsidiary is the
Paying Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest and Liquidated Damages, if any, on all
Securities to be redeemed on the redemption date other than Securities or
portions of Securities called for redemption that have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
---------------------------
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07. Optional Redemption. (a) Except as described in
-------------------
Section 3.07(b) or (c), the Securities will not be redeemable at the Company's
option prior to August 1, 2003. Thereafter, the Securities will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date (subject to the right of Holders on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on August 1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003........................ 105.500%
2004........................ 103.667%
2005........................ 101.883%
2006 and thereafter......... 100.000
(b) In addition, at any time and from time to time, prior to August 1,
2001, the Company may redeem up to 35% of the sum of (i) the aggregate principal
amount at maturity of Securities and (ii) the aggregate principal amount at
maturity of any Additional Securities, at a redemption price of 111% of the
Accreted Value thereof (determined at the redemption date) plus Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds
received by the Company of a public offering of common stock of the Company,
provided that at least 65% of the sum of (i) the aggregate principal amount at
- --------
maturity of Securities and (ii) the aggregate principal amount at maturity of
any Additional Securities remains outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
-------- -------
within 60 days of the date of the closing of such public offering.
(c) At any time on or prior to August 1, 2003, the Securities may be
redeemed as a whole but not in part at the option of the Company upon the
occurrence of a
44
<PAGE>
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the Accreted
Value thereof (determined at the redemption date) plus the Applicable Premium
and Liquidated Damages thereon, if any, to the redemption date (subject to the
right of Holders on the relevant record date to receive interest due on the
relevant interest payment date).
SECTION 3.08. Special Mandatory Redemption. In the event that the
----------------------------
Merger is not consummated prior to the earlier to occur of (i) January 10, 1999
and (ii) if it appears, in the sole judgment of the Company, that the Merger
shall not be consummated, the date on which notice of same is delivered by the
Company to the Collateral Agent and the Trustee, the Company shall be required
to redeem the Securities, in whole, on at least 15 days' prior written notice
mailed by first class mail to each Holder's last address as it appears in the
Security Register, at a redemption price equal to 101% of the Accreted Value
plus Liquidated Damages, if any, of the Securities on the date of repurchase to
the redemption date (the "Special Redemption Payment").
SECTION 3.09. Repurchase Offers. (a) In the event that the Company
-----------------
shall be required to commence an offer to all Holders to purchase Securities (a
"Repurchase Offer") pursuant to Section 4.06 hereof (an "Excess Proceeds Offer")
or pursuant to Section 4.08 hereof (a "Change of Control Offer") the Company
shall follow the procedures specified in this Section 3.09:
(i) Within 30 days after (A) a Change of Control (unless (1) the
Company is not required to make such offer pursuant to Section 4.08(c) or
(2) all Securities have been called for redemption pursuant to Section
3.07(a), 3.07(c) and 3.08 or (B) the Company is required to make an Asset
Sale Offer pursuant to Section 4.06, the Company shall (x) commence a
Repurchase Offer, which shall remain open for a period of at least 20
Business Days following its commencement (the "Offer Period") and (y) send,
by first class mail, a notice to the Trustee and each of the Holders which
shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to such Repurchase Offer. The
notice, which shall govern the terms of the Repurchase Offer, shall
describe the transaction or transactions that constitute the Change of
Control or Asset Sale requiring an Asset Sale Offer, as the case may be,
and shall state:
(A) that the Repurchase Offer is being made pursuant to this
Section 3.09 and Section 4.06 or 4.08, as the case may be, as
applicable;
(B) the principal amount of Securities required to be purchased
pursuant to Section 4.06, in case of an Excess Proceeds Offer, or that
the Company is required to offer to purchase all of the outstanding
principal amount of Securities, in the case of a Change of Control
Offer (such amount, the "Offer
45
<PAGE>
Amount"), the purchase price and, that on the date specified in such
notice (the "Purchase Date"), which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed,
the Company shall repurchase all Securities validly tendered and not
withdrawn pursuant to this Section 3.09 and Section 4.06 or 4.08, as
applicable;
(C) that any Security not tendered or accepted for payment shall
continue to accrue interest;
(D) that, unless the Company defaults in making such payment,
Securities accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest after the Purchase Date;
(E) that Holders electing to have a Security purchased pursuant
to a Repurchase Offer may elect to have all or any portion of such
Security purchased;
(F) that Holders electing to have a Security purchased pursuant
to any Repurchase Offer shall be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security, or such other customary documents of
surrender and transfer as the Company may reasonably request, duly
completed, or transfer by book-entry transfer, to the Company, the
Depositary or the Paying Agent at the address specified in the notice
prior to the Purchase Date;
(G) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security the Holder
delivered for purchase and a statement that such Holder is withdrawing
its election to have such Security purchased;
(H) that, in the case of an Excess Proceeds Offer, if the
aggregate principal amount of Securities surrendered by Holders
thereof exceeds the Offer Amount, the Company shall select the
Securities to be purchased on a pro rata basis (based upon the
outstanding principal amount thereof), with such adjustments as may be
deemed appropriate by the Company so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be
purchased;
(I) that Holders whose Securities are purchased only in part
shall be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered (or transferred by
book-entry transfer); and
46
<PAGE>
(J) the CUSIP number, if any, printed on the Securities being
repurchased and that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Securities.
(ii) On (or at the Company's election, before) the Purchase Date, the
Company shall, (A) to the extent lawful, accept for payment, on a pro rata
basis to the extent necessary in the case of an Excess Proceeds Offer, the
Securities or portions thereof tendered pursuant to the Repurchase Offer
and not theretofore withdrawn, or if Securities aggregating less than the
Offer Amount have been tendered, all Securities tendered, and shall deliver
to the Trustee an Officers' Certificate stating that such Securities or
portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09, (B) deposit with the Paying Agent an
amount equal to the payment required in respect of all Securities or
portions thereof so tendered and (C) deliver or cause to be delivered to
the Trustee the Securities so accepted together with an Officers'
Certificate stating the aggregate principal amount of Securities or
portions thereof being purchased by the Company. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than five days after the Purchase Date) mail or deliver
to each tendering Holder an amount equal to the Change of Control Payment
or the payment due to each respective Holder in respect of the Excess
Proceeds Offer, as applicable, with respect to the Securities tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Security, and the Trustee, upon written request from
the Company, shall authenticate and mail or deliver such new Security to
such Holder, in a principal amount equal to any unpurchased portion of the
Securities so surrendered, provided that each such new Security shall be in
--------
a principal amount of $1,000 or an integral multiple thereof. Any Security
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. On the Purchase Date, all Securities purchased by the
Company shall be delivered to the Trustee for cancellation. All Securities
or portions thereof purchased pursuant to the Repurchase Offer will be
canceled by the Trustee. The Company shall publicly announce the results
of the Repurchase Offer on or as soon as practicable after the Purchase
Date, but in no case more than five Business Days thereafter.
If the Company complies with the provisions of the preceding
paragraph, on and after the Purchase Date interest shall cease to accrue on the
Securities or the portions of Securities repurchased. If a Security is
repurchased on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Security was registered at the close of business on
such record date. If any Security called is not repurchased upon surrender
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the Purchase Date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Securities and
in Section 4.01 hereof.
47
<PAGE>
(b) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations to the
extent such laws and regulations are applicable in connection with the
Repurchase Offer. To the extent that the provisions of any applicable securities
laws or regulations conflict with provisions of this Section 3.09, the Company
shall comply with such securities laws and regulations and shall not be deemed
to have breached its obligations under this Section by virtue thereof.
(c) Prior to complying with the provisions of this Section 3.09, but
in any event within 90 days following a Change of Control Offer or Asset Sale
Offer, as applicable, the Company shall either repay all outstanding Senior Debt
of the Company or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt of the Company to permit the repurchase of
Securities required by this Section 3.09 and Section 4.06 or 4.08, as
applicable.
(d) Once notice of repurchase is mailed in accordance with this
Section 3.09, all Securities validly tendered and not withdrawn (or, in the case
of an Excess Proceeds Offer, if the Company is not required to repurchase all of
such Securities then the pro rata portion of such Securities that the Company
may be required to purchase pursuant to Section 3.02 and/or 4.06 hereof, as
applicable) become irrevocably due and payable on the Purchase Date at the
purchase price specified herein. A notice of repurchase may not be conditional.
(e) Other than as specifically provided in this Section 3.09 or
Section 4.06 or 4.08, as applicable, any purchase pursuant to this Section 3.09
shall be made pursuant to the provisions of Sections 3.02 and 3.06 hereof.
SECTION 3.10. No Sinking Fund. There shall be no sinking fund for
---------------
the payment of principal on the Securities to the Securityholders.
ARTICLE IV
COVENANTS
---------
SECTION 4.01. Payment of Securities. The Company shall promptly pay
---------------------
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Unless otherwise specified in
the relevant Placement Agreement and set forth in an Officers' Certificate
delivered to the Trustee, principal and interest shall be considered paid on the
date due if on such date the Trustee or the Paying Agent (but only if other than
the Company or a Wholly Owned Restricted Subsidiary) holds by 11:00 a.m., New
York City time, in accordance with this Indenture available funds sufficient to
pay all principal and interest then due and the Trustee or the Paying Agent, as
the case may
48
<PAGE>
be, is not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports. Notwithstanding that the Company may not be
-------
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, to the extent permitted by the Exchange Act, the Company
will file with the SEC, and provide within 15 days after the Company is required
to file the same with the SEC, the Trustee and the Holders with the annual
reports and the information, documents and other reports that are specified in
Sections 13 and 15(d) of the Exchange Act. In the event the Company is not
permitted to file such reports, documents and information with the SEC, the
Company will provide substantially similar information to the Trustee and the
Holders, as if the Company were subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of TIA (S) 314(a).
SECTION 4.03. Incurrence of Debt and Issuance of Preferred Stock.
--------------------------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Debt and the Company and Guarantors shall not issue
any Disqualified Stock and shall not permit any of its Restricted Subsidiaries
that are not Guarantors to issue any shares of Preferred Stock; provided,
--------
however, that the Company and its Restricted Subsidiaries may Incur Debt or
- -------
issue shares of Disqualified Stock, if the Consolidated Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Debt is Incurred or such Disqualified Stock is issued would have been
at least 1.75 to 1.00 if such four-quarter period ends on or prior to the second
anniversary of the Issue Date and 2.00 to 1.00 if it ends thereafter, determined
on a pro forma basis (including a pro forma application of the net proceeds
--------- ---------
therefrom), as if the additional Debt had been Incurred, or the Disqualified
Stock had been issued, as the case may be, at the beginning of such four-quarter
period.
(b) The provisions of Section 4.03(a) shall not apply to the
Incurrence of any of the following items of Debt (collectively, "Permitted
Debt"):
(i) the Incurrence of term and revolving Debt, letters of credit
(with letters of credit being deemed to have a principal amount equal to
the undrawn face amount thereof) and other Debt under Credit Facilities
(including Guarantees by the Company or any of its Subsidiaries of
synthetic lease drawings and other loans under the New Credit Facility or
of other Debt under Credit Facilities); provided that the aggregate
--------
principal amount of such Debt outstanding pursuant to this clause (i) does
not exceed an amount equal to $250.0 million;
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(ii) the Incurrence by the Company and its Restricted Subsidiaries
of Existing Debt;
(iii) the Incurrence by the Company of Debt represented by the
Securities and by the Guarantors of Debt represented by the Security
Guarantees;
(iv) the Incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt;
(v) the Incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to refund, refinance or replace Debt (other than
intercompany Debt) that was permitted by this Indenture to be Incurred;
(vi) the Incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Debt or Preferred Stock owed or issued to and
held by the Company and any of its Restricted Subsidiaries, provided,
--------
however, that (X) any such Debt of the Company shall be subordinated and
-------
junior in right of payment to the Securities and (Y) (A) any subsequent
issuance or transfer of Equity Interests or other action that results in
any such Debt or Preferred Stock being held by a Person other than the
Company or a Restricted Subsidiary and (B) any sale or other transfer of
any such Debt or Preferred Stock to a Person that is neither the Company
nor a Restricted Subsidiary shall be deemed, in each case, to constitute an
Incurrence of such Debt or issuance of such Preferred Stock by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (vi);
(vii) the Incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are Incurred (A) principally for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate Debt that is permitted by the terms of this Indenture to be
outstanding or (B) principally for the purpose of fixing or hedging
currency exchange rate risk or commodity price risk Incurred in the
ordinary course of business;
(viii) the guarantee by the Company or any Guarantor of Debt of the
Company or a Restricted Subsidiary of the Company that was permitted to be
Incurred by another provision of this Section 4.03;
(ix) Debt of the Company in respect of Exchange Debentures issued as
payment in kind interest on Exchange Debentures issued upon the exchange of
Exchangeable Preferred Stock, to the extent such interest payments are made
pursuant to the terms of the Exchange Debenture Indenture; provided the
issuance of the Exchange Debentures upon such exchange was permitted by
this covenant at the time of such exchange; and
50
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(x) the Incurrence by the Company or any of its Restricted
Subsidiaries of additional Debt (which may comprise Debt under the New
Credit Facility) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding pursuant to this clause (x) not to
exceed an amount equal to $20.0 million.
For purposes of determining compliance with this Section 4.03, in the
event that an item of Debt meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (x) above or is entitled to
be Incurred pursuant to Section 4.03(a), the Company shall, in its sole
discretion, classify such item of Debt in any manner that complies with this
covenant and such item of Debt will be treated as having been Incurred pursuant
to only one of such clauses or pursuant to Section 4.03(a); provided that all
--------
outstanding Debt under the New Credit Facility immediately following the
Recapitalization shall be deemed to have been Incurred pursuant to clause (i) of
the definition of Permitted Debt. Accrual of interest and the accretion of
accreted value will be deemed not to be an Incurrence of Debt for purposes of
this Section 4.03.
SECTION 4.04. Restricted Payments. (a) The Company shall not, and
-------------------
will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution
(including any payment in connection with any merger or consolidation) on
account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) and dividends payable to the
Company or any Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value
(including in connection with any merger or consolidation) any Equity
Interests of the Company (or any Restricted Subsidiary held by Persons
other than the Company or any Restricted Subsidiary);
(iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Subordinated Debt of
the Company, except (A) a payment of interest, principal or other related
Obligations at Stated Maturity and (B) the purchase, repurchase or other
acquisition or retirement of Subordinated Debt of the Company in
anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of
purchase, repurchase or other acquisition or retirement; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv)
above being collectively referred to as "Restricted Payments"), unless, at
the time of, and after giving effect to, such Restricted Payment:
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<PAGE>
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof,
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
---------
been made at the beginning of the applicable four-quarter period, have been
permitted to Incur at least $1.00 of additional Debt pursuant to the
Consolidated Coverage Ratio test set forth in Section 4.03(a), and
(3) such Restricted Payment, together with (without duplication) the
aggregate amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the first Issue Date (excluding
Restricted Payments permitted by Section 4.04(b)(ii), Section
4.04(b)(iii)(A), Section 4.04(b)(iv), Section 4.04(b)(v), Section
4.04(b)(vi)(A) and Section 4.04(b)(vii), but including all other Restricted
Payments permitted by Section 4.04(b)), is less than the sum (without
duplication) of
(i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of
the fiscal quarter during which the first Issue Date occurs to
the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by
the Company from the issue or sale (other than to a Subsidiary)
of, or from capital contributions with respect to, Equity
Interests of the Company (other than Disqualified Stock), in
either case after the first Issue Date, plus
(iii) the aggregate principal amount (or accreted value, if
less) of Debt or Disqualified Stock of the Company or any
Restricted Subsidiary issued since the first Issue Date (other
than to a Restricted Subsidiary) that has been converted into
Equity Interests (other than Disqualified Stock) of the Company,
plus
(iv) 100% of the aggregate net cash received by the Company
or a Restricted Subsidiary of the Company since the first Issue
Date from (A) Restricted Investments, whether through interest
payments, principal payments, dividends or other distributions or
payments, or the sale or other disposition (other than to the
Company or a Restricted Subsidiary) thereof made by the Company
and its Restricted Subsidiaries and (B) a
52
<PAGE>
cash dividend from, or the sale (other than to the Company or a
Restricted Subsidiary) of the stock of, an Unrestricted
Subsidiary, plus
(v) upon the redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the fair market value of the
Investments of the Company and its Restricted Subsidiaries (other
than such Subsidiary) in such Subsidiary.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of this Section 4.04;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests or Subordinated Debt in exchange for,
or out of the net cash proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Company) of, other Equity Interests
(other than any Disqualified Stock) of, or a capital contribution to, the
Company; provided that the amount of any such net cash proceeds that are
--------
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from Section 4.04(a)(iv)(3)(ii);
(iii) the redemption, repurchase, retirement, defeasance or other
acquisition of (A) Subordinated Debt made by an exchange for, or with the
net cash proceeds from an Incurrence of, Permitted Refinancing Debt or (B)
Subordinated Debt (including Exchange Debentures) or Preferred Equity
Interests (other than Subordinated Debt or Preferred Equity Interests held
by Affiliates of the Company) upon a Change of Control or Asset Sale to the
extent required by the agreement governing such Subordinated Debt or the
certificate of designation governing such Preferred Equity Interests, as
the case may be, but only (x) if the Company shall have complied with
Section 4.06 or 4.08, as the case may be, and repurchased all Securities
tendered pursuant to the offer required by such covenants prior to
purchasing or repaying such Subordinated Debt or Preferred Equity
Interests, as the case may be, (y) in the case of an Asset Sale, to the
extent of the remaining Excess Proceeds offered to Holders pursuant to the
Asset Sale Offer and (z) within six months after the date such offer is
consummated;
(iv) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis;
(v) to the extent constituting Restricted Payments, the Specified
Affiliate Payments;
(vi) (A) the payment of any regular quarterly dividends in respect
of the Exchangeable Preferred Stock in the form of additional shares of
Exchangeable
53
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Preferred Stock having the terms and conditions set forth in the
Certificate of Designation for the Exchangeable Preferred Stock as in
effect on the first Issue Date; and (B) commencing November 1, 2003, the
payment of regular quarterly cash dividends (in the amount no greater than
that provided for in the Certificate of Designation for the Exchangeable
Preferred Stock as in effect on the first Issue Date), out of funds legally
available therefor, on any of the shares of Exchangeable Preferred Stock
issued on the first Issue Date or subsequently issued in payment of
dividends in respect of such shares of Exchangeable Preferred Stock issued
on the first Issue Date, provided that, at the time of and immediately
--------
after giving effect to the payment of such cash dividend, no Default or
Event of Default shall have occurred and be continuing;
(vii) the exchange of Exchangeable Preferred Stock for Exchange
Debentures in accordance with the terms of the Certificate of Designation
for such Exchangeable Preferred Stock as in effect on the Issue Date,
provided that such exchange is permitted by Article 4; and
--------
(viii) Restricted Payments in an aggregate amount not to exceed $10.0
million.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated, to the extent they do not
constitute Permitted Investments at the time such Subsidiary became an
Unrestricted Subsidiary, will be deemed to be Restricted Payments made at the
time of such designation. The amount of such outstanding Investments will be
equal to the portion of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary that is represented by the interest of the Company and
its Restricted Subsidiaries in such Subsidiary, in each case as determined in
good faith by the Board of Directors of the Company. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any noncash Restricted Payment shall be determined in
good faith by the Board of Directors of the Company.
In making the computations required by this covenant, (i) the Company
or the relevant Restricted Subsidiary may use audited financial statements for
the portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (ii) the Company or the relevant
Restricted Subsidiary will be permitted to rely in good faith on the
54
<PAGE>
financial statements and other financial data derived from the books and records
of the Company and the Restricted Subsidiary that are available on the date of
determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would, in the good faith determination of
the Company or any Restricted Subsidiary, be permitted under the requirements of
this Indenture, such Restricted Payment will be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's or any Restricted Subsidiary's financial
statements affecting Consolidated Net Income of the Company for any period.
For the avoidance of doubt, it is expressly agreed that no payment or
other transaction permitted by Sections 4.07(b)(3), 4.07(b)(4) and 4.07(b)(5)
shall be considered a Restricted Payment for purposes of, or otherwise
restricted by, this Indenture.
SECTION 4.05. Dividend and Other Payment Restrictions Affecting
-------------------------------------------------
Restricted Subsidiaries. The Company shall not, and shall not permit any of its
- -----------------------
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Debt owed to the Company or any of
its Restricted Subsidiaries, (ii) make loans or advances to the Company or any
of its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of:
(1) Existing Debt,
(2) this Indenture, the Securities, the Additional Securities, the
Exchangeable Preferred Stock and any Additional Exchangeable Preferred
Stock (as defined in the Certificate of Designation for the Exchangeable
Preferred Stock), the Exchange Debentures or the Exchange Debenture
Indenture and any other agreement entered into after the first Issue Date,
provided that the encumbrances or restrictions in such agreements are not
--------
materially more restrictive than those contained in the foregoing
agreements,
(3) any agreement or other instrument of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (but not created in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired,
(4) purchase money obligations (including Capital Lease Obligations)
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property
so acquired,
55
<PAGE>
(5) in the case of clause (iii) above, any encumbrance or restriction
(1) that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract, (2) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (3) contained in security agreements or mortgages securing
Debt to the extent such encumbrance or restriction restricts the transfer
of the property subject to such security agreements or mortgages,
(6) contracts for the sale of assets, including any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary pending the closing of such
sale or disposition,
(7) contractual encumbrances or restrictions in effect on the Closing
Date, including pursuant to the New Credit Facility and its related
documentation,
(8) restrictions on cash or other deposits or net worth imposed by
leases, credit agreements or other agreements entered into in the ordinary
course of business,
(9) customary provisions in joint venture agreements and other
similar agreements,
(10) any encumbrances or restrictions created with respect to (i) Debt
of Guarantors permitted to be Incurred subsequent to the first Issue Date
pursuant to Section 4.03 and (ii) Debt of Subsidiary Non-Guarantors
permitted to be Incurred subsequent to the Issue Date pursuant to Section
4.03 or operating leases, provided that in the case of this clause (ii) the
--------
Board of Directors of the Company determines (as evidenced by a Board
Resolution of the Board of Directors) in good faith at the time such
encumbrances or restrictions are created that such encumbrances or
restrictions would not reasonably be expected to impair the ability of the
Company to make payments of interest, Liquidated Damages (if any) and
scheduled payments of principal on the Securities, in each case as and when
due; and
(11) any encumbrances or restrictions of the type referred to in
clauses (1), (2) and (3) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (10), provided that such amendments, modifications,
--------
restatements, renewals, increases, supplements, refundings, replacements or
refinancings, taken as a whole, are, in the good faith judgment of the
Company, not materially more restrictive with respect to such encumbrances
or restrictions than those contained in the contracts, instruments or
obligations prior to such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.
56
<PAGE>
SECTION 4.06. Asset Sales. The Company shall not, and shall not
-----------
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed of
and (ii) at least 75% of the consideration therefor received by the Company or
such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided
--------
that the amount of (x) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Securities or, in the case of liabilities of a Guarantor,
the Security Guarantee of such Guarantor) that are assumed by the transferee of
any such assets, or from which the Company and its Restricted Subsidiaries are
released in writing by the creditor with respect thereto, and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received) within
180 days after receipt shall be deemed, in each case, to be cash for purposes of
this provision; provided, further, however, that this clause (ii) shall not
-------- ------- -------
apply to any sale of Equity Interests of or other Investments in Unrestricted
Subsidiaries.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay Senior
Debt, Debt of any Restricted Subsidiary or Pari Passu Debt (other than Debt owed
to the Company or a Subsidiary of the Company, and provided that if the Company
--------
shall so reduce Pari Passu Debt, it will equally and ratably make an Asset Sale
Offer (in accordance with the procedures set forth in Section 3.09 for an Asset
Sale Offer) to all Holders), (b) to invest in properties and assets that will be
used or useful in the business of the Company or any of its Subsidiaries or (c)
to the acquisition of a controlling interest in another business, the making of
a capital expenditure or the acquisition of other assets, in each case, that
will be used or useful in the business of the Company or any of its Restricted
Subsidiaries; provided that if during such 360-day period the Company or a
--------
Restricted Subsidiary enters into a definitive agreement committing it to apply
such Net Proceeds in accordance with the requirements of clause (b) or (c) such
360-day period will be extended for a period not to exceed 180 days with respect
to the amount of Net Proceeds so committed until required to be paid in
accordance with such agreement (or, if earlier, until termination of such
agreement). Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10
million, the Company shall (i) make an offer to all Holders of Securities, and
(ii) prepay, purchase or redeem (or make an offer to do so) any other Pari Passu
Debt of the Company in accordance with provisions requiring the Company to
prepay, purchase or redeem such Debt with the proceeds from any Asset Sales (or
offer to do so), pro rata in proportion to the respective principal amounts (or
accreted value, as applicable) of the Securities and such other Debt required to
be prepaid, purchased or redeemed or tendered for, in the case of the Securities
pursuant to such offer (an "Asset Sale Offer"), to purchase the maximum
principal amount of Securities that may be purchased out of such pro rata
portion of the Excess Proceeds, at an offer price in cash in an amount equal to
100% of their principal amount plus
57
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accrued and unpaid interest and Liquidated Damages (or, if prior to the Full
Accretion Date, 100% of the Accreted Value thereof on the date of purchase, plus
Liquidated Damages (if any) to the date of purchase subject to the right of
Holders of record on a record date to receive interest on the relevant interest
payment date, in accordance with the procedures set forth in Section 3.09). To
the extent that the aggregate principal amount (or, if prior to the Full
Accretion Date, the aggregate Accreted Value) of Securities and Pari Passu Debt
tendered pursuant to an Asset Sale Offer or other offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount (or Accreted Value, as the
case may be) of Securities surrendered by Holders thereof exceeds the pro rata
portion of such Excess Proceeds to be used to purchase Securities, the Trustee
shall select the Securities to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.07. Transactions with Affiliates. (a) The Company shall
----------------------------
not, and shall not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that, taken as a whole,
are no less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction entered into after the first Issue Date involving
aggregate consideration in excess of $3.0 million, a Board Resolution
certifying that such Affiliate Transaction complies with clause (i) above
and that such Affiliate Transaction has been approved by a majority of the
members of the Board of Directors and (b) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $10.0 million,
an opinion as to the fairness to the Holders of such Affiliate Transaction
from a financial point of view issued by an investment banking, appraisal
or accounting firm of national standing.
(b) The provisions of Section 4.07(a) shall not prohibit (and, the
following shall not be deemed to be Affiliate Transactions):
(1) transactions between or among the Company and/or its Restricted
Subsidiaries;
(2) Permitted Investments and Restricted Payments that are permitted
by Section 4.04;
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(3) employment agreements, employee benefit plans and related
arrangements entered into in the ordinary course of business and all
payments and other transactions contemplated thereby;
(4) any payments to Investcorp and its Affiliates (whether or not
such Persons are Affiliates of the Company) (A) for any financial advisory,
financing, underwriting or placement services or in respect of other
investment banking activities, including in connection with acquisitions or
divestitures, which payments are approved by the Board of Directors of the
Company in good faith and (B) of annual management, consulting and advisory
fees and related expenses;
(5) any agreement in effect on the Closing Date (including the
Recapitalization Agreement, the Services Agreement (as amended on April 15,
1998) between the Berkshire Companies Limited Partnership and the Company
and the Brevard lease agreement) or any amendment thereto (so long as any
such amendment is not disadvantageous to the Holders in any material
respect) or any payment or other transaction contemplated by any of the
foregoing; and
(6) Debt permitted by Section 4.03(b)(x) to the extent such Debt is
on terms that, taken as a whole, are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction with an unrelated Person.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a
-----------------
Change of Control, unless all Securities have been called for redemption
pursuant to the provisions in Section 3.07 or 3.08, each Holder of Securities
shall have the right to require the Company to repurchase all or any part (equal
to a principal amount at maturity of $1,000 or an integral multiple thereof) of
such Holder's Securities pursuant to a Change of Control Offer made pursuant to
Section 3.09 at an offer price in cash (the "Change of Control Payment") equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (or, if
such Change of Control Offer occurs prior to the Full Accretion Date, 101% of
the Accreted Value thereof on the date of repurchase plus Liquidated Damages
thereon, if any).
(b) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes and consummates a Change
of Control Offer.
SECTION 4.09. Compliance Certificate. The Company and each Guarantor
----------------------
shall deliver to the Trustee within 120 days after the end of each fiscal year
of the Company an Officers' Certificate stating that in the course of the
performance by the signers of their duties as Officers of the Company they would
normally have knowledge of any Default or Event of Default and whether or not
the signers know of any Default or Event of Default that occurred during such
period. If they do have such knowledge, the certificate shall describe the
Default
59
<PAGE>
or Event of Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with
Section 314(a)(4) of the TIA.
SECTION 4.10. Liens. The Company shall not, and shall not permit any
-----
of its Restricted Subsidiaries to, create, Incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing Debt or trade
payables (other than Permitted Liens) upon any of their property or assets, now
owned or hereafter acquired, unless all payments due under this Indenture and
the Securities are secured on an equal and ratable basis with the obligations so
secured until such time as such obligations are no longer secured by a Lien;
provided that (i) if such other Debt constitutes Subordinated Debt or is
- --------
otherwise subordinate or junior in right of payment to the Obligations under
this Indenture, the Securities or any Security Guarantee, as the case may be,
such Lien is expressly made prior and senior in priority to the Lien securing
such other Debt, or (ii) in any other case, such Lien ranks equally and ratably
with or prior to the Lien securing the other Debt or obligations so secured.
SECTION 4.11. Additional Security Guarantees. All future
------------------------------
Subsidiaries of the Company who guarantee any Debt of the Company under the New
Credit Facility, other than Subsidiaries that have been properly designated as
Unrestricted Subsidiaries in accordance with this Indenture for so long as they
continue to constitute Unrestricted Subsidiaries, shall be Guarantors in
accordance with the terms of this Indenture until released from such Guarantee
of the New Credit Facility.
Each future Security Guarantee shall be limited to an amount not to
exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Security Guarantee, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. Each future Security
Guarantee shall be subordinated to Senior Debt of the respective Guarantor on
the same basis and to the same extent as the Securities are subordinated to
Senior Debt of the Company.
SECTION 4.12. Restriction on Senior Subordinated Debt. The Company
---------------------------------------
shall not Incur any Debt that is expressly subordinate in right of payment to
any Senior Debt and senior in any respect in right of payment to the Securities
and no Guarantor shall Incur any Debt that is expressly subordinate in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Security Guarantee of such Guarantor.
ARTICLE V
SUCCESSOR COMPANY
-----------------
SECTION 5.01. Merger, Consolidation or Sale of All or Substantially
-----------------------------------------------------
All Assets of the Company. The Company shall not consolidate or merge with or
- -------------------------
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or
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otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person unless:
(i) the Company is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Securities
and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the
Person formed by or surviving any such consolidation or merger (if other
than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made shall, at the time of
such transaction and after giving pro forma effect thereto as if such
---------
transaction had occurred at the beginning of the applicable four-quarter
period, either (x) be permitted to Incur at least $1.00 of additional Debt
pursuant to the Consolidated Coverage Ratio test set forth in Section
4.03(a) or (y) have a Consolidated Coverage Ratio at least equal to the
Consolidated Coverage Ratio of the Company for such four-quarter reference
period; and
(v) the Company or the surviving corporation, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
Notwithstanding the foregoing clauses (iii) and (iv) above, (a) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company, (b) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction and (c) the Company may merge with and into Harborside.
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SECTION 5.02. Merger, Consolidation or Sale of All or Substantially
-----------------------------------------------------
All Assets of a Guarantor. No Guarantor may consolidate with or merge with or
- -------------------------
into (whether or not such Guarantor is the surviving Person) another Person
(other than the Company or another Guarantor) unless (i) subject to the
provisions of Section 11.02(b), the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor), assumes all the
obligations of such Guarantor under the Securities and this Indenture pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
Notwithstanding the foregoing clause (ii), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to any Guarantor and (b) any Guarantor may merge with an
Affiliate incorporated solely for the purpose of reincorporating such Guarantor
in another jurisdiction.
ARTICLE VI
DEFAULTS AND REMEDIES
---------------------
SECTION 6.01. Events of Default and Remedies.
------------------------------
Each of the following constitutes an Event of Default with respect to
the Securities if:
(1) the Company defaults for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Securities (whether
or not prohibited by the provisions of Article X);
(2) the Company defaults in payment when due of the principal of or
premium, if any, on the Securities (whether or not prohibited by the
provisions of Article X);
(3) the Company fails for 30 days after receipt of a Notice of
Default to comply with the provisions in Sections 4.03, 4.04, 4.06, 4.08
and 5.01;
(4) the Company fails for 60 days after receipt of a Notice of
Default specifying such failure to comply with any of its other agreements
in this Indenture or the Securities;
(5) the Company or any Restricted Subsidiary that is a Significant
Subsidiary fails to pay any Debt within any applicable grace period after
final maturity or acceleration by the holders thereof because of a default
if the total amount of such Debt unpaid or accelerated at the time exceeds
$15.0 million;
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(6) any judgment or decree for the payment of money in excess of
$15.0 million (net of any insurance or indemnity payments actually received
in respect thereof prior to or within 90 days from the entry thereof, or to
be received in respect thereof in the event any appeal thereof shall be
unsuccessful) shall be entered against the Company or any Significant
Subsidiary that is a Restricted Subsidiary and is not discharged, waived or
stayed and either (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (B) there shall be a period of 90
days following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof
stayed;
(7) except as permitted by this Indenture, any Security Guarantee by
a Guarantor that is a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to
be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Security Guarantee;
(8) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency; or
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or for any substantial
part of its property; or
(C) orders the winding-up or liquidation of the Company or any
Restricted Subsidiary that is a Significant Subsidiary;
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or any similar relief is granted under any foreign laws and the order or
decree relating thereto remains unstayed and in effect for 60 days:
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar federal or state law for the relief of debtors. For purposes of this
Section, the term "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
A Default under clause (3) or (4) is not an Event of Default until the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Securities notify the Company (and the Trustee, in the case of
notices to the Company by Holders) in writing by registered or certified mail,
return receipt requested, of the Default and the Company does not cure such
Default within the time specified in clauses (3) or (4) after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, forthwith upon any Senior
Officer obtaining actual knowledge of any Default, written notice in the form of
an Officers' Certificate of any Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If any Event of Default occurs and is
------------
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in principal amount of the then outstanding Securities by notice to the Company
and the Trustee may declare all the Securities to be due and payable. Upon such
a declaration, such amounts shall be due and payable immediately; provided,
--------
however, that if upon such declaration there are any amounts outstanding under
- -------
the New Credit Facility and the amounts thereunder have not been accelerated,
such amounts shall be due and payable upon the earlier of the time such amounts
are accelerated or five Business Days after receipt by the Company and the
Representative of the lenders under the New Credit Facility of such declaration.
Notwithstanding the foregoing, in the case of an Event of Default under clause
(8) or (9) with respect to the Company, all outstanding Securities will become
due and payable without further action or notice. The Holders of a majority in
aggregate principal amount of the Securities by written notice to the Trustee
may, on behalf of all the Holders, rescind an acceleration and its consequences
if the recession would not conflict with any judgment or decree and if all
existing Defaults or Events of Default have been cured or waived except
nonpayment of principal or interest that has become due because of such
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
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SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative (to the
extent permitted by law).
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
-----------------------
aggregate principal amount of the Securities then outstanding by written notice
to the Trustee may on behalf of the Holders of all of the Securities waive any
existing Default or Event of Default and its consequences except (i) a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Securities or (ii) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured and ceases to exist and
any Event of Default arising therefrom shall be deemed to have been cured and
waived for every purpose under this Indenture, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 6.05. Control by Majority. The Holders of a majority in
-------------------
aggregate principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee by this Indenture.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
-------- -------
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
-------------------
receive payment of principal, premium (if any), interest or Liquidated Damages
when due, a Security holder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) such Holder has previously given the Trustee written notice that
an Event of Default is continuing;
(2) Holders of at least 25% in principal amount at maturity of the
outstanding Securities have requested the Trustee to pursue the remedy;
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(3) such Holder has offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity;
and
(5) the Holders of a majority in principal amount at maturity of the
outstanding Securities have not given the Trustee a direction inconsistent
with such request within such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and Liquidated Damages and interest on the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 6.01(a)(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary or
any Guarantor, their creditors or their property and, unless prohibited by law
or applicable regulations, may vote on behalf of the Holders in any election of
a trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
----------
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
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SECOND: to the holders of Senior Debt to the extent required by
Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, and any Liquidated Damages
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, any Liquidated Damages and
interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
--------------------------------
nor any Guarantor (to the extent they may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and each Guarantor (to the extent that they may
lawfully do so) hereby expressly waive all benefit or advantage of any such law,
and shall not hinder, delay or impede the execution of any power herein granted
to the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VII
TRUSTEE
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of Section 7.01(b);
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise Incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
-----------------
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in any such document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
-------- -------
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other paper or document unless requested in
writing to do so by the Holders of not less than a majority in principal
amount of the Securities at the time outstanding, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(g) The Trustee shall not be required to give any note, bond or
surety in respect of the execution of the trusts and powers under this
Indenture.
(h) The permissive rights of the Trustee to take any action
enumerated in this Indenture shall not be construed as a duty to take such
action.
(i) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have
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offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
(j) The Trustee shall not be charged with knowledge of any Default or
Event of Default, of the identity of any Restricted Subsidiary or the
existence of any Change of Control or Asset Sale unless either (i) a Trust
Officer shall have received notice thereof or (ii) the Trustee shall have
received written notice thereof from the Company or any Holder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture, any Subsidiary Guarantee or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
in any document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and is known to the Trustee, the Trustee shall mail to each Holder
notice of the Default within the earlier of 90 days after it occurs or 30 days
after it is known to a Trust Officer or written notice of it is received by the
Trustee. Except in the case of a Default in the payment of principal of,
premium (if any), interest or Liquidated Damages on any Security, the Trustee
may withhold notice if and so long as a committee of its trust officers in good
faith determines that withholding notice is in the interests of Securityholders.
Notwithstanding anything to the contrary expressed in this Indenture, the
Trustee shall not be deemed to have knowledge of any Default or Event of Default
hereunder, except in the case of an Event of Default under Section 6.01(a) and
(b) hereof (provided that the Trustee is Paying Agent), unless and until a Trust
Officer receives written notice thereof at its Corporate Trust Office specified
in Section 13.02, from the Company or a Holder that such Default or Event of
Default has occurred.
SECTION 7.06. Reports by Trustee to Holders. The Trustee shall
-----------------------------
transmit to the Holders such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the TIA at the times and in
the manner provided pursuant thereto. To the extent that any such report is
required by the TIA with respect to any 12-month period, such report shall cover
the 12-month period ending December 31 and shall be transmitted by the next
succeeding March 1.
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A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
--------------------------
the Trustee from time to time such compensation as is agreed to in writing by
the Trustee and Company for the Trustee's services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket disbursements, advances and expenses Incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company and each Guarantor, jointly but not severally, shall
indemnify the Trustee and its officers, directors, shareholders, agents and
employees (each, an "Indemnified Party") for and hold each Indemnified Party
harmless against any and all loss, liability or expense (including reasonable
attorneys' fees) Incurred by them without negligence or bad faith on their part
arising out of or in connection with the acceptance or administration of this
Indenture or the Securities and the performance of their duties hereunder,
including the cost and expense of enforcing this Indenture against the Company
or any Guarantor (including this Section 7.07), and defending itself against any
claim (whether asserted by a Holder or any other person). The Trustee and its
officers, directors, shareholders, agents and employees in its capacity as
Paying Agent, Registrar, Custodian and agent for service of notice and demands
shall have the full benefit of the foregoing indemnity as well as all other
benefits, rights and privileges accorded to the Trustee in this Indenture when
acting in such other capacity. The Trustee shall notify the Company of any
claim for which it may seek indemnity promptly upon obtaining actual knowledge
thereof; provided that any failure so to notify the Company shall not relieve
--------
the Company or any Guarantor of its indemnity obligations hereunder. The
Company shall defend the claim and the Indemnified Party shall provide
reasonable cooperation at the Company's expense in the defense. Such
Indemnified Parties may have separate counsel and the Company shall pay the fees
and expenses of such counsel; provided that the Company shall not be required to
--------
pay such fees and expenses if it assumes such Indemnified Parties' defense and,
in such Indemnified Parties' reasonable judgment, there is no conflict of
interest between the Company and such parties in connection with such defense.
The Company need not reimburse any expense or indemnify against any loss,
liability or expense Incurred by an Indemnified Party through such party's own
willful misconduct, negligence or bad faith. The Company need not pay any
settlement made without its consent (which consent shall not be unreasonably
withheld).
To secure the Company's payment obligations in this Section and all
other obligations to the Trustee pursuant to this Indenture, including all fees,
expenses and rights to indemnification, the Trustee shall have a lien on all
money or property held or collected by the Trustee other than money or property
held in trust to pay principal of and interest and any Liquidated Damages on
particular Securities. Such lien shall survive the satisfaction and
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discharge of this Indenture and the resignation or removal of the Trustee. The
Trustee's right to receive payment of any amounts due under this Indenture shall
not be subordinated to any other indebtedness of the Company and the Securities
shall be subordinate to the Trustee's rights to receive such payment.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any Bankruptcy Law or the resignation or
removal of the Trustee. When the Trustee Incurs expenses after the occurrence
of a Default specified in Section 6.01(a)(8) or (9) with respect to the Company,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
----------------------
time by so notifying the Company in writing. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and the Company in writing and may appoint a successor Trustee. The
Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not, within
a reasonably prompt period, appoint a successor Trustee, or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
at least 10% in aggregate principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation, without any
further act, shall be the successor Trustee, provided that such Person shall be
--------
qualified and eligible under this Article VII.
In case at the time such successor or successors, by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
out standing if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.01. Legal Defeasance and Covenant Defeasance. (a) The
----------------------------------------
Company may, at the option of its Board of Directors evidenced by a Board
Resolution, at any
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time, elect to have either Section 8.01(b) or 8.01(c) hereof be applied to all
outstanding Securities upon compliance with the conditions set forth below in
this Article VIII.
(b) Upon the Company's exercise under Section 8.01(a) hereof of the
option applicable to this Section 8.01(b), the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.02 hereof,
be deemed to have been discharged from their obligations with respect to all
outstanding Securities and any Security Guarantee on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company and each Guarantor shall be deemed to
have paid and discharged the entire Debt represented by the outstanding
Securities and any Security Guarantee, which Securities and Security Guarantees
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.03 hereof and the other Sections of this Indenture referred to in clauses (i)
and (ii) below, and to have satisfied all their other obligations under such
Securities and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Securities to
receive, solely from the trust fund described in Article VIII hereof, as more
fully set forth in such Article, payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages, if any, on such Securities
when such payments are due, (ii) the Company's obligations with respect to the
Securities under Sections 2.04, 2.06 and 2.09 and the rights, powers, trusts,
duties and immunities of the Trustee, and (iii) the Company's obligations in
connection therewith and this Article VIII. Subject to compliance with this
Article VIII, the Company may exercise its option under this Section 8.01(b)
notwithstanding the prior exercise of its option under Section 8.01(c) hereof.
(c) Upon the Company's exercise under Section 8.01(a) hereof of the
option applicable to this Section 8.01(c), the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.02 hereof,
be released from their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 5.01(iv) hereof with respect to the
outstanding Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration of act of Holders (and the consequences of any
thereof) in connection with such Sections, but shall continue to be deemed
"outstanding" for all the other purposes hereunder (it being understood that
such Securities and the related Security Guarantees shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to any term, condition or limitation set forth in any
such Section, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or by reason of any reference in any such
Section to any other provision herein or in any other document and such omission
to comply shall not constitute a Default or an Event of Default under Section
6.01 hereof, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01(a) hereof of the option applicable to this Section
8.01(c) hereof, subject to the
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satisfaction of the conditions set forth in Section 8.02, Sections 6.01(4),
6.01(5) (with respect to compliance with Section 4.09 only), 6.01(6), 6.01(7)
(with respect to Subsidiaries of the Company only), 6.01(8) (with respect to
Subsidiaries of the Company only), 6.01(9) and 6.01(10) shall not constitute
Events of Default.
SECTION 8.02. Conditions to Legal or Covenant Defeasance. The
------------------------------------------
following shall be the conditions to the application of either Section 8.01(b)
or 8.01(c) hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company or the Guarantors must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders of the Securities cash in
U.S. dollars, Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest and Liquidated Damages on the outstanding Securities
on the stated maturity or on the applicable redemption date, as the case
may be, and the Company and the Guarantors must specify whether the
Securities are being defeased to maturity or to a particular redemption
date;
(b) in the case of Legal Defeasance, the Company or the Guarantors
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, (1) the Company and the Guarantors
have received from, or there has been published by, the Internal Revenue
Service a ruling or (2) since the Issue Date, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and, based thereon, such Opinion of Counsel shall confirm that, subject to
customary assumptions and exclusions, the Holders of the outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance, the Company or the Guarantors
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, the Holders of the outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the
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borrowing of funds to be applied to such deposit and the grant of any Lien
securing such borrowing) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company or the Guarantors must have delivered to the Trustee
an Opinion of Counsel, subject to customary assumptions and exclusions, to
the effect that after the 91st day following the deposit, the trust funds
will not be part of any "estate" formed by the bankruptcy or reorganization
of the Company or subject to the "automatic stay" under the Bankruptcy Code
or, in the case of Covenant Defeasance, will be subject to a first priority
Lien in favor of the Trustee for the benefit of the Holders;
(g) the Company or the Guarantors must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
or the Guarantors with the intent of preferring the Holders of Securities
over the other creditors of the Company or the Guarantors, as applicable,
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or the Guarantors, as applicable, or others; and
(h) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel (which opinion of counsel may be subject to
customary assumptions and exclusions), each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
SECTION 8.03. Deposited Money and Government Securities to Be Held in
-------------------------------------------------------
Trust; Other Miscellaneous Provisions. Subject to Section 8.04 hereof, all
- -------------------------------------
money and Government Obligations (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee, collectively for purposes of this
Section 8.03, the "Trustee") pursuant to Section 8.02 hereof in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal,
premium and Liquidated Damages if any, and interest but such money need not be
segregated from other funds except to the extent required by law.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time, upon the request
of the Company, any money or Government Obligations held by it as provided in
Section 8.02 hereof that, in the
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opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.02(a) hereof), are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.04. Repayment to Company. Any money deposited with the
--------------------
Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on any Security and remaining unclaimed for two years after such principal,
premium and Liquidated Damages, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may, at the
expense of the Company, cause to be published once, in the Wall Street Journal
-------------------
(national edition), notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 8.05. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any United States dollars or Government Obligations in
accordance with this Article VIII by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities and the Guarantors obligations under this Indenture and the Security
Guarantees shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with this Article VIII;
provided, however, that if the Company or any Guarantor makes any payment of
- -------- -------
principal of, premium and Liquidated Damages, if any, or interest on any
Security following the reinstatement of its obligations, the Company or any
Guarantor, as the case may be, shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money held by the Trustee or
Paying Agent.
SECTION 8.06. Satisfaction and Discharge of Indenture. Upon the
---------------------------------------
request of the Company, this Indenture will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Securities, as expressly provided for herein or pursuant hereto), the Company
and the Guarantors will be discharged from their obligations under the
Securities and Security Guarantees and the Trustee, at the expense of the
Company, will execute proper instruments acknowledging satisfaction and
discharge of this Indenture, any security agreements relating thereto, the
Securities and the Security Guarantees when:
(a) either (i) all the Securities theretofore authenticated and
delivered (other than mutilated, destroyed, lost or stolen Securities that
have been replaced or paid and
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Securities that have been subject to defeasance under this Article VIII)
have been delivered to the Trustee for cancellation or (ii) all Securities
not theretofore delivered to the Trustee for cancellation (A) have become
due and payable, (B) shall become due and payable at maturity within one
year or (C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and the expense, of the Company, and
the Company has irrevocably deposited or caused to be deposited with the
Trustee funds in trust for the purpose in an amount sufficient to pay and
discharge the entire Debt on such Securities not theretofore delivered to
the Trustee for cancellation, for principal (and premium and Liquidated
Damages, if any, on) and interest on the Securities to the date of such
deposit (in case of Securities that have become due and payable) or to the
Stated Maturity or redemption date, as the case may be;
(b) the Company has paid or caused to be paid all sums payable under
this Indenture by this Company; or
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided in this Indenture relating to the satisfaction and discharge of
this Indenture, the security agreements relating thereto, the Securities
and the Security Guarantees have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 7.07 and, if money shall
have been deposited with the Trustee pursuant to clause (a)(ii) of this Section,
the obligations of the Trustee under Section 8.06 and Section 2.04 shall
survive.
ARTICLE IX
AMENDMENTS
----------
SECTION 9.01. Without Consent of Holders. Notwithstanding Section
--------------------------
9.02, the Company and the Trustee may amend or supplement this Indenture, the
Securities, the Security Guarantees or the Pledge Agreement without notice to or
the consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities (provided that the uncertificated
--------
Securities are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code);
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(3) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of Securities in the case of a merger, consolidation
or sale of assets;
(4) to release any Security Guarantee or collateral in accordance
with the provisions of this Indenture or the Pledge Agreement;
(5) to provide for additional Guarantors;
(6) to make any change that would provide any additional rights or
benefits to the Holders of Securities or that, as determined by the Board
of Directors in good faith, does not have a material adverse effect on the
legal rights under this Indenture of any such Holder;
(7) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(8) to make any change to Article II, Section 4.01 or the Exhibits
hereto that applies only to Additional Securities (other than a change
relating to other provisions of this Indenture incorporated or referenced
in Article II, Section 4.01 or any such Exhibit).
An amendment under this Section may not make any change that adversely
affects the rights under Article X of any holder of Senior Debt then outstanding
unless the holders of such Senior Debt (or any group or representative thereof
authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. Except as provided in this
-----------------------
Section 9.02 and Section 9.01, this Indenture, the Securities, the Security
Guarantees and the Pledge Agreement may be amended or supplemented without
notice to any Securityholders but with the consent of the Holders of at least a
majority in principal amount at maturity of the Securities then outstanding
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Securities), and any existing default or noncompliance
with any provision of this Indenture or the Securities may be waived with the
consent of the Holders of a majority in principal amount at maturity of the then
outstanding Securities (including consents obtained in connection with a tender
offer or exchange offer for Securities). However, without the consent of each
Holder affected thereby, an amendment or waiver may not (with respect to any
Securities held by a non-consenting Holder):
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(i) reduce the principal amount at maturity of Securities whose
Holders must consent to an amendment, supplement or waiver,
(ii) reduce the principal of, change the fixed maturity of any
Security, reduce any premium payable upon optional redemption of the
Securities or otherwise alter the provisions with respect to the redemption
or repurchase of the Securities (other than provisions relating to the
covenants described in Sections 3.09, 4.06 and 4.08,
(iii) reduce the rate of or change the time for payment of interest
on any Security, or reduce the rate of accretion on the Accreted Value or
extend the period during which no interest accrues on the Securities,
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Securities (except a rescission
of acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of the Securities and a waiver of the payment
default that resulted from such acceleration),
(v) make any Security payable in money other than that stated in
the Securities,
(vi) impair the rights of Holders of the Securities to receive
payments of principal of or premium, if any, on the Securities,
(vii) make any change to Section 6.04 or 6.07 or this 9.02, or
(viii) except as permitted by this Indenture, release any Security
Guarantee or any collateral under the Pledge Agreement.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
-----------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the
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Security. However, any such Holder or subsequent Holder may revoke the consent
or waiver as to such Holder's Security or portion of the Security if the Trustee
receives written notice of revocation before the date the amendment or waiver
becomes effective. After an amendment or waiver becomes effective, it shall bind
every Securityholder. Except if otherwise specified in such amendment or waiver,
an amendment or waiver becomes effective once the requisite number of consents
are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
-------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture that such amendment is
the legal, valid and binding obligation of the Company and the Guarantors
enforceable against them in accordance with its terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
ARTICLE X
SUBORDINATION
-------------
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
------------------------
each Securityholder by accepting a Security agrees, that the Debt evidenced by
the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article X, to the prior payment in full in cash or Cash
Equivalents of all existing and future Senior Debt of the Company and that the
subordination is for the benefit of and enforceable by the holders of Senior
Debt of
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the Company. The Securities shall rank pari passu in right of payment with all
---- -----
existing and future Pari Passu Debt of the Company and shall be senior in right
of payment to all existing and future Subordinated Debt of the Company. The
Securities shall also be effectively subordinated to any Secured Debt of the
Company to the extent of the value of the assets securing such Debt. However,
payment from the money or the proceeds of Government Securities held in any
defeasance trust described in Article VIII is not subordinated to any Senior
Debt or subject to the restrictions described in this Section 10.01, so long as
the payments into the defeasance trust were not prohibited pursuant to the
subordination provisions described at the time when so paid. For purposes of
these subordination provisions, the Debt evidenced by the Securities is deemed
to include the Liquidated Damages payable pursuant to the provisions set forth
in the Securities and the applicable Registration Rights Agreement. All
provisions of this Article X shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
------------------------------------
payment or distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt of the Company shall be
entitled to receive payment in full, in cash or Cash Equivalents, of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt, whether or not allowed or allowable in such proceeding) before the
Holders of Securities will be entitled to receive any payment with respect to
the Securities, and until all Obligations with respect to such Senior Debt are
paid in full, in cash or Cash Equivalents, any payment or distribution to which
the Holders of Securities would be entitled shall be made to the holders of such
Senior Debt (except that Holders of Securities may receive and retain (i)
Permitted Junior Securities and (ii) payments made from the trust described in
Article VIII so long as, on the date or dates the respective amounts were paid
into the trust, such payments were made with respect to the Securities without
violating this Article X). The term "payment" means, with respect to the
Securities, any payment, whether in cash or other assets or property, of
interest, principal (including redemption price and purchase price), premium,
Liquidated Damages or any other amount on, of or in respect of the Securities,
any other acquisition of Securities and any deposit into the trust described in
Article VIII. The verb "pay" has a correlative meaning.
SECTION 10.03. Default on Senior Debt. The Company shall not make
----------------------
any payment or distribution upon or in respect of the Securities (except from
the trust described in Article VIII) if (i) a default in the payment of any
Obligations with respect to Designated Senior Debt of the Company occurs and is
continuing (a "payment default") or any other default on Designated Senior Debt
of the Company occurs and the maturity of such Designated Senior Debt is
accelerated in accordance with its terms or (ii) a default, other than a payment
default, occurs and is continuing with respect to Designated Senior Debt of the
Company that permits holders of the Designated Senior Debt of the Company as to
which such default relates to accelerate its maturity (a "non-payment default")
and, in the case of this clause (ii) only, the
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Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company, a Representative for, or the holders of a majority of the outstanding
principal amount, of any such issue of Designated Senior Debt of the Company.
Payments on the Securities may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and, in the case
of Designated Senior Debt of the Company that has been accelerated, such
acceleration has been rescinded, and (b) in case of a non-payment default, the
earlier of the date on which such non-payment default is cured or waived or 179
days after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt of the Company has been
accelerated. No new period of payment blockage may be commenced on account of
any non-payment default unless and until 360 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice. No non-payment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee, shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been cured or waived for
a period of not less than 90 days.
Notwithstanding any other provision in this Section 10.03, during any
365 day period, there must be at least 180 days where there is no Payment
Blockage Notice in effect.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
-------------------------------------
the Securities is accelerated because of an Event of Default, the Company shall
promptly notify the Representative of the lenders under the New Credit Facility
of the acceleration. If any Debt under the New Credit Facility is outstanding,
the Company may not make any payment on account of such accelerated Securities
until five Business Days after such holders of such Debt receive notice of such
acceleration and, thereafter, may pay the Securities only if this Article X
otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a
-----------------------------------
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive such distribution
shall hold it in trust for holders of Senior Debt of the Company and pay it over
to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Debt of the Company is
-----------
paid in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Debt of the Company to receive
distributions applicable to Senior Debt of the Company. A distribution made
under this Article X to holders of Senior Debt of the Company which otherwise
would have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on Senior Debt of the Company.
SECTION 10.07. Relative Rights. This Article X defines the relative
---------------
rights of Securityholders and holders of Senior Debt of the Company. Nothing in
this Indenture shall:
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(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon an Event of Default, subject to the rights of
holders of Senior Debt of the Company to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
--------------------------------------------
right of any holder of Senior Debt of the Company to enforce the subordination
of the Debt evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Debt of the Company may give the notice;
provided, however, that, if an issue of Senior Debt of the Company has a
- -------- -------
Representative, only the Representative may give the notice. The Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Debt of the Company
(or a Representative of such holder) to establish that such notice has been
given by a holder of such Senior Debt of the Company or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Debt of the Company with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Debt of the Company which may at any time
be held by it, to the same extent as any other holder of Senior Debt of the
Company; and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article X shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Debt of the
Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not to Prevent Events of Default or Limit
---------------------------------------------------
Right to Accelerate. The failure to make a payment pursuant to the Securities
- -------------------
by reason of any provision in this Article X shall not be construed as
preventing the occurrence of an Event of Default. Nothing in this Article X
shall have any effect on the right of the Securityholders or the Trustee to
accelerate the maturity of the Securities.
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SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
-----------------------------
anything contained herein to the contrary, payments from money or the proceeds
of Government Obligations held in trust under Article VIII by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Debt or subject to the
restrictions set forth in this Article X, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Debt of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representative for the holders of Senior Debt
of the Company for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt of
the Company and other Debt of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article X. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Debt of the Company to participate in any
payment or distribution pursuant to this Article X, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt of the Company held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article X, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee to Effectuate Subordination. Each
-----------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Debt of the Company as provided in this Article X and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt.
------------------------------------------------
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article X. The Trustee shall not be deemed
to owe any fiduciary or other duty to the holders of Senior Debt of the Company
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of Senior Debt of the Company shall be entitled by
virtue of this Article X or otherwise.
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SECTION 10.16. Reliance by Holders of Senior Debt on Subordination
---------------------------------------------------
Provisions. Each Securityholder by accepting a Security acknowledges and agrees
- ----------
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt of the Company,
whether such Senior Debt was created or acquired before or after the issuance of
the Securities, to acquire and continue to hold, or to continue to hold, such
Senior Debt and such holder of Senior Debt shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Debt.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in
-------------------------------------
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE XI
SECURITY GUARANTEES
-------------------
SECTION 11.01. Security Guarantees. Each Guarantor hereby jointly
-------------------
and severally unconditionally and irrevocably guarantees as a primary obligor
and not merely as a surety, to each Holder and to the Trustee and its successors
and assigns (a) the full and punctual payment of principal of, premium, if any,
and interest and Liquidated Damages, if any, on the Securities when due, whether
at maturity, by acceleration, by redemption or otherwise, subject to any
applicable grace period, and all other monetary obligations of the Company under
this Indenture (including obligations to the Trustee) and the Securities and (b)
the full and punctual performance within applicable grace periods of all other
obligations of the Company whether for expenses, indemnification or otherwise
under this Indenture and the Securities (all of the foregoing being hereinafter
collectively called the "Guaranteed Obligations"). Each Guarantor further
agrees that the Guaranteed Obligations may be extended or renewed, in whole or
in part, without notice or further assent from each such Guarantor, and that
each such Guarantor shall remain bound under this Article XI notwithstanding any
extension or renewal of any Guaranteed Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any Guaranteed
Obligations; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee
to exercise any right or remedy against any other
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Guarantor of the Guaranteed Obligations; or (f) any change in the ownership of
such Guarantor, except as provided in Section 11.02(b).
Each Guarantor further agrees that its Security Guarantee herein
constitutes a Guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
The obligations of each Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall not
be subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Guaranteed Obligations, or by any other act or thing or omission or delay to
do any other act or thing which may or might in any manner or to any extent vary
the risk of any Guarantor or would otherwise operate as a discharge of any
Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Security Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Guaranteed
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest, premium or Liquidated Damages, if any, on any Guaranteed
Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Guaranteed Obligations, (ii) accrued and unpaid
interest, premium and Liquidated Damages, if any, on such Guaranteed Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Guaranteed Obligations of the Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranteed Obligations
guaranteed hereby until payment in full of all Guaranteed Obligations. Each
Guarantor further agrees that, as between it, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
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Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article VI for the purposes of any Security Guarantee herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of
any declaration of acceleration of such Guaranteed Obligations as provided in
Article VI, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) Incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 11.02. Limitation on Liability. (a) Any term or provision
-----------------------
of this Indenture to the contrary notwithstanding, the maximum, aggregate amount
of the obligations guaranteed hereunder by any Guarantor shall not exceed the
maximum amount that can be guaranteed (after giving effect to all its Guarantees
of Debt under the New Credit Facility) without rendering this Indenture, as it
relates to any such Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally, provided, however, that the Security Guarantee by
-------- -------
HRI shall be limited to an amount not to exceed, together with any Debt
outstanding under the New Credit Facility, 80% of the aggregate purchase price
paid by HRI (which purchase price was approximately $17 million) for the
Harborside Healthcare - Pawtuxet Village Nursing and Rehabilitation Center and
the Harborside Healthcare - Greenwood Nursing and Rehabilitation Center.
(b) This Guarantee as to any Guarantor shall terminate and be of no
further force or effect upon (i) the designation (in accordance with the
provisions of this Indenture) of such Guarantor as an Unrestricted Subsidiary or
(ii) the sale or other disposition of all of the assets of such Guarantor in
accordance with the terms of this Indenture, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Guarantor then held by the Company and its Restricted Subsidiaries; provided
--------
that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.06, to the extent such Section is applicable to such
disposition and is required thereby, or (iii) the sale or other disposition of
Capital Stock of any Guarantor if (A) as a result of such disposition, such
Person ceases to be a Subsidiary of the Company and (B) the Net Proceeds of such
sale are applied in accordance with Section 4.06, to the extent such Section is
applicable to such disposition. If the Security Guarantee of any Guarantor
terminates pursuant to the foregoing provisions, such Person shall cease to be a
Subsidiary, a Guarantor or otherwise a party to this Indenture and, upon request
by the Company, the Trustee shall execute appropriate instruments acknowledging
such termination and the release of such Person from its obligations hereunder.
SECTION 11.03. Successors and Assigns. This Article XI shall be
----------------------
binding upon each Guarantor and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon
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that party in this Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
---------
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
------------
any provision of this Article XI, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
ARTICLE XII
SUBORDINATION OF THE SECURITY GUARANTEES
----------------------------------------
SECTION 12.01. Agreement to Subordinate. Each Guarantor agrees, and
------------------------
each Securityholder by accepting a Security agrees, that such Guarantor's
obligations under its Security Guarantee are subordinated in right of payment,
to the extent and in the manner provided in this Article XII, to the prior
payment in full in cash or Cash Equivalents of all existing and future Senior
Debt of such Guarantor and that the subordination is for the benefit of and
enforceable by the holders of Senior Debt of such Guarantor. The obligations of
a Guarantor under this Article XII shall rank pari passu in right of payment
----------
with all existing and future Pari Passu Debt of such Guarantor, and shall be
senior in right of payment to all existing and future Subordinated Debt of such
Guarantor. Each Security Guarantee will also be effectively subordinated to any
Secured Debt of the applicable Guarantor to the extent of the value of the
assets securing such Debt.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
------------------------------------
payment or distribution to creditors of any Guarantor in a liquidation or
dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor or its property,
an assignment for the benefit of creditors or any marshaling of such Guarantor's
assets and liabilities, the holders of Senior Debt of such Guarantor shall be
entitled to receive payment in full, in cash or Cash Equivalents, of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt, whether or not allowed or allowable in such
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proceeding) before the Holders of Securities will be entitled to receive any
payment with respect to the Security Guarantee and until all Obligations with
respect to such Senior Debt are paid in full, in cash or Cash Equivalents, any
payment or distribution to which the Holders of Securities would be entitled
shall be made to the holders of such Senior Debt (except that Holders of
Securities may receive and retain (i) Permitted Junior Securities and (ii)
payments made from the trust described in Article VII so long as, on the date or
dates the respective amounts were paid into the trust, such payments were made
with respect to the Securities without violating this Article XII).
SECTION 12.03. Default on Senior Debt of a Guarantor. A Guarantor
-------------------------------------
shall not make any payment or distribution upon or in respect of its Security
Guarantee if (i) a default in the payment of any Obligations with respect to
Designated Senior Debt of such Guarantor occurs and is continuing (a "Guarantor
payment default") or any other default on Designated Senior Debt of such
Guarantor occurs and the maturity of such Designated Senior Debt of such
Guarantor is accelerated in accordance with its terms or (ii) a default, other
than a Guarantor payment default, occurs and is continuing with respect to
Designated Senior Debt of such Guarantor that permits holders of the Designated
Senior Debt of such Guarantor as to which such default relates to accelerate its
maturity (a "Guarantor non-payment default") and, in the case of this clause
(ii) only, the Trustee receives a notice of such default (a "Guarantor Payment
Blockage Notice") from the Company, a Representative for, or the holders of a
majority of the outstanding principal amount of, any issue of Designated Senior
Debt of such Guarantor. Payments on the Security Guarantee of such Guarantor
may and shall be resumed (a) in the case of a Guarantor payment default, upon
the date on which such default is cured or waived and, in the case of Designated
Senior Debt of such Guarantor that has been accelerated, such acceleration has
been rescinded, and (b) in case of a Guarantor non-payment default, the earlier
of the date on which such Guarantor non-payment default is cured or waived or
179 days after the date on which the applicable Guarantor Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt of such
Guarantor has been accelerated. No new period of payment blockage may be
commenced on account of any Guarantor non-payment default unless and until 360
days have elapsed since the initial effectiveness of the immediately prior
Guarantor Payment Blockage Notice. No Guarantor non-payment default that
existed or was continuing on the date of delivery of any Guarantor Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Guarantor Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 90 days.
Notwithstanding any other provision in this Section 12.03, during any
365-day period, there must be at least 180 days in which there is no Guarantor
Payment Blockage Notice.
SECTION 12.04. Demand for Payment. If payment of the Securities is
------------------
accelerated because of an Event of Default and a demand for payment is made on a
Guarantor pursuant to Article XI, the Trustee shall promptly notify the Company,
and the Company shall promptly (and in no event more than five Business Days
after receipt of such notice) notify the
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Representative of the lenders under the New Credit Facility of the acceleration.
If any Debt under the New Credit Facility is outstanding, such Guarantor may not
pay its Obligations under its Security Guarantee until five Business Days after
the holders of such Debt receive notice of such demand and, thereafter, may pay
its Obligations under its Security Guarantee only if this Article XII otherwise
permits payment at that time.
SECTION 12.05. When Distribution Must Be Paid Over. If a
-----------------------------------
distribution is made to Securityholders that because of this Article XII should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Debt of the relevant Guarantor and
pay it over to them as their interests may appear.
SECTION 12.06. Subrogation. After all Senior Debt of a Guarantor is
-----------
paid in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Debt of such Guarantor to receive
distributions applicable to Senior Debt of such Guarantor. A distribution made
under this Article XII to holders of Senior Debt of such Guarantor which
otherwise would have been made to Securityholders is not, as between such
Guarantor and Securityholders, a payment by such Guarantor on Senior Debt of
such Guarantor.
SECTION 12.07. Relative Rights. This Article XII defines the
---------------
relative rights of Securityholders and holders of Senior Debt of a Guarantor.
Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Securityholders, the
obligation of a Guarantor, which is absolute and unconditional, to pay its
Obligations under its Security Guarantee to the extent set forth in Article
XI; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by a Guarantor under its Obligations
under its Security Guarantee, subject to the rights of holders of Senior
Debt of such Guarantor to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor. No
------------------------------------------------
right of any holder of Senior Debt of a Guarantor to enforce the subordination
of the Obligations under the Security Guarantee of such Guarantor shall be
impaired by any act or failure to act by such Guarantor or by its failure to
comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 12.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article XII. A Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Debt of a Guarantor may give the notice;
provided, however, that, if an issue of Senior Debt of a Guarantor has a
- -------- -------
Representative, only the
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Representative may give the notice. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Debt of a Guarantor (or a Representative of such
holder) to establish that such notice has been given by a holder of such Senior
Debt or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Debt of a Guarantor with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article XII with respect to any Senior Debt of a Guarantor which may at any time
be held by it, to the same extent as any other holder of Senior Debt of such
Guarantor; and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article XII shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Debt of a
Guarantor, the distribution may be made and the notice given to their
Representative (if any).
SECTION 12.11. Article XII Not to Prevent Events of Default or Limit
-----------------------------------------------------
Right to Accelerate. The failure of a Guarantor to make a payment on any of its
- -------------------
Obligations under its Security Guarantee by reason of any provision in this
Article XII shall not be construed as preventing the occurrence of a default by
such Guarantor under its Security Guarantee. Nothing in this Article XII shall
have any effect on the right of the Securityholders or the Trustee to make a
demand for payment on a Guarantor pursuant to Article XII.
SECTION 12.12. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior Debt
of a Guarantor for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt of a
Guarantor and other Debt of a Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XII. In the event that the Trustee determines, in
good faith, that evidence is required with respect to the right of any Person as
a holder of Senior Debt of a Guarantor to participate in any payment or
distribution pursuant to this Article XII, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Debt of such Guarantor held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article XII, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions
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of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of
actions by the Trustee pursuant to this Article XII.
SECTION 12.13. Trustee to Effectuate Subordination. Each
-----------------------------------
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Debt of each of the Guarantors as provided in this Article XII and
appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Debt of a
-----------------------------------------------------
Guarantor. The Trustee shall not be deemed to owe any fiduciary or other duty
- ---------
to the holders of Senior Debt of a Guarantor and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders or the
relevant Guarantor or any other Person, money or assets to which any holders of
Senior Debt of such Guarantor shall be entitled by virtue of this Article XII or
otherwise.
SECTION 12.15. Reliance by Holders of Senior Debt of a Guarantor on
----------------------------------------------------
Subordination Provisions. Each Securityholder by accepting a Security
- ------------------------
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Debt of a Guarantor, whether such Senior Debt was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Debt and such holder of Senior Debt shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Debt.
ARTICLE XIII
MISCELLANEOUS
-------------
SECTION 13.01. Trust Indenture Act Controls. If any provision of
----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail addressed as
follows:
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if to the Company prior to the Recapitalization:
HH Acquisition Corp.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48/th/ Floor
New York, NY 10166
Attention: Joerg H. Esdorn, Esq.
and
Investcorp International Inc.
280 Park Avenue, 37 West Floor
New York, NY 10017
Attention: Christopher J. O'Brien
if to the Company after the Recapitalization:
Harborside Healthcare Corporation
470 Atlantic Avenue
Boston, MA 02210
Attention: William H. Stephan
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48/th/ Floor
New York, NY 10166
Attention: Joerg H. Esdorn, Esq.
and
Investcorp International Inc.
280 Park Avenue, 37 West Floor
New York, NY 10017
Attention: Christopher J. O'Brien
And with respect to notices pursuant to Article VI, with copies to:
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, NY 10166
Attention: Joerg H. Esdorn, Esq.
94
<PAGE>
if to the Trustee:
United States Trust Company of New York
114 West 47/th/ Street
New York, NY 10036
telecopier no.: (212) 852-1626
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be made
in compliance with Section 313(c) of the TIA and mailed to the Securityholder at
the Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, at the request of the Trustee the
Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 13.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
To the extent applicable, the Company shall comply with the provisions
of Section 314(c)(3) of the TIA.
95
<PAGE>
SECTION 13.05. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Securities Disregarded. In determining whether
---------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE, THE SECURITIES AND THE
-------------
SECURITY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
96
<PAGE>
SECTION 13.10. No Recourse Against Others. A director, officer,
--------------------------
incorporator, employee, stockholder or Affiliate as such, of the Company or any
Guarantor shall not have any liability for any obligations of the Company or any
Guarantor under the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 13.11. Successors. All agreements of the Company and each
----------
Guarantor in this Indenture and the Securities shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
97
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
HH ACQUISITION CORP.
By: /s/ Christopher J. O'Brien
--------------------------------------
Name: Christopher J. O'Brien
Title: President
UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee,
By: _____________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
HH ACQUISITION CORP.
By: ____________________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee,
By: /s/ James E. Logan
______________________________________
Name: James E. Logan
Title: Vice President
<PAGE>
EXHIBIT A
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES AT
THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME
PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS
<PAGE>
A-2
A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
[For Global Securities only:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.]
<PAGE>
A-3
[FORM OF FACE OF SECURITY]
HH ACQUISITION CORP.
11% SENIOR SUBORDINATED DISCOUNT NOTE DUE 2008
No. ___ CUSIP No. _________
$____________
The following information is supplied for purposes of Sections 1273 and 1275
of the Internal Revenue Code:
Issue Date: [__________],____]
Original issue discount under Section
Yield to maturity for period from 1273 of the Internal Revenue Code
Issue Date to [__________,_____]: (for each $1,000 principal amount):
[____]%, compounded semi-annually on $[_______]
[__________ and _______], commencing
[_________, ____] (computed without Issue Price (for each $1,000
giving effect to the additional principal amount): $[_____]
payments of interest in the event
the issuer fails to commence the
exchange offer or cause the
registration statement to be
declared effective, each as
described on the reverse hereof)
HH ACQUISITION CORP., a Delaware corporation (the "Company"), promises
to pay to _______________,or registered assigns, the principal sum of
_____________________ ($________________) on August 1, 2008.
Interest Payment Dates: February 1 and August 1, commencing February 1, 2003
Regular Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated:
HH ACQUISITION CORP.
By: _______________________________________
Name:
Title:
<PAGE>
A-4
TRUSTEE'S CERTIFICATE OF AUHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: _______________________
Authorized Signatory
<PAGE>
A-5
[FORM OF REVERSE SIDE OF SECURITY]
11% Senior Subordinated Discount Note due 2008
1. Interest
--------
HH ACQUISITION CORP., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above and shall pay Liquidated Damages, if any, payable pursuant to the
relevant Registration Rights Agreement.
The Company will pay interest and Liquidated Damages, if any,
semiannually on August 1 and February 1 of each year commencing February 1,
2004; provided that no interest shall accrue on the principal amount of this
--------
Security prior to August 1, 2003 (the "Full Accretion Date"), and no interest
shall be paid on this Security prior to the Full Accretion Date except for
Liquidated Damages, if any, payable pursuant to the relevant Registration Rights
Agreement. The Holder of this Security is entitled to the benefit of such
Registration Rights Agreement.
Interest will be computed on the basis of a 360-day year of twelve 30-
day months. The Company shall pay interest on overdue principal at the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
The Company will pay interest (except defaulted interest) on and
Liquidated Damages, if any, in respect of the Securities to the Persons who are
registered holders of Securities at the close of business on the January 15 or
July 15 next preceding the interest payment date even if Securities are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money or by wire transfer of federal funds.
3. Paying Agent and Registrar
--------------------------
Initially, UNITED STATES TRUST COMPANY OF NEW YORK (the "Trustee")
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice to the Holders. The
Company or any domestically organized Wholly Owned Restricted Subsidiary may act
as Paying Agent, Registrar or co-registrar.
<PAGE>
A-6
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of July
31, 1998 (the "Indenture"), between the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are unsecured senior subordinated obligations of the
Company. Subject to the conditions set forth in the Indenture, the Company may
issue Additional Securities.
5. Optional Redemption
-------------------
Except as set forth in the next two paragraphs, the Securities may not
be redeemed at the Company's option prior to August 1, 2003. Thereafter, the
Securities will be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date (subject to the right of Holders on
the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the twelve-month period beginning on August 1
of the years indicated below:
Redemption
Year Price
- ---- ----------
2003 105.500%
2004 103.667%
2005 101.883%
2006 and thereafter 100.000%
In addition, at any time and from time to time, prior to August 1,
2001, the Company may redeem up to 35% of the sum of (i) the aggregate principal
amount at maturity of Securities and (ii) the aggregate principal amount at
maturity of any Additional Securities at a redemption price of 111% of the
Accreted Value thereof (determined at the redemption date) plus Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds
received by the Company of a public offering of common stock of the Company,
provided that at least 65% of the sum of (i) the aggregate principal amount at
- --------
maturity of Securities and (ii) the aggregate principal amount at maturity of
any Additional Securities remains outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
-------- -------
within 60 days of the date of the closing of such public offering.
<PAGE>
A-7
At any time on or prior to August 1, 2003, the Securities may be
redeemed as a whole but not in part at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
Accreted Value thereof (determined at the redemption date) plus the Applicable
Premium and Liquidated Damages thereon, if any, to the redemption date (subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date).
6. Special Mandatory Redemption
----------------------------
In the event that the Merger is not consummated prior to the earlier
to occur of (i) January 10, 1999 and (ii) if it appears, in the sole judgment of
the Company, that the Merger shall not be consummated, the date on which notice
of same is delivered by the Company to the Escrow Agent and the Trustee, the
Company shall be required to redeem the Securities, in whole, on at least 15
days' prior written notice mailed by first class mail to each Holder's last
address as it appears in the Securities Register, at a redemption price equal to
101% of the Accreted Value plus Liquidated Damages, if any, of the Securities on
the date of repurchase to the redemption date.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days (or in the case of a Special Mandatory Redemption described in paragraph 6
hereof, 15 days) but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at its registered address all in accordance
with the Indenture. If less than all of the Securities are to be redeemed at
any time, selection of Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed, or, if the Securities are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Securities in an aggregate principal
--------
amount at maturity of $1,000 or less shall be redeemed in part.
If money sufficient to pay the redemption price of and accrued
interest (if any) on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase at the Option of the Holder
--------------------------------------
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions set forth in the Indenture, to cause the
Company to repurchase all or any part of
<PAGE>
A-8
the Securities of such Holder at a purchase price equal to 101% of the aggregate
principal amount of the Securities to be repurchased plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of repurchase) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
-------------
The Securities are subordinated to Senior Debt of the Company, as
defined in the Indenture. To the extent provided in the Indenture, Senior Debt
of the Company must be paid before the Securities may be paid. The Company
agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any registration of transfer
or exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
11. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
<PAGE>
A-9
13. Discharge and Defeasance
------------------------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
14. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any past default or noncompliance with any provision of the Indenture
may be waived with the consent of the Holders of a majority in principal amount
then outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Securities in addition to or in
place of certificated Securities (provided that the uncertificated Securities
are issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Code), to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of Securities in the case of a merger,
consolidation or sale of assets, to release any Security Guarantee or collateral
in accordance with the provisions of the Indenture or Pledge Agreement, as the
case may be, to provide for additional Guarantors, to make any change that would
provide any additional rights or benefits to the Holders of Securities or that,
as determined by the Board of Directors in good faith, does not have a material
adverse effect on the legal rights under this Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA or to provide for the issuance of
Additional Securities in compliance with Article II and Section 4.03 of the
Indenture.
15. Defaults and Remedies
---------------------
Under the Indenture, an Event of Default occurs if: (i) the Company
defaults in any payment of interest on, or Liquidated Damages with respect to,
any Security when the same becomes due and payable, whether or not such payment
shall be prohibited by Article X of the Indenture, and such default continues
for a period of 30 days; (ii) the Company defaults in the payment of the
principal of or premium, if any, on the Securities, whether or not such payment
shall be prohibited by Article X of the Indenture; (iii) the Company fails to
comply with other covenants and agreements in the Indenture, subject to
applicable grace periods as set forth in the Indenture; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Debt of the Company or any Restricted Subsidiary that is a
Significant Subsidiary occur if the amount
<PAGE>
A-10
accelerated (or so unpaid) exceeds $15,000,000; (v) certain events of
bankruptcy, insolvency or reorganization with respect to the Company and any
Restricted Subsidiary which is a Significant Subsidiary; (vi) certain judgments
or decrees for the payment of money in excess of $15,000,000 against the Company
or any Restricted Subsidiary that is a Significant Subsidiary; and (vii) except
as is permitted by the Indenture, a Security Guarantee by a Guarantor that is a
Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall for any reason cease to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, denies
or disaffirms its obligations under the Indenture or its Security Guarantee. If
an Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal, premium, if any, or interest) if and
so long as a committee of its trust officers in good faith determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders
------------------------------------------------------------------------
No director, officer, employee, incorporator, stockholder or Affiliate
of the Company, as such, will have any liability for any obligations of the
Company under the Securities, the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. No director,
officer, employee, incorporator, stockholder or Affiliate of any of the
Guarantors, as such, will have any liability for any obligations of the
Guarantors under the Security Guarantees, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Securities and Security Guarantees by accepting a Security and a
Security Guarantee waives and releases all such liabilities. The waiver and
release are part of the consideration for issuance of the Securities and the
Security Guarantees. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
<PAGE>
A-11
18. Governing Law
-------------
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
----------------------------------------------------------------------
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
- --------------------------------------------------------------------------------
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
- -----------------------------------------------------------------------------
JURISDICTION WOULD BE REQUIRED THEREBY.
- ---------------------------------------
19. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE>
A-12
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
C/O GIBSON, DUNN & CRUTCHER LLP
HH ACQUISITION CORP.
200 PARK AVENUE, 48/TH/ FLOOR
NEW YORK, NEW YORK 10166
ATTENTION: JOERG H. ESDORN, ESQ.
<PAGE>
A-13
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- ------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- ------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing _____________________________________________ attorney to
transfer said Security on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON
ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
UNLEGENDED OFFSHORE GLOBAL SECURITIES AND
UNLEGENDED OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date the Shelf Registration Statement
is declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933 provided by Rule
144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
<PAGE>
A-14
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:__________ ________________________________________________________
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the within-
mentioned instrument in every particular, without
alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:_____________ ________________________________________________________
NOTICE: To be executed by an executive officer
<PAGE>
A-15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
[_] 4.06 Asset Sale [_] 4.08 Change of Control
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$__________.
Date: __________________ Your Signature: _________________________________
(Sign exactly as your name appears on the
other side of the Security)
__________________
Tax I.D. number
Signature Guarantee: ______________________________________________
(Signature must be guaranteed by a participant
in a recognized signature guarantee medallion
program)
<PAGE>
EXHIBIT B
---------
FORM OF CERTIFICATE
-------------------
_______, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HH Acquisition Corp.(the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
This letter relates to U.S. $_______________ principal amount at
maturity of Securities represented by a Security (the "Legended Security") which
bears a legend outlining restrictions upon transfer of such Legended Security.
Pursuant to Section 2.02 of the Indenture dated as of July 31, 1998 (the
"Indenture") relating to the Securities, we hereby certify that we are (or we
will hold such securities on behalf of) a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933. Accordingly, you
are hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical principal amount at maturity of
Securities, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ____________________________________
Authorized Signature
<PAGE>
EXHIBIT C
---------
[FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS]
____________, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HH Acquisition Corp. (the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of $__________________
aggregate principal amount at maturity of the Securities, we confirm that:
1. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture dated
as of July 31, 1998 (the "Indenture") relating to the Securities and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with such restrictions and
conditions and the Securities Act of 1933, amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities within the time period referred to
in Rule 144(k) of the Securities Act, we will do so only (A) to the Company or
any subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of an aggregate accreted value of Securities
at the time of transfer of less than $250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available) or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
<PAGE>
C-2
3. We understand that, on any proposed resale of any Securities, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Securities purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or its investment.
5. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:______________________________________________
Authorized Signature
<PAGE>
EXHIBIT D
---------
[FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S]
_______ __, 19__
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HH Acquisition Corp. (the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$__________________
aggregate principal amount at maturity of the Securities, we confirm that such
sale has been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933 and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal
<PAGE>
D-2
proceedings or official inquiry with respect to the matters covered hereby.
Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature
<PAGE>
EXHIBIT E
FORM OF FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture")
----------------------
dated as of __________, 199_, among HARBORSIDE HEALTHCARE CORPORATION, a
Delaware corporation ("Harborside"), the subsidiaries of Harborside listed on
----------
the signature pages hereto, as guarantors (collectively, the "Initial
-------
Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, as trustee under the
- ----------
indenture referred to below (the "Trustee").
-------
R E C I T A L S
WHEREAS, HH Acquisition Corp., a Delaware corporation ("MergerCo"),
--------
has heretofore executed and delivered to the Trustee an Indenture dated as of
July 31, 1998 (the "Indenture"), providing for the initial issuance of
---------
$170,000,000 million in aggregate principal amount at maturity of its 11%
Senior Subordinated Discount Notes due 2008 (the "Securities");
----------
WHEREAS, MergerCo has merged with and into Harborside and, in
connection therewith, Harborside has assumed by operation of law all of
MergerCo's debts, liabilities, duties and obligations, including MergerCo's
obligations in respect of the Securities and under the Indenture;
WHEREAS, each of the Initial Guarantors is required pursuant to the
Indenture to become a party thereto and as Guarantors under the Indenture to
guarantee the obligations of MergerCo in respect of the Securities and under the
Indenture;
WHEREAS, Harborside desires by this Supplemental Indenture, pursuant
to and as contemplated by Sections 5.01 and 9.01 of the Indenture, to expressly,
irrevocably and unconditionally assume the covenants, agreements, obligations
and undertakings of MergerCo in the Indenture and under the Securities; and
WHEREAS, all conditions and requirements necessary to make each of
this Supplemental Indenture and the Securities valid, binding and legal
instruments in accordance with their respective terms upon Harborside, and each
of this Supplemental Indenture and each of the Security Guarantees valid,
binding and legal instruments in accordance with their terms upon each of the
Initial Guarantors, have been performed and fulfilled by the applicable parties
hereto and the execution and delivery thereof have been in all respects duly
authorized by the applicable parties hereto.
<PAGE>
2
WHEREAS, MergerCo and Harborside authorize the Trustee to cancel the
11% Senior Subordinated Discount Notes due 2008 of MergerCo and to authenticate
the 11% Senior Subordinated Discount Notes due 2008 of Harborside, as guaranteed
by the Initial Guarantors.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, each
party agrees, for the benefit of the others and for the equal and ratable
benefit of the holders of the Notes as follows:
ARTICLE ONE
DEFINITIONS
-----------
SECTION 1.01. Definitions. For all purposes of this Supplemental
-----------
Indenture, except as otherwise herein expressly provided or unless the context
otherwise requires: (i) the terms and expressions used herein shall have the
same meanings as corresponding terms and expressions used in the Indenture; and
(ii) the words "herein," "hereof" and "hereby" and other words of similar import
used in this Supplemental Indenture refer to this Supplemental Indenture as a
whole and not to any particular section hereof.
ARTICLE TWO
ASSUMPTION OF OBLIGATIONS AND AGREEMENT TO GUARANTEE
----------------------------------------------------
SECTION 2.01. Assumption of Obligations of MergerCo. (a) Harborside
-------------------------------------
hereby expressly, irrevocably and unconditionally assumes each and every
covenant, agreement, obligation and undertaking of MergerCo in the Indenture as
if Harborside had been named the Company in the Indenture and the original
issuer of the Securities, and also hereby expressly, irrevocably and
unconditionally assumes each and every covenant, agreement, obligation and
undertaking of MergerCo in each Security outstanding on the date of this
Supplemental Indenture.
(b) Promptly following the execution and delivery of this Supplemental
Indenture, the Trustee shall, upon the written order of Harborside in the form
of an Officers' Certificate of Harborside, authenticate and deliver Initial
Securities substantially in the form of Exhibit A hereto in exchange for the
outstanding Initial Securities.
SECTION 2.02. Security Guarantee of the Initial Guarantors. Each of
--------------------------------------------
the Initial Guarantors hereby expressly, irrevocably and unconditionally agrees,
(i) that its shall be a "Guarantor" under the Indenture and shall, jointly and
severally with all other Guarantors, guarantee Harborside's obligations under
the Securities and the Indenture on the terms and subject to the conditions set
forth in Articles XI and XII of the Indenture and (ii) to be bound by all other
applicable provisions of the Indenture and the Securities.
<PAGE>
3
SECTION 2.03. Replacement of Exhibits to Indenture. Exhibits A, B, C
------------------------------------
and D to the Indenture are hereby deleted and replaced in their entirety by
Exhibits A, B, C and D, respectively, hereto.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
------------------------
SECTION 3.01. Effect of Supplemental Indenture. Upon the execution
---------------------------------
and delivery of this Supplemental Indenture by Harborside, each of the Initial
Guarantors and the Trustee, the Indenture shall be supplemented in accordance
herewith, and this Supplemental Indenture shall form a part of the Indenture for
all purposes, and every Holder of a Security heretofore or hereafter
authenticated and delivered under the Indenture shall be bound thereby.
SECTION 3.02. Indenture Remains in Full Force and Effect. Except as
------------------------------------------
expressly amended and supplemented hereby, the Indenture is in all respects
ratified and confirmed and all terms, conditions and provisions of the Indenture
shall remain in full force and effect.
SECTION 3.03. Indenture and Supplemental Indenture Construed
-----------------------------------------------
Together. This Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and the Indenture and this Supplemental
Indenture shall henceforth be read and construed together.
SECTION 3.04. Conflict with Trust Indenture Act. If any provision of
---------------------------------
this Supplemental Indenture limits, qualifies or conflicts with any provision of
the Trust Indenture Act that is required under such Act to be part of and govern
any provision of this Supplemental Indenture, the provision of such Act shall
control. If any provision of this Supplemental Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified or excluded,
the provision of such Act shall be deemed to apply to the Indenture as so
modified or to be excluded by this Supplemental Indenture, as the case may be.
SECTION 3.05. Separability Clause. In case any provision in this
-------------------
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 3.06. Effect of Headings. The Article and Section headings
------------------
herein are for convenience only and shall not affect the construction hereof.
SECTION 3.07. Benefits of Supplemental Indenture, Etc. Nothing in
---------------------------------------
this Supplemental Indenture, the Indenture or the Securities express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder
<PAGE>
4
and the Holders, any benefit of any legal or equitable right, remedy or claim
under the Indenture, this Supplemental Indenture or the Securities.
SECTION 3.08. Successors and Assigns. All covenants and agreements
----------------------
in this Supplemental Indenture by Harborside and by each Initial Guarantor shall
bind their respective successors and assigns, whether so expressed or not.
SECTION 3.09. Certain Duties and Responsibilities of Trustee. In
----------------------------------------------
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Company.
SECTION 3.10. Governing Law. This Supplemental Indenture shall be
-------------
governed by and construed in accordance with the laws of the State of New York.
SECTION 3.11. Counterparts. This Supplemental Indenture may be
------------
executed in counterparts, each of which, when so executed, shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
5
IN WITNESS WHEREOF, the parties have caused this Supplemental
Indenture to be duly executed as of the date first written above.
HARBORSIDE HEALTHCARE CORPORATION
By: ___________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK, as
Trustee
By: ___________________________
Name:
Title:
HARBORSIDE HEALTHCARE LIMITED
PARTNERSHIP
By: KHI CORPORATION, its general partner
By: ___________________________
Name:
Title:
BELMONT NURSING CENTER CORP.
By: ___________________________
Name:
Title:
<PAGE>
6
ORCHARD RIDGE NURSING CENTER
CORP.
By: ___________________________
Name:
Title:
OAKHURST MANOR NURSING CENTER CORP.
By: ___________________________
Name:
Title:
RIVERSIDE RETIREMENT LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE TOLEDO LIMITED PARTNERSHIP
By: HARBORSIDE TOLEDO CORP.,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
7
HARBORSIDE CONNECTICUT LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE OF FLORIDA LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE OF OHIO LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
8
HARBORSIDE HEALTHCARE BALTIMORE LIMITED
PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE OF CLEVELAND LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE OF DAYTON LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
9
HARBORSIDE MASSACHUSETTS LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE RHODE ISLAND LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE NORTH TOLEDO LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
10
HARBORSIDE HEALTHCARE ADVISORS
LIMITED PARTNERSHIP
By: KHI CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE TOLEDO LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
KHI CORPORATION
By: ___________________________
Name:
Title:
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP IV
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
11
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP V
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VI
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VII
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
<PAGE>
12
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VIII
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP IX
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP X
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
SAILORS, INC.
By: ___________________________
Name:
Title:
<PAGE>
13
NEW JERSEY HARBORSIDE CORP.
By: ___________________________
Name:
Title:
BRIDGEWATER ASSISTED LIVING LIMITED PARTNERSHIP
By: NEW JERSEY HARBORSIDE
CORPORATION, its general partner
By: ___________________________
Name:
Title:
MARYLAND HARBORSIDE CORP.
By: ___________________________
Name:
Title:
HARBORSIDE HOMECARE LIMITED PARTNERSHIP
By: KHI CORPORATION, its general partner
By: ___________________________
Name:
Title:
<PAGE>
14
HARBORSIDE REHABILITATION LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE HEALTHCARE
NETWORK LIMITED PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
its general partner
By: ___________________________
Name:
Title:
HARBORSIDE HEALTH I CORPORATION
By: ___________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES AT
THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME
PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
<PAGE>
A-2
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
[For Global Securities only:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.]
<PAGE>
A-3
[FORM OF FACE OF SECURITY]
HARBORSIDE HEALTHCARE CORPORATION
11% SENIOR SUBORDINATED DISCOUNT NOTE DUE 2008
No. ___ CUSIP No. _________
$____________
The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:
Issue Date: [__________],____]
Original issue discount under Section
Yield to maturity for period from 1273 of the Internal Revenue Code
Issue Date to [__________,_____]: (for each $1,000 principal amount):
[____]%, compounded semi-annually on $[_______]
[__________ and _______], commencing
[_________, ____] (computed without Issue Price (for each $1,000
giving effect to the additional principal amount): $[_____]
payments of interest in the event
the issuer fails to commence the
exchange offer or cause the
registration statement to be
declared effective, each as
described on the reverse hereof)
HARBORSIDE HEALTHCARE CORPORATION a Delaware corporation (the
"Company"), promises to pay to _______________,or registered assigns, the
principal sum of _____________________ ($________________) on August 1, 2008.
Interest Payment Dates: February 1 and August 1, commencing February 1,
2003
Regular Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated:
HARBORSIDE HEALTHCARE CORPORATION
By: _______________________________________
Name:
Title:
<PAGE>
A-4
TRUSTEE'S CERTIFICATE OF AUHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: ____________________________
Authorized Signatory
<PAGE>
A-5
[FORM OF REVERSE SIDE OF SECURITY]
11% Senior Subordinated Discount Note due 2008
1. Interest
--------
HARBORSIDE HEALTHCARE CORPORATION a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above and shall pay Liquidated Damages, if any, payable
pursuant to the relevant Registration Rights Agreement.
The Company will pay interest and Liquidated Damages, if any,
semiannually on August 1 and February 1 of each year commencing February 1,
2004; provided that no interest shall accrue on the principal amount of this
--------
Security prior to August 1, 2003 (the "Full Accretion Date"), and no interest
shall be paid on this Security prior to the Full Accretion Date except for
Liquidated Damages, if any, payable pursuant to the relevant Registration Rights
Agreement. The Holder of this Security is entitled to the benefit of such
Registration Rights Agreement.
Interest will be computed on the basis of a 360-day year of twelve 30-
day months. The Company shall pay interest on overdue principal at the rate
borne by the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
The Company will pay interest (except defaulted interest) on and
Liquidated Damages, if any, in respect of the Securities to the Persons who are
registered holders of Securities at the close of business on the January 15 or
July 15 next preceding the interest payment date even if Securities are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money or by wire transfer of federal funds.
3. Paying Agent and Registrar
--------------------------
Initially, UNITED STATES TRUST COMPANY OF NEW YORK (the "Trustee")
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice to the Holders. The
Company or any domestically organized Wholly Owned Restricted Subsidiary may act
as Paying Agent, Registrar or co-registrar.
<PAGE>
A-6
4. Indenture
---------
The Company issued the Securities under an Indenture dated as of July
31, 1998 (the "Indenture"), between the Company and the Trustee. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are unsecured senior subordinated obligations of the
Company. Subject to the conditions set forth in the Indenture, the Company may
issue Additional Securities.
5. Optional Redemption
-------------------
Except as set forth in the next two paragraphs, the Securities may not
be redeemed at the Company's option prior to August 1, 2003. Thereafter, the
Securities will be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date (subject to the right of Holders on
the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the twelve-month period beginning on August 1
of the years indicated below:
Redemption
Year Price
- ---- ----------
2003 105.500%
2004 103.667%
2005 101.883%
2006 and thereafter 100.000%
In addition, at any time and from time to time, prior to August 1,
2001, the Company may redeem up to 35% of the sum of (i) the aggregate principal
amount at maturity of Securities and (ii) the aggregate principal amount at
maturity of any Additional Securities at a redemption price of 111% of the
Accreted Value thereof (determined at the redemption date) plus Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds
received by the Company of a public offering of common stock of the Company,
provided that at least 65% of the sum of (i) the aggregate principal amount at
- --------
maturity of Securities and (ii) the aggregate principal amount at maturity of
any Additional Securities remains outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
-------- -------
within 60 days of the date of the closing of such public offering.
<PAGE>
A-7
At any time on or prior to August 1, 2003, the Securities may be
redeemed as a whole but not in part at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
Accreted Value thereof (determined at the redemption date) plus the Applicable
Premium and Liquidated Damages thereon, if any, to the redemption date (subject
to the right of Holders on the relevant record date to receive interest due on
the relevant interest payment date).
6. Special Mandatory Redemption
----------------------------
In the event that the Merger is not consummated prior to the earlier
to occur of (i) January 10, 1999 and (ii) if it appears, in the sole judgment of
the Company, that the Merger shall not be consummated, the date on which notice
of same is delivered by the Company to the Escrow Agent and the Trustee, the
Company shall be required to redeem the Securities, in whole, on at least 15
days' prior written notice mailed by first class mail to each Holder's last
address as it appears in the Securities Register, at a redemption price equal to
101% of the Accreted Value plus Liquidated Damages, if any, of the Securities on
the date of repurchase to the redemption date.
7. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days (or in the case of a Special Mandatory Redemption described in paragraph 6
hereof, 15 days) but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at its registered address all in accordance
with the Indenture. If less than all of the Securities are to be redeemed at
any time, selection of Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed, or, if the Securities are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Securities in an aggregate principal
--------
amount at maturity of $1,000 or less shall be redeemed in part.
If money sufficient to pay the redemption price of and accrued
interest (if any) on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Repurchase at the Option of the Holder
--------------------------------------
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions set forth in the Indenture, to cause the
Company to repurchase all or any part of
<PAGE>
A-8
the Securities of such Holder at a purchase price equal to 101% of the aggregate
principal amount of the Securities to be repurchased plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of repurchase) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
-------------
The Securities are subordinated to Senior Debt of the Company, as
defined in the Indenture. To the extent provided in the Indenture, Senior Debt
of the Company must be paid before the Securities may be paid. The Company
agrees, and each Securityholder by accepting a Security agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any registration of transfer
or exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
11. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
12. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
<PAGE>
A-9
13. Discharge and Defeasance
------------------------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
14. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any past default or noncompliance with any provision of the Indenture
may be waived with the consent of the Holders of a majority in principal amount
then outstanding of the Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Securities in addition to or in
place of certificated Securities (provided that the uncertificated Securities
are issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated Securities are described in Section
163(f)(2)(B) of the Code), to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of Securities in the case of a merger,
consolidation or sale of assets, to release any Security Guarantee or collateral
in accordance with the provisions of the Indenture or Pledge Agreement, as the
case may be, to provide for additional Guarantors, to make any change that would
provide any additional rights or benefits to the Holders of Securities or that,
as determined by the Board of Directors in good faith, does not have a material
adverse effect on the legal rights under this Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA or to provide for the issuance of
Additional Securities in compliance with Article II and Section 4.03 of the
Indenture.
15. Defaults and Remedies
---------------------
Under the Indenture, an Event of Default occurs if: (i) the Company
defaults in any payment of interest on, or Liquidated Damages with respect to,
any Security when the same becomes due and payable, whether or not such payment
shall be prohibited by Article X of the Indenture, and such default continues
for a period of 30 days; (ii) the Company defaults in the payment of the
principal of or premium, if any, on the Securities, whether or not such payment
shall be prohibited by Article X of the Indenture; (iii) the Company fails to
comply with other covenants and agreements in the Indenture, subject to
applicable grace periods as set forth in the Indenture; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Debt of the Company or any Restricted Subsidiary that is a
Significant Subsidiary occur if the amount
<PAGE>
A-10
accelerated (or so unpaid) exceeds $15,000,000; (v) certain events of
bankruptcy, insolvency or reorganization with respect to the Company and any
Restricted Subsidiary which is a Significant Subsidiary; (vi) certain judgments
or decrees for the payment of money in excess of $15,000,000 against the Company
or any Restricted Subsidiary that is a Significant Subsidiary; and (vii) except
as is permitted by the Indenture, a Security Guarantee by a Guarantor that is a
Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall for any reason cease to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, denies
or disaffirms its obligations under the Indenture or its Security Guarantee. If
an Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal, premium, if any, or interest) if and
so long as a committee of its trust officers in good faith determines that
withholding notice is in the interest of the Holders.
16. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders
------------------------------------------------------------------------
No director, officer, employee, incorporator, stockholder or Affiliate
of the Company, as such, will have any liability for any obligations of the
Company under the Securities, the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. No director,
officer, employee, incorporator, stockholder or Affiliate of any of the
Guarantors, as such, will have any liability for any obligations of the
Guarantors under the Security Guarantees, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Securities and Security Guarantees by accepting a Security and a
Security Guarantee waives and releases all such liabilities. The waiver and
release are part of the consideration for issuance of the Securities and the
Security Guarantees. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
<PAGE>
A-11
18. Governing Law
-------------
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
----------------------------------------------------------------------
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
- --------------------------------------------------------------------------------
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
- -----------------------------------------------------------------------------
JURISDICTION WOULD BE REQUIRED THEREBY.
- ---------------------------------------
19. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. Guarantee
---------
The Company's obligations under the Securities are guaranteed on a
senior subordinated basis, jointly and severally, by the Guarantors.
<PAGE>
A-12
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
HARBORSIDE HEALTHCARE CORPORATION
470 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02210
ATTENTION: CHIEF FINANCIAL OFFICER
<PAGE>
A-13
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- ------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- ------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing ____________________________________________ attorney to transfer
said Security on the books of the Company with full power of substitution in the
premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON
ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
UNLEGENDED OFFSHORE GLOBAL SECURITIES AND
UNLEGENDED OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date the Shelf Registration Statement
is declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933 provided by Rule
144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
<PAGE>
A-14
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:_____________ __________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:____________ __________________________________________________
NOTICE: To be executed by an executive officer
<PAGE>
A-15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
[_] 4.06 Asset Sale [_] 4.08 Change of Control
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$__________.
Date: __________________ Your Signature: _________________________________
(Sign exactly as your name appears on
the other side of the Security)
__________________
Tax I.D. number
Signature Guarantee: ______________________________________________
(Signature must be guaranteed by a participant
in a recognized signature guarantee medallion
program)
<PAGE>
EXHIBIT B
---------
FORM OF CERTIFICATE
-------------------
______, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HARBORSIDE HEALTHCARE CORPORATION (the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
This letter relates to U.S. $_______________ principal amount at maturity
of Securities represented by a Security (the "Legended Security") which bears a
legend outlining restrictions upon transfer of such Legended Security. Pursuant
to Section 2.02 of the Indenture dated as of July 31, 1998 (the "Indenture")
relating to the Securities, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Securities could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933. Accordingly, you are hereby
requested to exchange the legended certificate for an unlegended certificate
representing an identical principal amount at maturity of Securities, all in the
manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: _______________________________
Authorized Signature
<PAGE>
EXHIBIT C
---------
[FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS]
____________, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HARBORSIDE HEALTHCARE CORPORATION (the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of $__________________ aggregate
principal amount at maturity of the Securities, we confirm that:
1. We understand that any subsequent transfer of the Securities is subject
to certain restrictions and conditions set forth in the Indenture dated as of
July 31, 1998 (the "Indenture") relating to the Securities and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Securities except in compliance with such restrictions and conditions and the
Securities Act of 1933, amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities within the time period referred to
in Rule 144(k) of the Securities Act, we will do so only (A) to the Company or
any subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of an aggregate accreted value of Securities
at the time of transfer of less than $250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available) or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
<PAGE>
C-2
3. We understand that, on any proposed resale of any Securities, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Securities purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or its investment.
5. We are acquiring the Securities purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_______________________________________________________
Authorized Signature
<PAGE>
EXHIBIT D
---------
[FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S]
_______ __, 19__
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: HARBORSIDE HEALTHCARE CORPORATION (the "Company")
11% Senior Subordinated Securities due 2008 (the "Securities")
--------------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$__________________ aggregate
principal amount at maturity of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933 and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal
<PAGE>
D-2
proceedings or official inquiry with respect to the matters covered hereby.
Terms used in this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________________
Authorized Signature
<PAGE>
EXHIBIT 4.2
HARBORSIDE HEALTHCARE CORPORATION
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF
13 1/2% EXCHANGEABLE PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
------------------------------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------------------------
<PAGE>
Harborside Healthcare Corporation (the "Issuer"), a corporation
------
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Issuer or any committee of the Board of Directors by
its Certificate of Incorporation (the "Certificate of Incorporation"), and
----------------------------
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors, by unanimous written consent dated as
of August 11, 1998, duly approved and adopted the following resolution:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issue of 13 1/2%
Exchangeable Preferred Stock, par value $0.01 per share, with a
liquidation preference of $1,000.00 per share, consisting of up to
250,000 shares, having the designations, preferences and relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set
forth in the Certificate of Incorporation and in this Resolution as
follows:
This Certificate of Designation shall be deemed effective on August 11,
1998.
ARTICLE 1
DESIGNATION
SECTION 1.1 There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Issuer a class of Preferred Stock designated as
the "13 1/2% Exchangeable Preferred Stock". The number of shares constituting
such class shall be 250,000 shares of 13 1/2% Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock"), consisting of one or more series. Initially,
- -----------------------------
there is hereby created "Series A" (the "Series A Exchangeable Preferred
-------------------------------
Stock"), consisting of 120,000 shares of Exchangeable Preferred Stock which
- -----
consists of an initial issuance of 40,000 shares of Exchangeable Preferred
Stock, plus up to 40,000 additional shares of Exchangeable Preferred Stock which
may be issued pursuant to the Preferred Stock Registration Rights Agreement in
exchange for the Exchangeable Preferred Stock issued on the Issue Date, plus
additional shares of Exchangeable Preferred Stock which, among other things, may
be used to pay certain dividends on the Exchangeable Preferred Stock if the
Issuer elects to pay dividends in additional shares of Preferred Stock.
SECTION 1.2 In addition, if and when authorized by the Board of
Directors, the Issuer may issue (subject to the 250,000 maximum referred to
above and compliance with the terms and provisions hereof) additional series of
Preferred Stock having identical terms and conditions to the Series A
Exchangeable Preferred Stock (the "Additional Exchangeable Preferred Stock").
---------------------------------------
Any shares of Additional Exchangeable Preferred Stock will be part of the same
issue and class as the Series A Exchangeable Preferred Stock and will vote as
one class with such Exchangeable Preferred Stock on all matters subject to a
vote by the Holders thereof. All references in this Certificate of Designation
to "Exchangeable Preferred Stock" include any
2
<PAGE>
Additional Exchangeable Preferred Stock, and any references to "Exchange
Debentures" include any Exchange Debentures issued in exchange for Additional
Exchangeable Preferred Stock, unless the context otherwise requires.
ARTICLE 2
RANK
SECTION 2.1 The Exchangeable Preferred Stock shall, with respect to
dividends and as to distributions upon the liquidation, winding-up and
dissolution of the Issuer, rank (i) senior to all other classes of Capital Stock
of the Issuer established after the date of the Offering Memorandum by the Board
of Directors of the Issuer the terms of which do not expressly provide that it
ranks on a parity with the Exchangeable Preferred Stock as to dividends and as
to distributions upon the liquidation, winding-up and dissolution of the Issuer
(collectively referred to with the common stock of the Issuer as "Junior
------
Securities"); and (ii) on a parity with each series of Preferred Stock
- ----------
established after the date of the Offering Memorandum by the Board of Directors
of the Issuer, the terms of which expressly provide that such class will rank on
a parity with the Exchangeable Preferred Stock as to dividends and as to
distributions upon the liquidation, winding-up and dissolution of the Issuer
(collectively referred to as "Parity Securities").
-----------------
ARTICLE 3
DIVIDENDS
SECTION 3.1 Beginning on the Issue Date, Holders of outstanding
Exchangeable Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors of the Issuer, out of funds legally available
therefor, dividends on the outstanding Exchangeable Preferred Stock at a rate
per annum equal to 13 1/2% of the liquidation preference per share of
outstanding Exchangeable Preferred Stock. All dividends will be cumulative,
whether or not earned or declared, on a daily basis from the date of issuance of
the Exchangeable Preferred Stock and will be payable quarterly in arrears on
February 1, May 1, August 1 and November 1 of each year (each a "Dividend
--------
Payment Date"), commencing on November 1, 1998. On or before August 1, 2003,
- ------------
the Issuer may, at its option, pay dividends in cash or in additional fully paid
and non-assessable shares of Exchangeable Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. After August 1,
2003, dividends may be paid only in cash. Each distribution in the form of a
dividend (whether in cash or in additional shares of Exchangeable Preferred
Stock) shall be payable to Holders of record as they appear on the stock books
of the Issuer on the applicable record date, which record date shall be January
15, April 15, July 15 and October 15, as the case may be. Dividends shall cease
to accumulate in respect of shares of the Exchangeable Preferred Stock on the
Exchange Date or on the date of their earlier redemption unless the Issuer shall
have failed to issue the appropriate aggregate principal amount of Exchange
Debentures in respect of the Exchangeable Preferred Stock on the Exchange Date
or shall have failed to pay the relevant redemption price on the date fixed for
redemption.
3
<PAGE>
SECTION 3.2 In addition to the dividend rights set forth in Section 3.1,
under certain circumstances set forth in the Preferred Stock Registration Rights
Agreement, the Holders of outstanding Exchangeable Preferred Stock may be
entitled to Liquidated Damages (as defined therein). Copies of the Preferred
Stock Registration Rights Agreement may be obtained without charge by writing to
the Issuer at the following address: Harborside Healthcare Corporation, 470
Atlantic Avenue, Boston Massachusetts 02110, Attn: Chief Financial Officer.
SECTION 3.3 All dividends paid with respect to shares of the outstanding
Exchangeable Preferred Stock pursuant to Section 3.1 hereof shall be paid pro
rata to the Holders entitled thereto.
SECTION 3.4 Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Issuer to pay or set apart for payment, any dividends on shares
of the Exchangeable Preferred Stock at any time.
SECTION 3.5 Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant to
Section 5.1 hereof may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to Holders of record on such date, not more
than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors.
SECTION 3.6 Notwithstanding Section 3.4, no dividends may be declared or
paid (whether in cash, additional Parity Securities or otherwise) or funds set
apart for the payment of dividends on any Parity Securities for any period
unless full cumulative dividends shall have been or contemporaneously are
declared and paid in full or declared and, if payable in cash, a sum in cash is
set apart for such payment on the Exchangeable Preferred Stock. If full
dividends are not so declared, paid or funds therefor set aside, as the case may
be, the Exchangeable Preferred Stock will share dividends pro rata with the
Parity Securities based on the relative liquidation preference of the
Exchangeable Preferred Stock and such Parity Securities. No dividends may be
paid or set apart for such payment on Junior Securities (except dividends on
Junior Securities in additional shares of Junior Securities) and no Junior
Securities or Parity Securities may be repurchased, redeemed or otherwise
retired nor may funds be set apart for payment with respect thereto, if full
cumulative dividends have not been paid on the Exchangeable Preferred Stock.
Holders of Exchangeable Preferred Stock will not be entitled to any dividends,
whether payable in cash, in additional Exchangeable Preferred Stock, property or
stock, in excess of the full cumulative dividends as herein described.
SECTION 3.7 Holders of shares of Exchangeable Preferred Stock shall be
entitled to receive the dividends provided for in Section 3.1 hereof in
preference to and in priority over any dividends upon any Junior Securities.
SECTION 3.8 Dividends payable on shares of the outstanding Exchangeable
Preferred Stock for any period less than a year shall be computed on the basis
of a 360-day year of twelve 30-day months. If any Dividend Payment Date occurs
on a day that is not a Business
4
<PAGE>
Day, any accrued dividends otherwise payable on such Dividend Payment Date shall
be paid on the next succeeding Business Day.
ARTICLE 4
LIQUIDATION PREFERENCE
SECTION 4.1 Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Issuer, Holders of the Exchangeable Preferred Stock will be
entitled to be paid, out of the assets of the Issuer available for distribution,
the liquidation preference per share, plus an amount in cash equal to all
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any
Junior Securities, including, without limitation, common stock of the Issuer.
If, upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Issuer, the amounts payable with respect to the Exchangeable Preferred Stock
and all other Parity Securities are not paid in full, the Holders of the
Exchangeable Preferred Stock and the Parity Securities will share equally and
ratably in any distribution of assets of the Issuer in proportion to the full
liquidation preference and accumulated and unpaid dividends to which each is
entitled. After payment of the full amount of the liquidation preferences and
accumulated and unpaid dividends to which they are entitled, the Holders of
Exchangeable Preferred Stock will not be entitled to any further participation
in any distribution of assets of the Issuer.
SECTION 4.2 For purposes of Section 4.1, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Issuer nor the consolidation or merger of the Issuer with or into one or more
corporations will be deemed to be a liquidation, dissolution or winding-up of
the Issuer.
ARTICLE 5
REDEMPTION
SECTION 5.1 Optional Redemption.
--------------------
(a) The Exchangeable Preferred Stock may be redeemed for cash
(subject to contractual and other restrictions with respect thereto and to
the legal availability of funds therefor) at any time on or after August 1,
2003, in whole or in part, at the option of the Issuer, at the following
redemption prices (expressed as percentages of the liquidation preference
thereof) if redeemed during the 12-month period beginning August 1 of each
of the years set forth below, in each case together with an amount in cash
equal to all accumulated and unpaid dividends, if any (including an amount
in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption
Date):
5
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
YEAR PERCENTAGE
-------------------------------------
<S> <C>
2003 106.750%
-------------------------------------
2004 104.500%
-------------------------------------
2005 102.250%
-------------------------------------
2006 and thereafter 100.000%
-------------------------------------
</TABLE>
(b) In addition, at any time and from time to time prior to August 1,
2001, the Issuer may redeem up to 35% of the aggregate liquidation
preference of (i) all shares of Series A Exchangeable Preferred Stock
issued on the respective Issue Date, and (ii) all shares of each other
series of Exchangeable Preferred Stock issued on the respective Issue Date,
at the option of the Issuer, at a redemption price equal to 113.5% of the
liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends thereon, if any, to the Redemption Date
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date), with the net cash proceeds received by the Issuer of
a public offering of common stock of the Issuer, provided that such
redemption shall occur within 60 days of the date of the closing of such
public offering .
(c) At any time on or prior to August 1, 2003, the Exchangeable
Preferred Stock may be redeemed as a whole but not in part at the option of
the Issuer upon the occurrence of a Change of Control at a redemption price
equal to 100% of the liquidation preference thereof to the Redemption Date,
plus an amount in cash equal to all accumulated and unpaid dividends
thereon (including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date) plus the Applicable Premium, provided that in
no event may any such redemption pursuant to this Section 5.1(c) occur more
than 90 days after the occurrence of such Change of Control.
(d) In the event of partial redemptions of Exchangeable Preferred
Stock, the shares to be redeemed will be determined pro rata or by lot, as
determined by the Issuer, except that the Issuer may redeem such shares
held by any Holders of fewer than 100 shares (or shares held by Holders who
would hold less than 100 shares as a result of such redemption), without
regard to any pro rata redemption requirement.
(e) Notwithstanding Sections 5.1(a), 5.1(b) or 5.1(c), no optional
redemption may be authorized or made unless prior thereto or
contemporaneously therewith full unpaid cumulative dividends shall have
been paid or a sum shall have been set apart for such payment on the
Exchangeable Preferred Stock.
SECTION 5.2 [Intentionally Deleted]
6
<PAGE>
SECTION 5.3 Mandatory Redemption On August 1, 2010, the Issuer shall be
--------------------
required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Exchangeable Preferred Stock at a price equal to the then
effective liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends thereon.
SECTION 5.4 Procedures for Redemption. Redemptions pursuant to Section
-------------------------
5.1 and 5.3 shall made in the manner set forth in this Section 5.4.
(a) At least 30 days and not more than 60 days prior to the date
fixed for any redemption of the Exchangeable Preferred Stock written notice
(the "Redemption Notice") shall be given by the Issuer by first-class mail
-----------------
to each Holder of record on the record date fixed for such redemption of
the Exchangeable Preferred Stock at such Holder's address as the same
appears on the stock register of the Issuer, provided that no failure to
give such notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any shares of Exchangeable Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Issuer
has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:
(i) whether the redemption is pursuant to Section 5.1(a),
5.1(b), 5.1(c), or 5.3 hereof;
(ii) the redemption price;
(iii) whether all or less than all the outstanding shares of the
Exchangeable Preferred Stock are to be redeemed and the total number
of shares of the Exchangeable Preferred Stock being redeemed;
(iv) the number of shares of Exchangeable Preferred Stock held,
as of the appropriate record date, by the Holder that the Issuer
intends to redeem;
(v) the Redemption Date;
(vi) that the Holder is to surrender to the Issuer, at the
place or places where certificates for shares of Exchangeable
Preferred Stock are to be surrendered for redemption, in the manner
and at the price designated, the certificate or certificates
representing the shares of Exchangeable Preferred Stock to be
redeemed; and
(vii) that dividends on the shares of the Exchangeable Preferred
Stock to be redeemed shall cease to accrue on such Redemption Date
unless the Issuer defaults in the payment of the redemption price.
(b) Each Holder of Exchangeable Preferred Stock shall surrender the
certificate or certificates representing such shares of Exchangeable
Preferred Stock to the Issuer (duly endorsed or assigned for transfer) in
the manner and at the place designated
7
<PAGE>
in the Redemption Notice and on the Redemption Date. The full redemption
price for such shares of Exchangeable Preferred Stock shall be payable in
cash to the Person whose name appears on such certificate or certificates
as the owner thereof, and each surrendered certificate shall be canceled
and retired. In the event that less than all of the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(c) Unless the Issuer defaults in the payment in full of the
applicable redemption price, dividends on the Exchangeable Preferred Stock
called for redemption shall cease to accumulate on the Redemption Date, and
the Holders of such redeemed shares shall cease to have any further rights
with respect thereto from and after the Redemption Date, other than the
right to receive the redemption price, without interest.
SECTION 5.5 Sinking Fund. The Issuer will not be required to make
------------
sinking fund payments with respect to the Exchangeable Preferred Stock.
ARTICLE 6
VOTING RIGHTS
SECTION 6.1 The Holders of shares of Exchangeable Preferred Stock,
except as otherwise required under Delaware law or as set forth in this Article
6, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Issuer.
SECTION 6.2 Voting Rights Triggering Event.
------------------------------
(a) If (i) dividends on the Exchangeable Preferred Stock are in
arrears and unpaid (or, in the case of dividends payable after August 1,
2003, are not paid in cash) for six quarterly periods (whether or not
consecutive), (ii) the Issuer fails to discharge any redemption obligation
with respect to the Exchangeable Preferred Stock (whether or not such
redemption is prohibited by the terms of the New Credit Facility, the Notes
or any other obligation of the Issuer), (iii) the Issuer fails to redeem or
make an offer to purchase all of the outstanding shares of Exchangeable
Preferred Stock following a Change of Control (whether or not the Issuer is
permitted to do so by the terms of the New Credit Facility, the Notes or
any other obligation of the Issuer) or fails to purchase shares of
Exchangeable Preferred Stock from Holders who elect to have such shares
purchased pursuant to the Exchangeable Preferred Change of Control Offer
(as defined in Section 8.1), (iv) a breach or violation of the covenants
contained in Articles 9, 10, 11, 12 or Section 15.6 occurs and the breach
or violation continues for a period of 90 days or more after the Issuer
receives notice thereof specifying the default from Holders of at least 25%
of the Exchangeable Preferred Stock then outstanding, or (v) the Issuer or
any Significant Subsidiary fails to pay any Debt within any applicable
grace period after final maturity, or the acceleration of any such Debt by
the holders thereof because of a default, so long as the total amount of
such Debt unpaid or accelerated exceeds $15.0 million or its foreign
currency equivalent, then the number of directors constituting the Board of
8
<PAGE>
Directors of the Issuer will be adjusted to permit the Holders of the
majority of the then outstanding Exchangeable Preferred Stock, voting
separately as a class, to elect two directors. Each such event described
in clauses (i) through (v) above is referred to herein as a "Voting Rights
-------------
Triggering Event." Voting rights arising as a result of a Voting Rights
----------------
Triggering Event will continue until (x) in the case of any Voting Rights
Triggering Event under clause (i) of the definition thereof, such time as
all dividends in arrears on the Exchangeable Preferred Stock are paid in
full (and after August 1, 2003, are paid in cash) and (y) in all other
cases, any failure, breach or default giving rise to such voting rights is
remedied or waived by the Holders of at least a majority of the shares of
Exchangeable Preferred Stock then outstanding (and, in the case of any
acceleration referred to in clause (v) of the definition of ''Voting Rights
Triggering Event,'' such acceleration has been rescinded), at which time
the term of the directors elected pursuant to the provisions of this
Article 6 shall terminate automatically.
(b) At any time after voting power to elect directors shall have
become vested and be continuing in the Holders of shares of the
Exchangeable Preferred Stock pursuant to Section 6.2(a) hereof, or if
vacancies shall exist in the offices of directors elected by the Holders of
shares of the Exchangeable Preferred Stock, a proper officer of the Issuer
may, and upon the written request of the Holders of record of at least 25%
of the shares of Exchangeable Preferred Stock then outstanding addressed to
the Secretary of the Issuer shall, call a special meeting of the Holders of
Exchangeable Preferred Stock, for the purpose of electing the directors
which such Holders are entitled to elect. If such meeting shall not be
called by the proper officer of the Issuer within 15 days after personal
service of said written request upon the Secretary of the Issuer, or within
20 days after mailing the same within the United States by certified mail,
addressed to the Secretary of the Issuer at its principal executive
offices, then the Holders of record of at least 25% of the outstanding
shares of the Exchangeable Preferred Stock may designate in writing one of
their number to call such meeting at the expense of the Issuer, and such
meeting may be called by the Person so designated upon the notice required
for the annual meetings of stockholders of the Issuer and shall be held at
the place for holding the annual meetings of stockholders or such other
place in the United States as shall be designated in such notice.
Notwithstanding the provisions of this Section 6.2(b), no such special
meeting shall be called if any such request is received less than 40 days
before the date fixed for the next ensuing annual or special meeting of
stockholders of the Issuer. Such meeting shall be held within 30 days of
the date such notice is given. Any Holder of shares of the Exchangeable
Preferred Stock so designated shall have, and the Issuer shall provide,
access to the lists of Holders of shares of the Exchangeable Preferred
Stock for purposes of calling a meeting pursuant to the provisions of this
Section 6.2(b).
(c) At any meeting held for the purpose of electing directors at
which the Holders of Exchangeable Preferred Stock shall have the right,
voting separately as one class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding Exchangeable Preferred Stock shall be required to constitute a
quorum of such Exchangeable Preferred Stock.
9
<PAGE>
(d) Any vacancy occurring in the office of a director elected by the
Holders of the Exchangeable Preferred Stock may be filled by the remaining
director elected by such Holders unless and until such vacancy shall be
filled by such Holders.
SECTION 6.3 So long as any shares of Exchangeable Preferred Stock are
outstanding, the Issuer shall not amend this Certificate of Designation so as to
affect adversely the special rights, powers, preferences, privileges or voting
rights of Holders of the Exchangeable Preferred Stock, without the affirmative
vote or consent of the Holders of in excess of 50% of the then outstanding
shares of Exchangeable Preferred Stock, voting or consenting, as the case may
be, separately as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting; provided that (i) the
creation, authorization or issuance of any shares of Junior Securities or any
Parity Securities, (ii) the decrease in the amount of authorized Capital Stock
of any class, including any Exchangeable Preferred Stock or (iii) the increase
in the amount of authorized Capital Stock of any class of Junior Securities or
Parity Securities (including Exchangeable Preferred Stock) shall not require the
consent of the Holders of Exchangeable Preferred Stock and shall not be deemed
to affect adversely the special rights, powers, preferences, privileges or
voting rights of Holders of shares of Exchangeable Preferred Stock.
SECTION 6.4 In any case in which the Holders of shares of the
Exchangeable Preferred Stock shall be entitled to vote pursuant to this Article
6 or pursuant to Delaware law, each Holder of shares of the Exchangeable
Preferred Stock shall be entitled to one vote for each share of Exchangeable
Preferred Stock held. Any action that may be taken hereunder by the Holders of
the Exchangeable Preferred Stock at a meeting may be taken by written consent of
a majority of the Holders of such Exchangeable Preferred Stock.
SECTION 6.5 Without the consent of any Holder of Exchangeable Preferred
Stock, the Issuer may amend or supplement this Certificate of Designation to (i)
cure any ambiguity, defect or inconsistency in this Certificate of Designation
or (ii) make any change that, as determined by the Board of Directors in good
faith, does not adversely effect the legal rights under this Certificate of
Designation of any such Holder.
ARTICLE 7
OPTIONAL EXCHANGE
SECTION 7.1 Requirements.
------------
(a) The Issuer may at its option exchange all, but not less than all,
of the then outstanding shares of Exchangeable Preferred Stock into
Exchange Debentures on any Dividend Payment Date, provided that (i) on the
date of such exchange such exchange is permitted by the terms of the
Indenture and the New Credit Facility, (ii) the Recapitalization shall have
been consummated, (iii) either (x) a registration statement relating to the
Exchange Debentures shall have been declared effective under the Securities
Act prior to such exchange and shall continue to be in effect on the
Exchange Date or (y) (1) the Issuer shall have obtained (and delivered to
the Exchange Debenture
10
<PAGE>
Trustee) a written Opinion of Counsel reasonably acceptable to the Exchange
Debenture Trustee that an exemption from the registration requirements of
the Securities Act is available for such exchange and that upon receipt of
such Exchange Debentures pursuant to such exchange made in accordance with
such exemption, each Holder that is not an Affiliate of the Issuer will not
be subject to any restrictions imposed by the Securities Act upon the
resale thereof and (2) such exemption is relied upon by the Issuer for such
exchange; and (iv) the Issuer shall have delivered to the Exchange
Debenture Trustee a written Opinion of Counsel reasonably acceptable to the
Exchange Debenture Trustee, dated the Exchange Date, subject to customary
exceptions and qualifications, regarding the satisfaction of the conditions
set forth in clauses (i) and (ii) and including language substantially to
the effect set forth in Section 7.1(b) hereof, provided that in rendering
such opinion such counsel may rely, as to matters of fact, on an Officer's
Certificate. In the event that the issuance of the Exchange Debentures is
not permitted on the date of exchange or any of the conditions set forth in
clauses (i) through (iv) of the preceding sentence are not satisfied on the
Exchange Date, the Issuer shall use its reasonable best efforts to satisfy
such conditions and effect such exchange as soon as practicable.
(b) Opinion Language. The Opinion of Counsel referenced in Section
----------------
7.1(a)(iv) hereof shall include language substantially to the following effect:
(i) The Exchange Debentures have been duly authorized by the
Issuer and, when executed, authenticated and delivered in accordance
with the provisions of the Exchange Debenture Indenture, will be valid
and binding obligations of the Issuer, enforceable against the Issuer,
in accordance with their terms, except as the same may be limited by
(A) applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally, including without
limitation the effect of statutory or other laws regarding fraudulent
conveyances or transfers, preferential transfers or distributions by
corporations to shareholders, or (B) general principles of equity,
whether considered at law or at equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing.
(ii) The Exchange Debenture Indenture has been duly authorized,
executed and delivered by the Issuer, and is a valid and binding
agreement of the Issuer, enforceable against the Issuer in accordance
with its terms, except as the same may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, including without limitation
the effect of statutory or other laws regarding fraudulent conveyances
or transfers, preferential transfers or distributions by corporations
to shareholders, or (B) general principles of equity, whether
considered at law or at equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing.
(c) To exchange the Exchangeable Preferred Stock for Exchange
Debentures, the Issuer shall send a written notice (the "Exchange Notice")
---------------
of exchange by mail to
11
<PAGE>
each Holder of shares of Exchangeable Preferred Stock, which notice shall
state (i) that the Issuer is exercising its option to exchange the
Exchangeable Preferred Stock for Exchange Debentures pursuant to this
Certificate of Designation, (ii) the date fixed for exchange (the
"Exchange Date"), which date shall not be less than 30 days nor more than
-------------
60 days following the date on which the Exchange Notice is mailed, (iii)
that the Holder is to surrender to the Issuer, at the place or places where
certificates for shares of Exchangeable Preferred Stock are to be
surrendered for exchange, in the manner designated in the Exchange Notice,
the certificate or certificates representing the shares of Exchangeable
Preferred Stock to be exchanged (duly endorsed or assigned for transfer);
(iv) that dividends on the shares of Exchangeable Preferred Stock to be
exchanged shall cease to accrue on the Exchange Date, and that Holders of
Exchangeable Preferred Stock shall cease to have any further rights with
respect to such shares (other than the right to receive Exchange
Debentures), whether or not certificates for shares of Exchangeable
Preferred Stock are surrendered for exchange on the Exchange Date unless
the Issuer shall default in the delivery of Exchange Debentures; and (v)
that interest on the Exchange Debentures shall accrue from the Exchange
Date whether or not certificates for shares of Exchangeable Preferred Stock
are surrendered for exchange on the Exchange Date; provided, however, that
no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Exchangeable
Preferred Stock to be exchanged except as to the Holder or Holders to whom
the Issuer has failed to give said notice or except as to the Holder or
Holders whose notice was defective. On the Exchange Date, if the conditions
set forth in Section 7.1(a)(i) through 7.1(a)(iv) are satisfied, the Issuer
shall issue Exchange Debentures in exchange for the Exchangeable Preferred
Stock as provided in Section 7.1(d).
(d) On the Exchange Date, Holders of outstanding shares of
Exchangeable Preferred Stock will be entitled to receive a principal amount
of Exchange Debentures equal to the liquidation preference per share, plus
an amount in cash (or, on or prior to August 1, 2003, in principal amount
of Exchange Debentures) equal to all accumulated and unpaid dividends
(including an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Exchange Date to the
Exchange Date). The Exchange Debentures will be issued in registered form,
without coupons. Exchange Debentures issued in exchange for Exchangeable
Preferred Stock will be issued in principal amounts of $1,000 and integral
multiples thereof to the extent possible, and will also be issued in
principal amounts less than $1,000 so that each Holder of Exchangeable
Preferred Stock will receive certificates representing the entire amount of
Exchange Debentures to which his or her shares of Exchangeable Preferred
Stock entitle him or her, provided that the Issuer may, at its option, pay
cash in lieu of issuing an Exchange Debenture in a principal amount less
than $1,000. On and after the Exchange Date, dividends will cease to
accumulate on the outstanding shares of Exchangeable Preferred Stock, and
all rights of the Holders of Exchangeable Preferred Stock (except the right
to receive the Exchange Debentures, an amount in cash equal to the
accumulated and unpaid dividends to the Exchange Date (or, on or prior to
August 1, 2003, in principal amount of Exchange Debentures) and if the
Issuer so elects, cash in lieu of any Exchange Debenture that is in an
amount that is not an integral multiple of
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$1,000) will terminate. The Person entitled to receive the Exchange
Debentures issuable upon such exchange will be treated for any purposes as
the registered Holder of such Exchange Debentures.
SECTION 7.2 Procedure for Exchange.
----------------------
(a) On or before the Exchange Date, each Holder of Exchangeable
Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner and
at the place designated in the Exchange Notice. The Issuer shall cause the
Exchange Debentures to be executed on the Exchange Date and, upon surrender
in accordance with the Exchange Notice of the certificates for any shares
of Exchangeable Preferred Stock so exchanged (duly endorsed or assigned for
transfer), such shares shall be exchanged by the Issuer into Exchange
Debentures. The Issuer shall pay interest on the Exchange Debentures at
the rate and on the dates specified therein from the Exchange Date.
(b) Subject to the satisfaction of the conditions set forth in
clauses (i) through (iv) of Section 7.1(a), if notice has been mailed as
aforesaid, and if before the Exchange Date (i) the Exchange Debenture
Indenture shall have been duly executed and delivered by the Issuer and the
Exchange Debenture Trustee and (ii) all Exchange Debentures necessary for
such exchange shall have been duly executed by the Issuer and delivered to
the Exchange Debenture Trustee with irrevocable instructions to
authenticate the Exchange Debentures necessary for such exchange, then the
rights of the Holders of shares of the Exchangeable Preferred Stock as
stockholders of the Issuer shall cease (except the right to receive
Exchange Debentures), and the Person or Persons entitled to receive the
Exchange Debentures issuable upon exchange shall be treated for all
purposes as the registered Holder or Holders of such Exchange Debentures as
of the date of exchange without any further action of the Holders of
Exchangeable Preferred Stock.
ARTICLE 8
CHANGE OF CONTROL OFFER
SECTION 8.1
(a) Upon the occurrence of a Change of Control, unless all
Exchangeable Preferred Stock has been called for redemption pursuant to
Article 5, each Holder of outstanding Exchangeable Preferred Stock will
have the right to require the Issuer to repurchase all or any part of such
Holder's Exchangeable Preferred Stock pursuant to an offer (the
"Exchangeable Preferred Change of Control Offer") at an offer price in
------------------------------------------------
cash (the "Exchangeable Preferred Change of Control Payment") equal to
------------------------------------------------
101% of the aggregate liquidation preference thereof plus an amount in cash
equal to all accumulated and unpaid dividends per share (including an
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the repurchase date to the
repurchase date), if any, to the date of repurchase.
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(b) The Issuer shall not be required to make an Exchangeable
Preferred Change of Control Offer upon a Change of Control if a third party
makes and consummates an Exchangeable Preferred Change of Control Offer in
accordance with the provisions of this Article 8.
SECTION 8.2 In the event that the Issuer shall be required to commence
an Exchangeable Preferred Change of Control Offer, the Issuer shall follow the
procedures specified in this Section 8.2.
(a) Within 30 days after a Change of Control (unless (i) the Issuer
is not required to make such offer pursuant to Section 8.1(b) or (ii) all
shares of Exchangeable Preferred Stock have been called for redemption
pursuant to Article 5), the Issuer shall (x) commence an Exchangeable
Preferred Change of Control Offer, which shall remain open for a period of
at least 20 Business Days following its commencement (the "Offer Period")
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and (y) send, by first class mail, a notice to the Transfer Agent and each
of the Holders of the Exchangeable Preferred Stock which shall contain all
instructions and materials necessary to enable such Holders to tender their
shares of Exchangeable Preferred Stock pursuant to such Exchangeable
Preferred Change of Control Offer. The notice, which shall govern the
terms of the Exchangeable Preferred Change of Control Offer, shall describe
the transaction or transactions that constitute the Change of Control and
shall state:
(i) that the Exchangeable Preferred Change of Control Offer is
being made pursuant to this Article 8;
(ii) that the Issuer is required to offer to purchase all of
the outstanding shares of Exchangeable Preferred Stock at a purchase
price equal to the Exchangeable Preferred Change of Control Payment
and, that on the date specified in such notice (the "Purchase Date"),
-------------
which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed, the Issuer shall repurchase all
shares of Exchangeable Preferred Stock validly tendered and not
withdrawn pursuant to this Article 8;
(iii) that any outstanding shares of Exchangeable Preferred
Stock not tendered or accepted for payment shall continue to accrue
dividends;
(iv) that, unless the Issuer defaults in making such payment,
shares of Exchangeable Preferred Stock accepted for payment pursuant
to the Exchangeable Preferred Change of Control Offer shall cease to
accrue dividends after the Purchase Date;
(v) that Holders of outstanding Exchangeable Preferred Stock
electing to have such shares purchased pursuant to an Exchangeable
Preferred Change of Control Offer may elect to have all or any portion
of such shares purchased;
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(vi) that Holders of outstanding Exchangeable Preferred Stock
electing to have such shares purchased pursuant to an Exchangeable
Preferred Change of Control Offer shall be required to surrender the
Exchangeable Preferred Stock with such customary documents of
surrender and transfer as the Issuer may reasonably request, duly
completed, or transfer by book-entry transfer, to the Issuer or the
Transfer Agent at the address specified in the notice prior to the
Purchase Date;
(vii) that Holders shall be entitled to withdraw their election
if the Issuer, or the Transfer Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the aggregate liquidation preference of the Exchangeable Preferred
Stock the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Exchangeable Preferred
Stock purchased; and
(viii) that Holders whose shares of Exchangeable Preferred Stock
are purchased only in part shall be issued new Exchangeable Preferred
Stock equal in liquidation preference to the unpurchased portion of
the Exchangeable Preferred Stock surrendered (or transferred by book-
entry transfer), which unpurchased portion must be equal to $1,000 in
liquidation preference or an integral multiple thereof.
(b) On (or at the Issuer's election, before) the Purchase Date, the
Issuer shall:
(i) to the extent lawful, accept for payment, the outstanding
Exchangeable Preferred Stock or portions thereof validly tendered
pursuant to the Exchangeable Preferred Change of Control Offer and not
theretofore withdrawn;
(ii) deposit with the Transfer Agent an amount equal to the
Exchangeable Preferred Change of Control Payment in respect of all
Exchangeable Preferred Stock or portions thereof so tendered; and
(iii) deliver or cause to be delivered to the Transfer Agent the
shares of Exchangeable Preferred Stock so accepted together with an
Officers' Certificate stating the aggregate liquidation preference of
such Exchangeable Preferred Stock or portions thereof being purchased
by the Issuer.
The Issuer or the Transfer Agent, as the case may be, shall promptly
mail or deliver to each tendering Holder an amount equal to the
Exchangeable Preferred Change of Control Payment with respect to the
Exchangeable Preferred Stock tendered by such Holder and accepted by the
Issuer for purchase. The Issuer shall promptly issue new certificates
representing shares of Exchangeable
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Preferred Stock and mail (or cause to be transferred by book entry) to each
Holder a new certificate representing shares of Exchangeable Preferred
Stock equal in liquidation preference to any unpurchased portion of the
Exchangeable Preferred Stock so surrendered, if any, provided that each
such new share of Exchangeable Preferred Stock shall be in a principal
amount of $1,000 or an integral multiple thereof.
Any Exchangeable Preferred Stock not so accepted shall be promptly
mailed or delivered by the Issuer to the Holder thereof. On the Purchase
Date, all Exchangeable Preferred Stock purchased by the Issuer shall be
delivered to the Transfer Agent for cancellation. All Exchangeable
Preferred Stock or portions thereof purchased pursuant to the Exchangeable
Preferred Change of Control Offer will be canceled by the Transfer Agent.
The Issuer shall publicly announce the results of the Exchangeable
Preferred Change of Control Offer on or as soon as practicable after the
Purchase Date.
(c) On and after the Purchase Date, dividends shall cease to accrue
on the Exchangeable Preferred Stock or the portions of Exchangeable
Preferred Stock repurchased and all rights of Holders of such tendered
shares shall terminate, except for the right to receive payment therefor,
on the Purchase Date.
SECTION 8.3 The Issuer shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations to the
extent such laws and regulations are applicable in connection with the
Exchangeable Preferred Change of Control Offer. To the extent that the
provisions of any applicable securities laws or regulations conflict with
provisions of this Article 8, the Issuer shall comply with such securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 8.3 by virtue thereof.
SECTION 8.4 Prior to complying with the provisions of this Article
8, but in any event within 90 days following a Change of Control, the Issuer
will either use commercially reasonable efforts to repay all outstanding Senior
Debt or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Exchangeable Preferred Stock
required by this Article 8, unless notice of redemption of all Exchangeable
Preferred Stock has then been given pursuant to the provisions described in this
Article 5 and such redemption is permitted by the terms of outstanding Senior
Debt.
ARTICLE 9
RESTRICTED PAYMENTS
SECTION 9.1 The Issuer will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution
(including any payment in connection with any merger or consolidation) on
account of any Junior Equity
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Interests of the Issuer or Equity Interests of any Restricted Subsidiary
(other than dividends or distributions payable in Junior Equity Interests
of the Issuer or Equity Interests of any Restricted Subsidiary (other than
Disqualified Stock) and dividends payable to the Issuer or any Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value
(including in connection with any merger or consolidation) any Junior
Equity Interests of the Issuer or any Equity Interests of any Restricted
Subsidiary held by Persons other than the Issuer or any Restricted
Subsidiary; or
(iii) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iii)
above being collectively referred to as ''Restricted Payments''), unless, at the
time of, and after giving effect to, such Restricted Payment:
(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Issuer would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Debt pursuant to the
Consolidated Coverage Ratio test set forth in Section 10.1; and
(c) such Restricted Payment, together with (without duplication)
the aggregate amount of all other Restricted Payments made by the Issuer
and its Restricted Subsidiaries after the Issue Date (excluding Restricted
Payments permitted by clauses (ii), (iv) and (v) of Section 9.2, but
including all other Restricted Payments permitted by Section 9.2, is less
than the sum (without duplication) of
(i) 50% of the Consolidated Net Income of the Issuer for
the period (taken as one accounting period) from the beginning of the
fiscal quarter during which the Issue Date with respect to the Series
A Exchangeable Preferred Stock occurs to the end of the Issuer's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by
the Issuer from the issue or sale (other than to a Subsidiary) of, or
from capital contributions with respect to, Junior Equity Interests of
the Issuer (other than Disqualified Stock), in either case after the
Issue Date, plus
(iii) the aggregate principal amount (or accreted value, if
less) of Debt, Disqualified Stock or Equity Interests (other than
Junior Equity Interests) of the Issuer or any Restricted Subsidiary
issued since the Issue Date (other than to a
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Restricted Subsidiary) that has been converted into Junior Equity
Interests (other than Disqualified Stock) of the Issuer, plus
(iv) 100% of the aggregate net cash received by the Issuer
or a Restricted Subsidiary of the Issuer since the Issue Date from (A)
Restricted Investments, whether through interest payments, principal
payments, dividends or other distributions or payments, or the sale or
other disposition (other than to the Issuer or a Restricted
Subsidiary) thereof made by the Issuer and its Restricted Subsidiaries
and (B) a cash dividend from, or the sale (other than to the Issuer or
a Restricted Subsidiary) of the stock of, an Unrestricted Subsidiary,
plus
(v) upon the redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the fair market value of the Investments
of the Issuer and its Restricted Subsidiaries (other than such
Subsidiary) in such Subsidiary.
SECTION 9.2 The foregoing provisions of Section 9.1 will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of this Certificate of Designation;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Junior Equity Interests of the Issuer or Equity
Interests of any Restricted Subsidiary in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Issuer) of other Junior Equity Interests of
the Issuer or Equity Interests of any Restricted Subsidiary, or a capital
contribution with respect to Junior Equity Interests of the Issuer (other
than, in each case, any sale of or capital contribution in respect of
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of
Section 9.1;
(iii) the redemption, repurchase, retirement, defeasance or other
acquisition of Junior Equity Interests upon a Change of Control to the
extent required by the agreement or certificate of designation governing
such Junior Equity Interests, but only (x) if the Issuer shall have
complied with Article 8 and repurchased all Exchangeable Preferred Stock
tendered pursuant to the offer required by such covenant prior to
purchasing or repaying such Junior Equity Interests, and (y) within six
months after the date such offer is consummated;
(iv) the payment of any dividend by a Restricted Subsidiary of the
Issuer to the holders of its common Equity Interests on a pro rata basis;
(v) to the extent constituting Restricted Payments, the Specified
Affiliate Payments; and
(vi) Restricted Payments in an aggregate amount not to exceed $10
million.
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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Voting Rights
Triggering Event. For purposes of making such determination, all outstanding
Investments by the Issuer and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated, to the extent they do not
constitute Permitted Investments at the time such Subsidiary became an
Unrestricted Subsidiary, will be deemed to be Restricted Payments made at the
time of such designation. The amount of such outstanding Investments will be
equal to the portion of the fair market value of the net assets of any
Subsidiary of the Issuer at the time that such Subsidiary is designated an
Unrestricted Subsidiary that is represented by the interest of the Issuer and
its Restricted Subsidiaries in such Subsidiary, in each case as determined in
good faith by the Board of Directors of the Issuer. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined in good
faith by the Board of Directors of the Issuer.
In making the computations required by this Article 9, (i) the Issuer or
the relevant Restricted Subsidiary may use audited financial statements for the
portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Issuer for
the remaining portion of such period and (ii) the Issuer or the relevant
Restricted Subsidiary will be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of the
Issuer and the Restricted Subsidiary that are available on the date of
determination. If the Issuer makes a Restricted Payment that, at the time of the
making of such Restricted Payment, would in the good faith determination of the
Issuer or any Restricted Subsidiary be permitted under the requirements of this
Certificate of Designation, such Restricted Payment will be deemed to have been
made in compliance with this Certificate of Designation notwithstanding any
subsequent adjustments made in good faith to the Issuer's or any Restricted
Subsidiary's financial statements, affecting Consolidated Net Income of the
Issuer for any period.
For the avoidance of doubt, it is expressly agreed that no payment or other
transaction permitted by clauses (3), (4) and (5) of Section 12.2 shall be
considered a Restricted Payment for purposes of, or otherwise restricted by,
this Certificate of Designation.
ARTICLE 10
INCURRENCE OF DEBT
AND ISSUANCE OF PREFERRED STOCK
SECTION 10.1 The Issuer will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become
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directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Debt and that the Issuer will not issue any
-----
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of Preferred Stock; provided, however, that the Issuer and its
Restricted Subsidiaries may incur Debt or issue shares of Disqualified Stock and
the Issuer's Restricted Subsidiaries may issue Preferred Stock, if the
Consolidated Coverage Ratio for the Issuer's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Debt is incurred or such
Disqualified Stock or Preferred Stock is issued would have been at least 1.75 to
1.00 if such four-quarter period ends on or prior to the second anniversary of
the Issue Date and 2.00 to 1.00 if it ends thereafter, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Debt had been incurred, or the Disqualified Stock or Preferred
Stock had been issued, as the case may be, at the beginning of such four-quarter
period.
SECTION 10.2 The provisions of Section 10.1 will not apply to the
incurrence of any of the following items of Debt (collectively, "Permitted
---------
Debt"):
- ----
(i) the incurrence of term and revolving Debt, letters of credit
(with letters of credit being deemed to have a principal amount equal to
the undrawn face amount thereof) and other Debt under Credit Facilities
(including Guarantees by the Issuer or any of its Subsidiaries of synthetic
lease drawings and other loans under the New Credit Facility or of other
Debt under Credit Facilities); provided that the aggregate principal amount
of such Debt outstanding pursuant to this clause (i) does not exceed an
amount equal to $250.0 million;
(ii) the incurrence by the Issuer and its Restricted Subsidiaries of
Existing Debt;
(iii) the incurrence by (A) the Issuer of Debt represented by the
Notes and the Exchange Debentures and (B) the Guarantors of Debt
represented by the Note Guarantees;
(iv) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Acquired Debt;
(v) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to refund, refinance or replace Debt (other than
intercompany Debt) that was permitted by this Certificate of Designation to
be incurred;
(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of intercompany Debt or Preferred Stock owed or issued to and
held by the Issuer and any of its Restricted Subsidiaries, provided,
however, that (A) any subsequent issuance or transfer of Equity Interests
or other action that results in any such Debt or Preferred Stock being held
by a Person other than the Issuer or a Restricted Subsidiary and (B) any
sale or other transfer of any such Debt or Preferred Stock to a Person that
is not either the Issuer or a Restricted Subsidiary shall be deemed, in
each case, to constitute an incurrence of
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such Debt or issuance of such Preferred Stock by the Issuer or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vi);
(vii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred (A) principally for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate Debt that is permitted by the terms of this Certificate of
Designation to be outstanding or (B) principally for the purpose of fixing
or hedging currency exchange rate risk or commodity price risk incurred in
the ordinary course of business;
(viii) the guarantee by the Issuer or any Restricted Subsidiary of
Debt of the Issuer or a Restricted Subsidiary of the Issuer that was
permitted to be incurred by another provision of this section; and
(ix) the incurrence by the Issuer or any of its Restricted
Subsidiaries of additional Debt (which may comprise Debt under the New
Credit Facility) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding pursuant to this clause (ix) not to
exceed an amount equal to $20.0 million.
For purposes of determining compliance with this Article 10, in the event
that an item of Debt meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (ix) of Section 10.2, or is
entitled to be incurred pursuant to Section 10.1, the Issuer shall, in its sole
discretion, classify such item of Debt in any manner that complies with this
Article 10 and such item of Debt will be treated as having been incurred
pursuant to only one of such clauses of Section 10.2 or pursuant to Section 10.1
hereof; provided that all outstanding Debt under the New Credit Facility
immediately following the Recapitalization shall be deemed to have been incurred
pursuant to clause (i) of Section 10.2. Accrual of interest and the accretion
of accreted value will be deemed not to be an incurrence of Debt for purposes of
this Article 10.
ARTICLE 11
MERGER, CONSOLIDATION OR SALE OF
ALL OR SUBSTANTIALLY ALL ASSETS
SECTION 11.1 The Issuer may not consolidate or merge with or into
(whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(i) the Issuer is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Issuer) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia;
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(ii) the Exchangeable Preferred Stock shall be converted into or
exchanged for and shall become shares of the surviving entity having in
respect of such surviving entity substantially the same rights and
privileges that the Exchangeable Preferred Stock had immediately prior to
such transaction with respect to the Issuer and shall not be subordinated
to any Preferred Stock of the surviving entity;
(iii) immediately after such transaction no Voting Rights Triggering
Event shall exist; and
(iv) except in the case of a merger of the Issuer with or into a
Wholly Owned Restricted Subsidiary of the Issuer, the Issuer or the Person
formed by or surviving any such consolidation or merger (if other than the
Issuer), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, either (x) be permitted to incur at least $1.00 of additional Debt
pursuant to the Consolidated Coverage Ratio test set forth in Section 10.1
or (y) have a Consolidated Coverage Ratio at least equal to the
Consolidated Coverage Ratio of the Issuer for such four-quarter reference
period.
SECTION 11.2 Notwithstanding clauses (iii) and (iv) of Section 11.1, (a)
any Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Issuer and (b) the Issuer may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Issuer in another jurisdiction.
ARTICLE 12
TRANSACTIONS WITH AFFILIATES
SECTION 12.1 The Issuer will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an ''Affiliate Transaction''),
---------------------
unless:
(i) such Affiliate Transaction is on terms that, taken as a whole,
are no less favorable to the Issuer or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Issuer or such Restricted Subsidiary with an unrelated Person; and
(ii) the Issuer delivers to the Transfer Agent (a) with respect to any
Affiliate Transaction entered into after the Issue Date involving aggregate
consideration in excess of $3.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the members of the
Board of Directors and (b) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $10.0 million, an opinion as
to the fairness to the Holders of
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such Affiliate Transaction from a financial point of view issued by an
investment banking, appraisal or accounting firm of national standing.
SECTION 12.2 The provisions of Section 12.1 shall not prohibit and the
following shall not be deemed to be Affiliate Transactions:
(1) transactions between or among the Issuer and/or its Restricted
Subsidiaries;
(2) Permitted Investments and Restricted Payments that are permitted
by the provisions of this Certificate of Designation described in Article
9;
(3) employment agreements, employee benefit plans and related
arrangements entered into in the ordinary course of business and all
payments and other transactions contemplated thereby;
(4) any payments to Investcorp and its Affiliates (whether or not
such Persons are Affiliates of the Issuer) (A) for any financial advisory,
financing, underwriting or placement services or in respect of other
investment banking activities, including in connection with acquisitions or
divestitures, which payments are approved by the Board of Directors of the
Issuer in good faith and (B) of annual management, consulting and advisory
fees and related expenses;
(5) any agreement in effect on the Closing Date (including the
Recapitalization Agreement, the Services Agreement between the Berkshire
Companies Limited Partnership and the Issuer (as amended) and the Brevard
lease agreement) or any amendment thereto (so long as any such amendment is
not disadvantageous to the Holders in any material respect) or any payment
or other transaction contemplated by any of the foregoing; and
(6) Debt permitted by clause (ix) of Section 10.2 hereof to the
extent such Debt is on terms that, taken as a whole, are no less favorable
to the Issuer or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction with an unrelated Person.
ARTICLE 13
DISCHARGE AND DEFEASANCE
SECTION 13.1 Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Issuer may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect
to have either Section 13.1(b) or 13.1(c) hereof be applied to all
outstanding Exchangeable Preferred Stock upon compliance with the
conditions set forth below in this Article 13.
(b) Upon the Issuer's exercise under Section 13.1(a) hereof of the
option applicable to this Section 13.1(b), the Issuer shall, subject to the
satisfaction of the
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conditions set forth in Section 13.2 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding
Exchangeable Preferred Stock on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
----------------
Defeasance means that the Issuer shall be deemed to have paid and
discharged all the obligations represented by the outstanding Exchangeable
Preferred Stock, which Exchangeable Preferred Stock shall thereafter be
deemed to be "outstanding" only for the purposes of Section 13.3 hereof and
the other Sections of this Certificate of Designation referred to in (i)
and (ii) below, and to have satisfied all their other obligations under
such Exchangeable Preferred Stock and this Certificate of Designation (and
the Transfer Agent, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Exchangeable
Preferred Stock to receive solely from the trust fund described in this
Article 13, as more fully set forth in such Article, payments in respect of
the liquidation preference of, accumulated and unpaid dividends on, and
Liquidated Damages, if any, on such Exchangeable Preferred Stock when such
payments are due and (ii) this Article 13. Subject to compliance with this
Article 13, the Issuer may exercise its option under this Section 13.1(b)
notwithstanding the prior exercise of its option under Section 13.1(c)
hereof.
(c) Upon the Issuer's exercise under Section 13.1(a) hereof of the
option applicable to this Section 13.1(c), the Issuer shall, subject to the
satisfaction of the conditions set forth in Section 13.2 hereof, be
released from its obligations under Articles 8, 9, 10, 12, and Sections
11.1(iv) and 15.6 hereof with respect to the outstanding Exchangeable
Preferred Stock on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Exchangeable
-------------------
Preferred Stock shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such Articles and
Section, but shall continue to be deemed "outstanding" for all the other
purposes hereunder (it being understood that such Exchangeable Preferred
Stock shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect of any term,
condition or limitation set forth in any such Article or Section, whether
directly or indirectly, by reason of any reference elsewhere herein to any
such Article or Section or by reason of any reference in any such Article
or Section to any other provision herein or in any other document and such
omission to comply shall not constitute a Voting Rights Triggering Event
under Section 6.2 hereof, but, except as specified above, the remainder of
this Certificate of Designation and such Exchangeable Preferred Stock shall
be unaffected thereby.
SECTION 13.2. Conditions to Legal or Covenant Defeasance. The following
------------------------------------------
shall be the conditions to the application of either Section 13.1(b) or 13.1(c)
hereof to the outstanding Exchangeable Preferred Stock:
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(a) the Issuer must irrevocably deposit with the Transfer Agent, in
trust, for the benefit of the Holders, cash in United States dollars,
Government Notes, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the aggregate liquidation preference of,
accumulated and unpaid dividends on, and Liquidated Damages, if any, on the
outstanding Exchangeable Preferred Stock on the stated date for payment
thereof or on the applicable Redemption Date, as the case may be;
(b) in the case of an election under Section 13.1(b) hereof, the
Issuer shall have delivered to the Transfer Agent an Opinion of Counsel in
the United States reasonably acceptable to the Transfer Agent confirming
that (A) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date hereof, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Exchangeable Preferred Stock will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 13.1(c) hereof, the
Issuer shall have delivered to the Transfer Agent an Opinion of Counsel in
the United States, subject to customary assumptions and exclusions,
reasonably acceptable to the Transfer Agent confirming that the Holders of
the outstanding Exchangeable Preferred Stock will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Voting Rights Triggering Event shall have occurred and be
continuing on the date of such deposit (other than a Voting Rights
Triggering Event resulting from the Incurrence of Debt) all or a portion of
the proceeds of which will be used to defease the Exchangeable Preferred
Stock pursuant to this Article 13 concurrently with such Incurrence;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Certificate of Designation) to
which the Issuer or any of its Subsidiaries is a party or by which the
Issuer or any of its Subsidiaries is bound;
(f) the Issuer shall have delivered to the Transfer Agent an Opinion
of Counsel, subject to customary assumptions and exclusions, to the effect
that after the 91st day following the deposit pursuant to Section 13.2(a),
the trust funds will not be part of any "estate" formed by the bankruptcy
or reorganization of the Issuer or subject to the "automatic stay" under
the Bankruptcy Code, or in the case of a Covenant Defeasance,
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<PAGE>
will be subject to a first priority lien in favor of the Transfer Agent for
the benefit of the Holders;
(g) the Issuer shall have delivered to the Transfer Agent an Officers'
Certificate stating that the deposit was not made by the Issuer with the
intent of preferring the Holders over any other creditors of the Issuer or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Issuer; and
(h) the Issuer shall have delivered to the Transfer Agent an Officers'
Certificate and an Opinion of Counsel, subject to customary assumptions and
exclusions, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
SECTION 13.3. Deposited Money and Government Securities to be Held in
-------------------------------------------------------
Trust; Other Miscellaneous Provisions. Subject to Section 13.4 hereof, all
- -------------------------------------
money and Government Notes (including the proceeds thereof) deposited with the
Transfer Agent (or other qualifying trustee, collectively for purposes of this
Section 13.3, the "Transfer Agent") pursuant to Section 13.2 hereof in respect
--------------
of the outstanding Exchangeable Preferred Stock shall be held in trust and
applied by the paying agent, in accordance with the provisions of such
Exchangeable Preferred Stock and this Certificate of Designation, to the
payment, either directly or through any paying agent (including the Issuer
acting as paying agent) as the Transfer Agent may determine, to the Holders of
such Exchangeable Preferred Stock of all sums due and to become due thereon in
respect of the liquidation preference of and accumulated and unpaid dividends on
the Exchangeable Preferred Stock, but such money need not be segregated from
other funds except to the extent required by law.
Anything in this Article 13 to the contrary notwithstanding, the Transfer
Agent shall deliver or pay to the Issuer from time to time upon the request of
the Issuer any money or Government Notes held by it as provided in Section 13.2
hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Transfer Agent (which may be the opinion delivered under Section 13.2(a)
hereof), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 13.4. Repayment to Issuer. Any money deposited with the Transfer
-------------------
Agent or any paying agent, or then held by the Issuer, in trust for the payment
of the aggregate liquidation preference of, accumulated and unpaid dividends on
and Liquidated Damages, if any, and remaining unclaimed for two years after such
amounts have become due and payable shall be paid to the Issuer on its request
or (if then held by the Issuer) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof, and all liability of the Transfer Agent
with respect to such trust money, and all liability of any paying agent
(including the Issuer as paying agent) thereof, shall thereupon cease; provided,
--------
however, that the Transfer Agent or paying agent, before being required to make
- -------
any such repayment, may at the expense of the Issuer, cause to be published
once, in the Wall Street Journal (national edition), notice that such money
remains unclaimed and
26
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that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Issuer.
SECTION 13.5. Reinstatement. If the Transfer Agent is unable to apply any
-------------
United States dollars or Government Notes in accordance with this Article 13 by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Issuer's obligations under this Certificate of Designation and the Exchangeable
Preferred Stock shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 13 until such time as the Transfer Agent is
permitted to apply all such money in accordance with this Article 13; provided,
--------
however, that, if the Issuer makes any payment on account of the Exchangeable
- -------
Preferred Stock following the reinstatement of its obligations, the Issuer shall
be subrogated to the rights of the Holders of such Exchangeable Preferred Stock
to receive such payment from the money held by the Transfer Agent or any paying
agent.
ARTICLE 14
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights. So long as any shares of Exchangeable
-------------------
Preferred Stock constitute "Transfer Restricted Securities", as defined in the
Preferred Stock Registration Rights Agreement, each Holder shall be entitled to
the rights granted by the Issuer thereunder, and shall be bound by the
restrictions contained therein, on the certificates representing the
Exchangeable Preferred Stock, in the Offering Memorandum and in any offering
memorandum for any Additional Exchangeable Preferred Stock.
ARTICLE 15
MISCELLANEOUS
SECTION 15.1 Conversion or Exchange. The Holders of Exchangeable
----------------------
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Issuer.
SECTION 15.2 Preemptive Rights. No shares of Exchangeable Preferred
-----------------
Stock shall have any rights of preemption whatsoever as to any securities of the
Issuer, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
SECTION 15.3 Reissuance of Exchangeable Preferred Stock. Shares of
------------------------------------------
Exchangeable Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware) have the status of authorized
but unissued shares of Preferred Stock of the Issuer and may be designated or
redesignated and issued or reissued, as the case may
27
<PAGE>
be, as part of any series of Preferred Stock of the Issuer, except that any
issuance or reissuance of shares of Exchangeable Preferred Stock must be in
compliance with this Certificate of Designation.
SECTION 15.4 Business Day. If any payment, redemption, repurchase or
------------
exchange shall be required by the terms hereof to be made on a day that is not a
Business Day, such payment, redemption, repurchase or exchange shall be made on
the immediately succeeding Business Day and no interest shall accrue on the
intervening period.
SECTION 15.5 Remedies. The sole remedy to Holders of Exchangeable
--------
Preferred Stock in the event of the Issuer's failure to comply with any of the
provisions hereof and the sole consequence of any such failure will be the
voting rights described in Article 6.
SECTION 15.6 Reports. Notwithstanding that the Issuer may not be
-------
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, to the extent permitted by the Exchange Act, the Issuer
will file with the Commission, and provide, within 15 days after the Issuer is
required to file the same with the Commission and the Holders with the annual
reports and the information, documents and other reports that are specified in
Sections 13 and 15(d) of the Exchange Act. In the event the Issuer is not
permitted to file such reports, documents and information with the Commission,
the Issuer will provide substantially similar information to the Trustee and the
Holders, as if the Issuer were subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act.
SECTION 15.7 Waiver. The Holders of at least a majority of the
------
outstanding shares of Exchangeable Preferred Stock, voting or consenting, as the
case may be, as one class, may also waive compliance with any provision of this
Certificate of Designation.
SECTION 15.8 Certificate as to Conditions Precedent. Upon any request or
--------------------------------------
application by the Issuer to the Transfer Agent to take or refrain from taking
any action under this Certificate of Designation, at the request of the Transfer
Agent, the Issuer shall furnish to the Transfer Agent:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Transfer Agent (which shall include the statements set
forth in Section 15.9 hereof) stating that in the opinion of the signers,
all conditions precedent, if any, provided for in this Certificate of
Designation relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Transfer Agent (which shall include the statements set
forth in Section 15.9 hereof) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 15.9. Statements Required in Certificate. Each certificate or
----------------------------------
opinion with respect to compliance with a covenant or condition provided for in
this Certificate of Designation shall include:
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(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 15.10 Notice. Any notice or communication given pursuant to this
------
Certificate of Designation shall be in writing and delivered in person or
mailed by first-class mail addressed as follows:
if to the Issuer, to:
Harborside Healthcare Corporation
470 Atlantic Avenue
Boston, MA 02210
Attn: Chief Financial Officer
Phone: (617) 556 8158
Fax: (617) 556 1565
with copies to:
Investcorp International Inc.
280 Park Avenue, 37 West
New York, NY 10017
Attn: Christopher J. O'Brien
Phone: (212) 599-4700
Fax: (212) 983-7073
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48th Floor
New York, NY 10166
Attn: Joerg H. Esdorn
Phone: (212) 351-4000
Fax: (212) 351-4035
If to the Transfer Agent, to:
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<PAGE>
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attn: Corporate Trust Administration
Phone: (212) 852-1000
Fax: (212) 852-1626
The Issuer or the Transfer Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of Exchangeable Preferred
Stock shall be mailed to the Holder at the Holder's address as it appears
in the stock register of the Issuer and shall be sufficiently given if so
mailed within the time prescribed. Failure to mail a notice or
communication to a Holder or any defect in such notice shall not affect its
sufficiency with respect to other Holders. If a notice or communication is
mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
ARTICLE 16
TRANSFER RESTRICTIONS
SECTION 16.1 The certificates evidencing the Exchangeable Preferred Stock
shall, unless otherwise agreed to by the Issuer and the Holders of any such
certificates, bear a legend substantially to the following effect:
THE EXCHANGEABLE PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT
ON THE DATE OF THE TRANSFER OF THE EXCHANGEABLE PREFERRED STOCK, RESELL OR
OTHERWISE TRANSFER THE EXCHANGEABLE PREFERRED STOCK EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
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<PAGE>
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE EXCHANGEABLE PREFERRED
STOCK (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT)
AND, IF SUCH TRANSFER IS IN RESPECT OF EXCHANGEABLE PREFERRED STOCK HAVING
AN AGGREGATE LIQUIDATION PREFERENCE AT THE TIME OF TRANSFER OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (E) AFTER REGISTRATION UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS EXCHANGEABLE
PREFERRED STOCK IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS EXCHANGEABLE PREFERRED
STOCK WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT. THE
CERTIFICATE OF DESIGNATION OF THE ISSUER CONTAINS A PROVISION REQUIRING THE
TRANSFER AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS EXCHANGEABLE
PREFERRED STOCK IN VIOLATION OF THE FOREGOING RESTRICTIONS.
SECTION 16.2 The Transfer Agent shall refuse to register any attempted
transfer of shares of Exchangeable Preferred Stock not in compliance with
Section 16.1.
SECTION 16.3 The legend provided in Section 16.1 may be removed if the
Exchangeable Preferred Stock has been registered pursuant to an effective
registration statement under the Securities Act.
ARTICLE 17
BOOK-ENTRY, DELIVERY AND FORM
SECTION 17.1 The certificates representing the Exchangeable Preferred
Stock will be issued in fully registered form. Exchangeable Preferred Stock
sold in reliance on Rule 144A under the Securities Act will be represented by
one or more permanent global Exchangeable Preferred Stock certificates in
definitive, fully registered form (each a "Restricted Global Preferred Stock
---------------------------------
Certificate") and will be deposited with a custodian for, and registered in the
- -----------
name of a nominee of, Depositary Trust Company ("DTC"). Owners of beneficial
---
interests in a Restricted Global Preferred Stock Certificate will generally not
be entitled to receive physical delivery of a physical certificate for their
Exchangeable Preferred Stock ("Certificated Preferred Stock"). The
----------------------------
Exchangeable Preferred Stock is not issuable in bearer form.
31
<PAGE>
Investors to whom Exchangeable Preferred Stock is transferred and who
are not Qualified Institutional Buyers (as defined in Rule 144A under the
Securities Act) will receive Certificated Preferred Stock, which cannot then be
traded through the facilities of DTC, except in connection with a transfer to a
Qualified Institutional Buyer. Upon the transfer to a Qualified Institutional
Buyer of Certificated Preferred Stock, such Certificated Preferred Stock will,
unless the relevant Restricted Global Preferred Stock Certificate has previously
been exchanged in whole for Certificated Preferred Stock, be exchanged for an
interest in a Restricted Global Preferred Stock Certificate.
Upon the issuance of the Restricted Global Preferred Stock
Certificates, DTC or its custodian will credit, on its internal system, the
respective liquidation preference of the individual beneficial interests
represented by such Restricted Global Preferred Stock Certificates, to the
accounts of Persons who have accounts with such depositary. Such accounts
initially will be designated by or on behalf of the Placement Agents. Ownership
of beneficial interests in a Restricted Global Preferred Stock Certificate will
be limited to Persons who have accounts with DTC ("participants") or Persons
who hold interests through participants. Ownership of beneficial interests in a
Restricted Global Preferred Stock Certificate will be shown on, and the transfer
of that ownership will be effected only through, records maintained by DTC or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of Persons other than participants).
Qualified Institutional Buyers may hold their interests in a Restricted Global
Preferred Stock Certificate directly through DTC if they are participants in
such system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of a
Restricted Global Preferred Stock Certificate, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the Exchangeable
Preferred Stock represented by such Restricted Global Preferred Stock
Certificate for all purposes under the Certificate of Designation and the
Exchangeable Preferred Stock. No beneficial owner of an interest in a
Restricted Global Preferred Stock Certificate will be able to transfer that
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under this Certificate of Designation.
Payments made with respect to the Restricted Global Preferred Stock
Certificates will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Issuer nor the Placement Agents will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Restricted
Global Preferred Stock Certificate or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
If DTC is at any time unwilling or unable to continue as a depositary
for the Restricted Global Preferred Stock Certificates and a successor
depositary is not appointed by the Issuer within 90 days, the Issuer will issue
Certificated Preferred Stock, which may bear the legend referred to in Section
16.1 in exchange for the Restricted Global Preferred Stock Certificates.
ARTICLE 18
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DEFINITIONS
SECTION 18.1 As used in this Certificate of Designation, the following
terms shall have the following meanings:
"Acquired Debt" means, with respect to any specified Person, (i) Debt of
any other Person existing at the time such other Person is merged with or into
or became a Restricted Subsidiary of such specified Person, (ii) Debt incurred
by such specified Person, its Restricted Subsidiaries or such other Person for
the purpose of financing the acquisition of such other Person or its assets
(provided that such other Person becomes or, in the case of an asset purchase,
the Person acquiring such assets is, a Restricted Subsidiary and (iii) Debt
secured by a Lien encumbering any asset acquired by such specified Person.
"Additional Notes" means any additional notes that may be issued under
the Indenture.
"Affiliate" of any specified Person means (i) any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person, (ii) any other Person that owns, directly or
indirectly, 5% or more of such specified Person's Voting Stock or (iii) any
Person who is a director or officer (a) of such Person, (b) of any Subsidiary of
such Person or (c) of any Person described in clause (i) or (ii) above. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"),
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Applicable Premium" means, with respect to a share of Exchangeable
Preferred Stock at any Redemption Date, the greater of (i) 1.0% of the
liquidation preference thereof or (ii) the excess of (A) the present value at
such time of the redemption price of such share of Exchangeable Preferred Stock
at August 1, 2003 (such redemption price being set forth in the table above),
computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (B) the liquidation preference of such Exchangeable Preferred Stock, if
greater.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person, or any authorized committee of the Board of Directors
of such Person.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited
33
<PAGE>
liability company, partnership or membership interests (whether general or
limited) and (iv) any similar participation in profits and losses or equity of a
Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank or trust company
having capital and surplus in excess of $300.0 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. ("S&P") and in each case maturing
within one year after the date of acquisition, (vi) investment funds investing
95% of their assets in securities of the types described in clauses (ii)-(v)
above, (vii) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's or S&P and (viii)
Debt with a rating of "A" or higher from S&P or "A2" or higher from Moody's
and having a maturity of not more than one year from the date of acquisition.
"Change of Control" means the occurrence of any of the following events:
(i) prior to the first public offering of Voting Stock of the Issuer,
the Initial Control Group ceases to be the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly,
of more than 50% of the total voting power of the Voting Stock of the
Issuer, whether as a result of the issuance of securities of the Issuer,
any merger, consolidation, liquidation or dissolution of the Issuer, any
direct or indirect transfer of securities by the Initial Control Group or
otherwise (for purposes of this clause (i), the Initial Control Group shall
be deemed to beneficially own all Voting Stock of an entity (the
"specified entity") held by any other entity (the "parent entity") so
long as the Initial Control Group beneficially owns (as so defined),
directly or indirectly, in the aggregate a majority of the voting power of
the Voting Stock of the parent entity);
(ii) following the first public offering of Voting Stock of the Issuer
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more members of the Initial Control Group,
is or becomes the beneficial owner (as defined in clause (i) above),
directly or indirectly, of more than 40% of the total voting power of the
Voting Stock of the Issuer and (B) the Initial Control Group "beneficially
owns" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Issuer, than such other person and does not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Issuer (for purposes
of this clause (ii), such other person shall be deemed to beneficially own
all
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Voting Stock of a specified entity held by a parent entity, if such other
person "beneficially owns" (as defined in clause (i) above), directly or
indirectly, in the aggregate more than 40% of the voting power of the
Voting Stock of such parent entity and the Initial Control Group
"beneficially owns" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent entity and does not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of such parent entity); or
(iii) at any time after the first public offering of common stock of
the Issuer, any person other than the Initial Control Group (or their
designated board members), (A)(I) nominates one or more individuals for
election to the Board of Directors of the Issuer and (II) solicits proxies,
authorizations or consents in connection therewith and (B) such number of
nominees elected to serve on the Board of Directors in such election and
all previous elections after the Closing Date represents a majority of the
Board of Directors of the Issuer following such election.
"Closing Date" means the date on which MergerCo was merged with and into
the Issuer.
"Collateral Agent" means United States Trust Company of New York, as
Collateral Agent, under the Collateral Pledge and Security Agreement dated as of
July 31, 1998 between the Issuer and the Collateral Agent relating to the
Exchangeable Preferred Stock.
"Commission" means the Securities and Exchange Commission.
"Commodity Hedging Agreements" means any futures contract or other
similar agreement or arrangement designed to protect the Issuer or any
Restricted Subsidiary against fluctuations in commodities prices.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period (A) plus
(without duplication), to the extent deducted in computing such Consolidated Net
Income, (i) Consolidated Interest Expense and the amortization of debt issuance
costs, commissions, fees and expenses of such Person and its Restricted
Subsidiaries for such period, (ii) provision for taxes based on income or
profits (including franchise taxes) of such Person and its Restricted
Subsidiaries for such period, (iii) depreciation and amortization expense,
including amortization of inventory write-up under APB 16, amortization of
intangibles (including goodwill and the non-cash costs of Interest Rate
Agreements, Commodity Hedging Agreements or Currency Agreements, license
agreements and non-competition agreements), non-cash amortization of Capital
Lease Obligations, and organization costs, (iv) non-cash expenses related to the
amortization of management fees paid on or prior to the Closing Date, (v)
expenses and charges related to any equity offering or incurrence of Debt
permitted to be incurred by the Indenture (including any such expenses or
charges relating to the Recapitalization), (vi) the amount of any restructuring
charge or reserve, (vii) unrealized gains and losses from hedging, foreign
currency or commodities translations and transactions, (viii) expenses
consisting of internal software development costs that are expensed during the
period but could have been capitalized in accordance with GAAP, (ix) any write-
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downs, write-offs, and other non-cash charges, items and expenses, (x) the
amount of expense relating to any minority interest in a Restricted Subsidiary,
and (xi) costs of surety bonds in connection with financing activities, and (B)
minus any cash payment for which a reserve or charge of the kind described in
clauses (vi), (ix) or (x) of subclause (A) above was taken previously during
such period.
"Consolidated Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period. In the event that
the Issuer or any of its Restricted Subsidiaries incurs, assumes, Guarantees,
redeems or repays any Debt (other than revolving credit borrowings) or issues or
redeems Preferred Stock subsequent to the commencement of the period for which
the Consolidated Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Consolidated Coverage Ratio is
made (the "Calculation Date"), then the Consolidated Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
redemption or repayment of Debt, or such issuance or redemption of Preferred
Stock, as if the same had occurred at the beginning of the applicable four-
quarter reference period. For purposes of making the computation referred to
above, Investments, acquisitions, dispositions, mergers and consolidations that
have been made by the Issuer or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date, and discontinued operations determined in
accordance with GAAP on or prior to the Calculation Date, shall be given effect
on a pro forma basis assuming that all such Investments, acquisitions,
dispositions, mergers and consolidations or discontinued operations (and the
reduction or increase of any associated Consolidated Interest Expense and the
change in Consolidated Cash Flow resulting therefrom, including because of
reasonably anticipated cost savings) had occurred on the first day of the four-
quarter reference period. If since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period) shall
have made any Investment, acquisition, disposition, merger or consolidation or
determined a discontinued operation, that would have required adjustment
pursuant to this definition, then the Consolidated Coverage Ratio shall be
calculated giving pro forma effect thereto for such period as if such
Investment, acquisition, disposition, merger or consolidation or discontinued
operations had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculations shall be made in good faith by a
financial or accounting officer of the Issuer. If any Debt to which pro forma
effect is given bears interest at a floating rate, the interest expense on such
Debt shall be calculated as if the rate in effect on the Calculation Date had
been the applicable interest rate for the entire period (taking into account any
Interest Rate Agreement in effect on the Calculation Date). Interest on a
Capital Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by a responsible financial or accounting officer of the
Issuer to be the rate of interest implicit in such Capital Lease Obligation in
accordance with GAAP. Interest on Debt that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Issuer may designate.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated net interest
expense of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued (including amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations relating to Interest Rate Agreements or
Currency Agreements with respect to Debt, excluding, however, (A) amortization
of debt issuance costs, commissions, fees and expenses, (B) customary
commitment, administrative and transaction fees and charges and (C) expenses
attributable to letters of credit or similar arrangements supporting insurance
certificates issued to customers in the ordinary course of business), (ii) any
interest expense on Debt of another Person that is Guaranteed by or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (but only to
the extent such Guarantee or Lien has then been called upon), and (iii) cash
dividends paid in respect of any Preferred Stock of such Person or any
Restricted Subsidiary of such Person held by Persons other than the Issuer or a
Subsidiary, in each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary of
such Person, (ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, prohibited by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders unless such restriction with respect to the
payment of dividends has been permanently waived, (iii) except for purposes of
calculating "Consolidated Cash Flow," the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded (effected either through cumulative
effect adjustment or a retroactive application, in each case, in accordance with
GAAP), (v) to the extent deducted in determining Net Income, the fees, expenses
and other costs incurred in connection with the Recapitalization, including
payments to management contemplated by the Recapitalization Agreement, shall be
excluded, and (vi) to the extent deducted in determining Net Income, any non-
cash charges resulting from any write-up, write-down or write-off of assets, of
the Issuer and its Restricted Subsidiaries in connection with the
Recapitalization, shall be excluded.
"Credit Facilities" means, with respect to the Issuer, one or more debt
facilities (including the New Credit Facility) or commercial paper facilities
with banks, insurance companies or other institutional lenders providing for
revolving credit loans, term loans,
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synthetic lease financing, notes, receivables factoring or other financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from or issue securities to such lenders against such
receivables) or letters of credit or other credit facilities, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement to which the Issuer or any
Restricted Subsidiary is a party or of which it is a beneficiary.
"Debt" means, with respect to any Person (without duplication), (i) any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property, which purchase price is due
more than six months after the date of placing such property in final service or
taking final delivery thereof, or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (ii) all indebtedness under clause (i)
of other Persons secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person) provided that the amount of
indebtedness of such Person shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such indebtedness
of such other Persons, and (iii) to the extent not otherwise included, the
Guarantee by such Person of any Debt under clause (i) of any other Person;
provided, however, that Debt shall not include (a) obligations of the Issuer or
any of its Restricted Subsidiaries arising from agreements of the Issuer or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, assets or a Subsidiary, other than
guarantees of Debt incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
provided, however, that (x) such obligations are not reflected on the balance
sheet of the Issuer or any Restricted Subsidiary (contingent obligations
referred to in a footnote to financial statements and not otherwise reflected on
the balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (x)) and (y) the maximum assumable liability in respect
of all such obligations shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being measured
at the time received and without giving effect to any subsequent changes in
value) actually received by the Issuer and its Restricted Subsidiaries in
connection with such disposition, (b) (A) obligations under (or constituting
reimbursement obligations with respect to) letters of credit, performance bonds,
surety bonds, appeal bonds, completion guarantees or similar instruments issued
in connection with the ordinary course of business conducted by the Issuer,
including letters of credit in respect of workers' compensation claims, security
or lease deposits and self-insurance, provided, however, that upon the drawing
of such letters of credit or other instrument, such obligations are reimbursed
within 30 days following such drawing, and (B) obligations arising from the
honoring by a bank or other financial institution of a check, draft
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or similar instrument inadvertently (except in the case of day-light overdrafts)
drawn against insufficient funds in the ordinary course of business; provided,
however, that such obligations are extinguished within three Business Days of
incurrence, or (c) retentions in connection with purchasing assets in the
ordinary course of business of the Issuer and its Restricted Subsidiaries. The
amount of any Debt outstanding as of any date shall be the lesser of (i) the
accreted value thereof and (ii) the principal amount thereof, provided that the
amount of Permitted Debt under clause (i) or (ix) of the definition thereof, at
the Issuer's election, but without duplication, may be reduced by the principal
amount (not to exceed $7.5 million) of the note receivable issued to the Issuer
before the Issue Date in connection with the leasing of certain nursing home
facilities in the State of Connecticut.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than as a result of a
Change of Control), matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date on which the Exchangeable Preferred
Stock is subject to mandatory redemption as set forth in Section 5.3 hereof;
provided, however, that if such Capital Stock is issued to any plan for the
benefit of employees of the Issuer or its Subsidiaries or by any such plan to
such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Issuer in order to
satisfy applicable statutory or regulatory obligations. For the avoidance of
doubt, Exchangeable Preferred Stock shall not be considered "Disqualified
Stock."
"Dividend Payment Date" means February 1, May 1, August 1 and November 1 of
each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
Quarterly Dividend Period.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Exchange Date" means the date on which the Exchangeable Preferred Stock
is exchanged for Exchange Debentures.
"Exchange Debentures" means the Exchange Debentures of the Issuer due
2010 issued in exchange for the Exchangeable Preferred Stock and any Exchange
Debentures issued as payments in kind interest thereon, provided that such
Exchange Debentures have the terms set forth in the Offering Memorandum.
"Exchange Debenture Indenture" means the indenture pursuant to which the
Exchange Debentures are to be issued as it may from time to time be amended or
supplemented.
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"Exchange Debenture Trustee" means the trustee under the Exchange
Debenture Indenture, as appointed by the Issuer in its discretion.
"Exchangeable Preferred Stock" is defined in Section 1.1.
"Existing Debt" means Debt of the Issuer and its Restricted
Subsidiaries (other than Debt under the New Credit Facility) in existence on the
Issue Date, until such amounts are repaid.
"Foreign Subsidiary" means any Subsidiary of the Issuer formed under
the laws of any jurisdiction other than the United States or any political
subdivision thereof substantially all of the assets of which are located outside
of the United States or that conducts substantially all of its business outside
of the United States.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in the Exchange Debenture Indenture shall be computed in conformity
with GAAP as in effect as of the Issue Date.
"Government Notes" means non-callable direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Debt.
"Guarantors" means, at any time after the Closing Date, (i) each of the
Issuer's Subsidiaries on the Closing Date, other than the Subsidiary
Non-Guarantors on such date and (ii) each Restricted Subsidiary that executes
and delivers a Note Guarantee after the Closing Date, and their respective
successors and assigns, in each case until released from its Note Guarantee in
accordance with the terms of the Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under Interest Rate Agreements, Currency Agreements
or Commodity Hedging Agreements.
"Holder" means with respect to any share of Exchangeable Preferred
Stock, a Person in whose name such share of Exchangeable Preferred Stock is
registered in the register for the Exchangeable Preferred Stock.
"Indenture" means the Indenture dated as of July 31, 1998 between
MergerCo and United States Trust Company of New York, as Trustee pursuant to
which the Notes were issued as it may from time to time be amended or
supplemented.
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"Initial Control Group" means Investcorp, its Affiliates, any Person
acting in the capacity of an underwriter or initial purchaser in connection with
a public or private offering of the Issuer's Capital Stock, any employee benefit
plan of the Issuer or any of its Subsidiaries or any participant therein, a
trustee or other fiduciary holding securities under any such employee benefit
plan or any Permitted Transferee of any of the foregoing Persons.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the day before the first Dividend Payment Date to occur
thereafter.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, repurchase agreement, futures contract or other
financial agreement or arrangement designed to protect the Issuer or any
Restricted Subsidiary against fluctuations in interest rates.
"Investcorp" means Investcorp S.A. and certain affiliates thereof.
"Investment Grade Securities" means (i) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents) having maturities of not
more than one year from the date of acquisition, (ii) debt securities or debt
instruments with a rating of BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such rating by such rating organization, or, if no rating
of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Issuer and
its Subsidiaries having maturities of not more than one year from the date of
acquisition, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii), which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Debt or other obligations, but excluding
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advances or capital
contributions (excluding commission, travel, payroll, entertainment, relocation
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Debt, Equity
Interests or other securities. If the Issuer or any Restricted Subsidiary of the
Issuer sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of the Issuer such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Issuer, the
Issuer shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
third to last paragraph of Section 9.2.
"Issue Date" means, with respect to any series of Exchangeable
Preferred Stock, the date on which such series of Exchangeable Preferred Stock
is originally issued. The Series A Exchangeable Preferred Stock was originally
issued on July 31, 1998 by MergerCo.
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"Issuer" means Harborside Healthcare Corporation, a Delaware
corporation, and any successor.
"Junior Equity Interests" means Junior Securities or warrants, options
or other rights to acquire Junior Securities (but excluding any debt security
that is convertible into, or exchangeable for, Junior Securities).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement or any lease
in the nature thereof); provided that in no event shall an operating lease be
deemed to constitute a Lien.
"MergerCo" means HH Acquisition Corp., a Delaware corporation.
"Net Income" means, with respect to any Person and any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP and before any reduction in respect of Preferred Stock dividends,
excluding, however, (i) any extraordinary or non-recurring gains or losses or
charges and gains or losses or charges from the sale of assets outside the
ordinary course of business, together with any related provision for taxes on
such gain or loss or charges and (ii) deferred financing costs written off in
connection with the early extinguishment of Debt; provided, however, that Net
Income shall be deemed to include any increases during such period to
shareholder's equity of such Person attributable to tax benefits from net
operating losses and the exercise of stock options that are not otherwise
included in Net Income for such period.
"New Credit Facility" means the collective reference to (a) the Credit
Agreement among the Issuer and certain Subsidiaries of the Issuer named therein
and the financial institutions named therein, any Credit Documents (as defined
therein) and any related notes, collateral documents, letters of credit,
participation agreements, guarantees, and other documents part of or relating to
the Credit Documents, including any appendices, exhibits or schedules to any of
the foregoing (as the same may be in effect from time to time), and (b) the
Synthetic Lease Facility described in the Credit Agreement, including the Lease
between a Subsidiary of the Issuer, as lessee, and the Delaware business trust
named therein, as lessor (the "Lessor"), the Credit Agreement among the Lessor
and the financial institutions named therein, the Participation Agreement among
the parties to the Lease, the parties to the Credit Agreement, the Trustee of
Lessor, and the Investors in Lessor, and the additional Operative Agreements
described in the Participation Agreement, including any appendices, exhibits or
schedules to any of the foregoing (as the same may be in effect from time to
time), in each case, as such agreements may be amended, modified, supplemented
or restated from time to time, or refunded, refinanced, restructured, replaced,
renewed, repaid or extended from time to time (whether with the original agents
and lenders or other agents or lenders or otherwise, and whether provided under
the original credit agreements or other credit agreements or otherwise).
"Note Guarantee" means the Guarantee by each Guarantor of the Issuer's
Obligations under the Notes.
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"Notes" means the 11% Senior Subordinated Discount Notes Due 2008
issued by the Issuer.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, guarantees and other liabilities
payable under the documentation governing any Debt, in each case whether now or
hereafter existing, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred, whether or
not arising on or after the commencement of a proceeding under Title 11, U.S.
Code or any similar federal or state law for the relief of debtors (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
"Offering Memorandum" means the Offering Memorandum, dated July 29,
1998, relating to the offering and placement of the Notes and the Exchangeable
Preferred Stock.
"Officers" means any of the following: Chairman, President, Chief
Executive Officer, Treasurer, Chief Financial Officer, Executive Vice President,
Senior Vice President, Vice President, Assistant Vice President, Secretary,
Assistant Secretary or any other officer reasonably acceptable to the Transfer
Agent.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Transfer Agent. The counsel may be an employee of
or counsel to the Issuer or the Transfer Agent.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Restricted Subsidiary (including in any Equity Interests of a Restricted
Subsidiary); (b) any Investment in cash, Cash Equivalents or Investment Grade
Securities; (c) any Investment by the Issuer or any Restricted Subsidiary of the
Issuer in a Person, if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary or (ii) such Person, in one transaction or a series of
substantially concurrent related transactions, is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Issuer or a Restricted Subsidiary; (d) any
securities or other assets received or other Investments made as a result of the
receipt of non-cash consideration from an asset sale that was made in connection
with any other disposition of assets not constituting an asset sale; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Issuer; (f) loans or advances to
employees (or guarantees of third party loans to employees) in the ordinary
course of business; (g) stock, obligations or securities received in
satisfaction of judgments, foreclosure of liens or settlement of debts (whether
pursuant to a plan of reorganization or similar arrangement); (h) receivables
owing to the Issuer or any Restricted Subsidiary, if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms (including such concessionary terms as the Issuer or such
Restricted Subsidiary deems reasonable); (i) any Investment existing on the
Issue Date for the Series A Exchangeable Preferred Stock or made pursuant to
legally binding written commitments in existence on the Issue Date for the
Series A Exchangeable Preferred Stock; (j) Investments in Interest Rate
Agreements, Currency Agreements and Commodity Hedging Agreements
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otherwise permitted under the Exchange Debenture Indenture; and (k) additional
Investments having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (k) that are at that time outstanding,
not to exceed 15.0% of Total Assets at the time of such Investment (with the
fair market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value).
"Permitted Refinancing Debt" means any Debt of the Issuer or any of its
Restricted Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Debt of the
Issuer or any of its Restricted Subsidiaries incurred in compliance with the
Exchange Debenture Indenture; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Debt does not
exceed the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Debt so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable premium and fees and expenses incurred
in connection therewith); (ii) in the case of term Debt, (1) principal payments
required under such Permitted Refinancing Debt have a Stated Maturity no earlier
than the earlier of (A) the Stated Maturity of those under the Debt being
refinanced and (B) the maturity date of the Exchange Debentures and (2) such
Permitted Refinancing Debt has a Weighted Average Life to Maturity equal to or
greater than the lesser of the Weighted Average Life to Maturity of the Debt
being extended, refinanced, renewed, replaced, defeased or refunded and the
Weighted Average Life to Maturity of the Exchange Debentures; (iii) if the Debt
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Exchange Debentures, such Permitted
Refinancing Debt has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the Exchange Debentures on terms
at least as favorable to the Holders of Exchange Debentures as those contained
in the documentation governing the Debt being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Debt is incurred either by the
Issuer or by its Restricted Subsidiary who is the obligor on the Debt being
extended, refinanced, renewed, replaced, defeased or refunded. The Issuer may
Incur Permitted Refinancing Debt not more than six months prior to the
application of the proceeds thereof to repay the Debt to be refinanced; provided
that upon the Incurrence of such Permitted Refinancing Debt, the Issuer shall
provide written notice thereof to the Exchange Debenture Trustee, specifically
identifying the Debt to be refinanced with Permitted Refinancing Debt.
"Permitted Transferee" means, with respect to any Person, (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) the spouse, former
spouse, lineal descendants, heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any such Person, (iii) a trust, the
beneficiaries of which, or a corporation or partnership or limited liability
company, the stockholders, general or limited partners or members of which,
include only such Person or his or her spouse, lineal descendants or heirs, in
each case to whom such Person has transferred, or through which it holds, the
beneficial ownership of any securities of the Issuer and (iv) any investment
fund or investment entity that is a subsidiary of such Person or a Permitted
Transferee of such Person.
44
<PAGE>
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Placement Agents" means each of Morgan Stanley Dean Witter, BT Alex.
Brown and Chase Securities Inc.
"Preferred Stock" means, with respect to any Person, any Capital Stock
of such Person (however designated) that is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person. With respect to the Issuer,
"Preferred Stock" includes the Exchangeable Preferred Stock.
"Preferred Equity Interests" means Preferred Stock and all warrants,
options or other rights to acquire Preferred Stock (but excluding any debt
security that is convertible into, or exchangeable for, Preferred Stock).
"Preferred Stock Registration Rights Agreement" means (i) with respect
to the Series A Exchangeable Preferred Stock, the Registration Rights Agreement
dated July 31, 1998 between the Issuer and the Placement Agents, as the same may
be amended or supplemented from time to time and (ii) with respect to any other
series of Exchangeable Preferred Stock, any registration rights agreement
applicable to such series.
"Quarterly Dividend Period" means the quarterly period commencing on
each February 1, May 1, August 1 and November 1 and ending on the day before the
following Dividend Payment Date.
"Recapitalization" means the recapitalization of Harborside Healthcare
Corporation pursuant to which MergerCo was merged with and into the Issuer and
the financing transactions related thereto.
"Recapitalization Agreement" means the Agreement and Plan of Merger
dated as of April 15, 1998 by and between MergerCo and Harborside Healthcare
Corporation, as amended through the Closing Date.
"Redemption Date" with respect to any shares of Exchangeable Preferred
Stock, means the date on which such shares of Exchangeable Preferred Stock are
redeemed by the Issuer.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Debt of the Issuer outstanding under the
New Credit Facility and all Hedging Obligations with respect thereto, (ii) all
Debt represented by the Notes
45
<PAGE>
(including any Additional Notes), (iii) any other Debt (including Acquired Debt)
permitted to be incurred by the Issuer under the terms of the Exchange Debenture
Indenture, unless the instrument under which such Debt is incurred expressly
provides that it is on a parity with or subordinated in right of payment to the
Exchange Debentures, and (iv) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (v) any liability for federal, state, local or other taxes owed or owing
by the Issuer, (w) any Debt of the Issuer to any of its Subsidiaries, officers,
employees or other Affiliates (other than Debt under any Credit Facility to any
such Affiliate), (x) any trade payables, (y) that portion of Debt incurred in
violation of Article 10 (but as to any such Debt under any Credit Facility, such
violation shall be deemed not to exist for purposes of this clause (y) if the
lenders have obtained a representation from a Senior Officer of the Issuer to
the effect that the issuance of such Debt does not violate such Article 10) or
(z) any Debt or obligation of the Issuer which is expressly subordinated in
right of payment to any other Debt or obligation of the Issuer including any
Subordinated Debt of the Issuer.
"Senior Officer" means the Chief Executive Officer or the Chief
Financial Officer of the Issuer.
"Series A Exchangeable Preferred Stock" is defined in Section 1.1.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the Issue Date.
"Specified Affiliate Payments" means:
(i) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Issuer or any Restricted Subsidiary of the
Issuer, held by any future, present or former employee, director, officer or
consultant of the Issuer (or any of its Restricted Subsidiaries) pursuant to any
management equity subscription agreement, stock option agreement, put agreement,
stockholder agreement or similar agreement that may be in effect from time to
time; provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $3.0 million in any
calendar year (with unused amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum amount of repurchases,
redemptions or other acquisitions pursuant to this clause (i) (without giving
effect to the immediately following proviso) of $10.0 million in any calendar
year) and no payment default on Senior Debt or the Exchange Debentures shall
have occurred and be continuing; provided further that such amount in any
calendar year may be increased by an amount not to exceed (A) the cash proceeds
received by the Issuer (including by way of capital contribution) since the
Issue Date for the Series A Exchangeable Preferred Stock from the sale of Equity
Interests of the Issuer to employees, directors, officers or consultants of the
Issuer or its Subsidiaries that occurs in such calendar year (it being
understood that such cash proceeds shall be excluded from clause (c)(ii) of
Section 9.1 plus (B) the cash proceeds from key man life insurance policies
received by the Issuer and its Restricted Subsidiaries in such calendar year
(including proceeds from the sale of such policies to the person insured
thereby); and provided,
46
<PAGE>
further, that cancellation of Debt owing to the Issuer from employees,
directors, officers or consultants of the Issuer or any of its Subsidiaries in
connection with a repurchase of Equity Interests of the Issuer will not be
deemed to constitute a Restricted Payment for purposes of the Exchange Debenture
Indenture;
(ii) repurchases of Equity Interests deemed to occur upon exercise of
stock options or warrants as a result of the payment of all or a portion of the
exercise price of such options or warrants with Equity Interests;
(iii) payments by the Issuer to shareholders or members of management
of the Issuer and its Subsidiaries in connection with the Recapitalization; and
(iv) payments or transactions permitted under clause (5) of Section
12.2;
"Stated Maturity" means, with respect to any installment of interest on
or principal of, or any other amount payable in respect of, any series of Debt,
the date on which such interest, principal or other amount was scheduled to be
paid in the documentation governing such Debt, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest,
principal or other amount prior to the date scheduled for the payment thereof.
"Subordinated Debt" means any Debt of the Issuer (whether outstanding
on the Issue Date for the Series A Exchangeable Preferred Stock or thereafter
incurred) that is subordinate or junior in right of payment to the Exchange
Debentures pursuant to written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof). Unless the context
otherwise requires, "Subsidiary" refers to a Subsidiary of the Issuer.
"Subsidiary Non-Guarantors" means (i) each of the Subsidiaries of the
Issuer on the Closing Date that do not issue or are released from a Note
Guarantee, (ii) each Unrestricted Subsidiary, and (iii) each Restricted
Subsidiary formed or acquired after the Closing Date that does not execute and
deliver or is released from a Note Guarantee.
"Total Assets" means, at any time, the total consolidated assets of the
Issuer and its Restricted Subsidiaries at such time.
"Transfer Agent" means (i) United States Trust Company of New York,
until a successor is appointed by the Issuer or replaces it and, thereafter,
means the successor or (ii) any exchange agent appointed by the Issuer for
purposes of Article 7 or 8, as applicable.
47
<PAGE>
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to August 1, 2003, provided, however, that if
the period from the Redemption Date to August 1, 2003 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to August 1, 2003 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, and (ii) any Subsidiary of an Unrestricted Subsidiary; but in the
case of any Subsidiary referred to in clause (i) (or any Subsidiary of any such
Subsidiary) only to the extent that such Subsidiary: (a) is not party to any
agreement, contract, arrangement or understanding with the Issuer or any
Restricted Subsidiary of the Issuer unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Issuer or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Issuer; and (b) except in the case of a
Foreign Subsidiary, is a Person with respect to which neither the Issuer nor any
of its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results. Any such designation by the Board of Directors
shall be evidenced to the Exchange Debenture Trustee by filing with the Exchange
Debenture Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Article 9. If, at
any time, any Unrestricted Subsidiary referred to in clause (ii) of the first
sentence of this definition (or any Subsidiary thereof) would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Exchange Debenture
Indenture and any Debt of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Issuer as of such date (and, if such Debt is not
permitted to be incurred as of such date under Article 10, the Issuer shall be
in default of such Article). The Board of Directors of the Issuer may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of Debt by a
Restricted Subsidiary of the Issuer of any outstanding Debt of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Debt is
permitted under Article 10 calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Voting Rights Triggering Event would be in existence following such
designation.
48
<PAGE>
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person, excluding, however, Exchangeable Preferred Stock.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Debt.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 18.2 Rules of Construction.. For the purposes of this
---------------------
Certificate of Designation (i) words in the singular shall be held to include
the plural and vice versa and words of one gender shall be held to include the
other gender as the context requires, (ii) the word "including" and words of
similar import shall mean "including, without limitation," (iii) a word has the
meaning assigned to it, (iv) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP, and (v) "or" is not exclusive.
49
<PAGE>
IN WITNESS WHEREOF, Harborside Healthcare Corporation has caused this
Certificate of Designation to be signed by Stephen L. Guillard, its President,
on the date and year first above written.
HARBORSIDE HEALTHCARE CORPORATION
By /s/ Stephen L. Guillard
--------------------------
Name: Stephen L. Guillard
Title: President
50
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
HARBORSIDE HEALTHCARE CORPORATION
------------------------------------
CREDIT AGREEMENT
dated as of August 11, 1998
------------------------------------
$250,000,000
Credit Facility
------------------------------------
CHASE SECURITIES INC.,
as Arranger,
MORGAN STANLEY SENIOR FUNDING, INC.
and
BT ALEX. BROWN INCORPORATED,
as Co-Arrangers,
BANKERS TRUST COMPANY,
as Documentation Agent,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Syndication Agent,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
- --------------------------------------------------------------------------------
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. DEFINITIONS................................................................................... 2
1.1 Defined Terms................................................................................. 2
1.2 Other Definitional Provisions................................................................. 28
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS....................................................................... 29
2.1 Revolving Credit Commitments.................................................................. 29
2.2 Commitment Fee................................................................................ 30
2.3 Proceeds of Revolving Credit Loans............................................................ 30
2.4 Swing Line Commitment......................................................................... 30
2.5 Issuance of Letters of Credit................................................................. 32
2.6 Participating Interests....................................................................... 32
2.7 Procedure for Opening Letters of Credit....................................................... 33
2.8 Payments in Respect of Letters of Credit...................................................... 33
2.9 Letter of Credit Fees......................................................................... 34
2.10 Letter of Credit Reserves..................................................................... 34
2.11 Further Assurances............................................................................ 35
2.12 Obligations Absolute.......................................................................... 35
2.13 Assignments................................................................................... 36
2.14 Participations................................................................................ 36
2.15 Conversion to Term Loans...................................................................... 36
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS........................................................ 37
3.1 Procedure for Borrowing....................................................................... 37
3.2 Conversion and Continuation Options........................................................... 38
3.3 Changes of Commitment Amounts................................................................. 38
3.4 Optional and Mandatory Prepayments; Repayments of Term Loans.................................. 39
3.5 Interest Rates and Payment Dates.............................................................. 42
3.6 Computation of Interest and Fees.............................................................. 42
3.7 Certain Fees.................................................................................. 43
3.8 Inability to Determine Interest Rate.......................................................... 43
3.9 Pro Rata Treatment and Payments............................................................... 43
3.10 Illegality.................................................................................... 46
3.11 Requirements of Law........................................................................... 47
3.12 Indemnity..................................................................................... 49
3.13 Repayment of Loans; Evidence of Debt.......................................................... 50
3.14 Replacement of Lenders........................................................................ 51
3.15 Appointment of the Company and Reliance on Representation of the
Company....................................................................................... 51
SECTION 4. REPRESENTATIONS AND WARRANTIES................................................................ 51
4.1 Financial Condition........................................................................... 52
4.2 No Change..................................................................................... 53
4.3 Corporate Existence; Compliance with Law...................................................... 53
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
4.4 Corporate Power; Authorization............................................................... 54
4.5 Enforceable Obligations...................................................................... 54
4.6 No Legal Bar................................................................................. 55
4.7 No Material Litigation....................................................................... 55
4.8 Investment Company Act....................................................................... 55
4.9 Federal Regulation........................................................................... 55
4.10 No Default................................................................................... 56
4.11 Taxes........................................................................................ 56
4.12 Subsidiaries................................................................................. 56
4.13 Ownership of Property; Liens................................................................. 56
4.14 ERISA........................................................................................ 57
4.15 Security Documents........................................................................... 58
4.16 Copyrights, Patents, Permits, Trademarks and Licenses........................................ 58
4.17 Environmental Matters........................................................................ 59
4.18 Accuracy and Completeness of Information..................................................... 60
4.19 AcquisitionCo................................................................................ 60
4.20 Health Care Permits.......................................................................... 60
4.21 Year 2000.................................................................................... 61
SECTION 5. CONDITIONS PRECEDENT......................................................................... 61
5.1 Conditions to Initial Revolving Credit Loans and Letters of Credit........................... 61
5.2 Conditions to All Loans and Letters of Credit................................................ 66
SECTION 6. AFFIRMATIVE COVENANTS........................................................................ 67
6.1 Financial Statements......................................................................... 67
6.2 Certificates; Other Information.............................................................. 69
6.3 Payment of Obligations....................................................................... 70
6.4 Conduct of Business and Maintenance of Existence............................................. 71
6.5 Maintenance of Property; Insurance........................................................... 71
6.6 Inspection of Property; Books and Records; Discussions....................................... 71
6.7 Notices...................................................................................... 72
6.8 Environmental Laws........................................................................... 73
6.9 Additional Collateral........................................................................ 74
6.10 Health Care Permits and Approvals............................................................ 76
6.11 Operating Leases............................................................................. 77
6.12 Mortgages.................................................................................... 77
SECTION 7. NEGATIVE COVENANTS........................................................................... 77
7.1 Indebtedness................................................................................. 78
7.2 Limitation on Liens.......................................................................... 82
7.3 Limitation on Contingent Obligations......................................................... 83
7.4 Prohibition of Fundamental Changes........................................................... 85
7.5 Prohibition on Disposition of Assets......................................................... 85
7.6 Limitation on Investments, Loans and Advances................................................ 87
7.7 Capital Expenditures......................................................................... 91
</TABLE>
ii
<PAGE>
<TABLE>
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<S> <C> <C>
7.8 Interest Rate Agreements..................................................................... 92
7.9 Debt to EBITDA............................................................................... 92
7.10 Coverage Ratio............................................................................... 93
7.11 Limitation on Dividends...................................................................... 95
7.12 Transactions with Affiliates................................................................. 95
7.13 Prepayments and Amendments of Subordinated Debt.............................................. 96
7.14 Limitation on Changes in Fiscal Year......................................................... 96
7.15 Limitation on Lines of Business.............................................................. 96
7.16 Health Care Permits and Approvals............................................................ 96
7.17 Preferred Stock.............................................................................. 97
SECTION 8. EVENTS OF DEFAULT............................................................................ 97
SECTION 9. MISCELLANEOUS................................................................................ 100
9.1 Amendments and Waivers....................................................................... 100
9.2 Notices...................................................................................... 102
9.3 No Waiver; Cumulative Remedies............................................................... 102
9.4 Survival of Representations and Warranties................................................... 103
9.5 Payment of Expenses and Taxes................................................................ 103
9.6 Successors and Assigns; Participations and Assignments....................................... 104
9.7 Set-off...................................................................................... 108
9.8 Counterparts................................................................................. 109
9.9 Governing Law; No Third Party Rights......................................................... 109
9.10 Submission to Jurisdiction; Waivers.......................................................... 109
9.11 Releases..................................................................................... 110
9.12 Interest..................................................................................... 110
9.13 Special Indemnification...................................................................... 111
9.14 Permitted Payments and Transactions.......................................................... 111
9.15 Harborside of Rhode Island................................................................... 112
</TABLE>
iii
<PAGE>
SCHEDULES
Schedule I Borrowers
Schedule II Lenders, Addresses and Commitments
Schedule III Pricing and Commitment Fee Grid
Schedule 2.5 Existing Letters of Credit
Schedule 4.11 Taxes
Schedule 4.12 Subsidiaries
Schedule 4.13 Fee and Leased Properties
Schedule 4.15(a) UCC Filing Offices
Schedule 4.16 Trademarks and Copyrights
Schedule 7.1(a) Existing Indebtedness
Schedule 7.2(i) Existing Liens
Schedule 7.3(e) Existing Contingent Obligations
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Term Loan Note
EXHIBIT C Form of Swing Line Note
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Collateral Agreement
EXHIBIT F Form of Agency and Intercreditor Agreement
EXHIBIT G Form of L/C Participation Certificate
EXHIBIT H Form of Swing Line Loan Participation Certificate
EXHIBIT I Form of Subsection 3.11(d)(2) Certificate
EXHIBIT J-1 Form of Opinion of Gibson, Dunn & Crutcher LLP
EXHIBIT J-2 Form of Opinion of In-house or Massachusetts Counsel to
the Company
EXHIBIT K-1 Form of Company Closing Certificate
EXHIBIT K-2 Form of Subsidiaries Closing Certificate
EXHIBIT L Form of Mortgage
EXHIBIT M-1 Form of Lease Intercreditor Agreement
EXHIBIT M-2 Form of Loan Intercreditor Agreement
EXHIBIT N Form of Trust Guarantee
iv
<PAGE>
CREDIT AGREEMENT, dated as of August 11, 1998, among HARBORSIDE HEALTHCARE
CORPORATION, a Delaware corporation (the "Company"), and the other entities
-------
listed on Schedule I hereto, as joint and several borrowers hereunder (together
with the Company and any other Subsidiary of the Company that may become a party
hereto as provided herein, the "Borrowers" and, individually, a "Borrower"), the
--------- --------
several lenders from time to time parties hereto (the "Lenders"), CHASE
-------
SECURITIES INC., as arranger (the "Arranger"), MORGAN STANLEY SENIOR FUNDING,
--------
INC. and BT ALEX. BROWN INCORPORATED, as co-arrangers (collectively, in such
capacity, the "Co-Arrangers"), MORGAN STANLEY SENIOR FUNDING, INC., as
------------
syndication agent (in such capacity, the "Syndication Agent"), BANKERS TRUST
-----------------
COMPANY, as documentation agent (in such capacity, the "Documentation Agent"),
-------------------
and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H :
-------------------
WHEREAS, HH Acquisition Corp., a Delaware corporation ("AcquisitionCo"),
-------------
and the Company have entered into an Agreement and Plan of Merger, dated as
April 15, 1998 (together with all schedules and exhibits attached thereto and
any and all amendments, supplements and modifications thereto and as the same
may be hereafter amended, supplemented or otherwise modified from time to time
in accordance with this Agreement, the "Merger Agreement"), pursuant to which
----------------
AcquisitionCo will be merged with and into the Company (the "Merger"), the
------
Company being the surviving corporation of the Merger;
WHEREAS, upon the Merger, the Investors will own approximately 90% of the
common stock of the Company and certain existing shareholders and management
(the "Existing Shareholders") will own the remaining portion of such common
---------------------
stock;
WHEREAS, the Company intends to finance the Merger (including the
refinancing of certain existing indebtedness) and related premiums, fees and
expenses from the following sources: (a) approximately $175,000,000 in common
equity (consisting of a cash investment of at least approximately 90% of the
common equity from the Investors, with the balance represented by common stock
retained by the Existing Shareholders); (b) approximately $40,000,000 in
exchangeable preferred stock or junior subordinated unsecured loans, with any
amount of exchangeable preferred stock over $40,000,000 reducing the common
equity ownership referenced in clause (a) above by a like amount; (c)
approximately $100,000,000 in gross cash proceeds from an issuance by the
Company of either subordinated unsecured loans or senior subordinated discount
notes; (d) approximately $15,000,000 of drawings under $250,000,000 of senior
secured credit facilities consisting of the credit facilities provided for
herein and/or the Synthetic Lease Facility (as defined below);
<PAGE>
2
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 for herein benefits all Borrowers in connection with their various
businesses; and
WHEREAS, the Company and the other Borrowers, jointly and severally, have
requested the Lenders to make loans and other extensions of credit available to
the Borrowers: (a) to enable the Company to finance a portion of the Merger,
(b) to refinance certain of the existing indebtedness of the Company and its
subsidiaries, (c) for working capital purposes of the Company and its
subsidiaries; (d) to finance certain acquisitions and capital expenditures and
(e) for general corporate purposes;
NOW, THEREFORE, the Borrowers, the Administrative Agent, the Arranger, the
Co-Arrangers, the Syndication Agent, the Documentation Agent and the Lenders
agree as follows:
SECTION 1. DEFINITIONS
-----------
1.1 Defined Terms. As used in this Agreement, the terms defined in the
-------------
caption hereto shall have the meanings set forth therein, and the following
terms have the following meanings:
"Acquired Business": any Person or assets acquired by the Company or
-----------------
any Subsidiary in an acquisition permitted by subsection 7.6(g).
"AcquisitionCo": as defined in the Recitals hereto.
-------------
"Acquisition Consideration": with respect to any acquisition, the
-------------------------
aggregate consideration therefor paid by the Company or any Subsidiary
(excluding fees and expenses incurred in connection therewith), including,
without limitation, the cash purchase price payment, upfront cash payments
to obtain purchase options or favorable lease rates, Indebtedness arising
in connection with such acquisition as permitted by subsection 7.1(f) and
the fair market value of Capital Stock of the Company issued in connection
with such acquisition.
"Added Amount": at any time, an amount equal to 10% of the sum of (a)
------------
aggregate Acquisition Consideration given subsequent to the date hereof in
connection with acquisitions of Encumbered Subsidiaries permitted by
subsection 7.6(g)(iv) plus (b) the aggregate appraised value (as set forth
----
in the appraisals furnished pursuant to subsection 6.11) of the properties
that are the subject of operating leases entered into subsequent to the
date hereof under which any Encumbered Subsidiary is the lessee.
"Additional Mortgage": as defined in subsection 6.9(c).
-------------------
<PAGE>
3
"Administrative Agent": as defined in the Preamble hereto.
--------------------
"Adjustment Date": as defined in the definition of Applicable Margin.
---------------
"Affiliate": as to any Person (a) any other Person (other than a
---------
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person, or (b) any other Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For
purposes of this definition, control of a Person shall mean the power,
direct or indirect, (x) to vote 25% or more of the securities having
ordinary voting power for the election of directors of such Person, whether
by ownership of securities, contract, proxy or otherwise, or (y) to direct
or cause the direction of the management and policies of such Person,
whether by ownership of securities, contract, proxy or otherwise.
"Agency and Intercreditor Agreement": the Agency and Intercreditor
-----------------------------------
Agreement, substantially in the form of Exhibit F, to be executed and
delivered by the Borrowers, the Trust, the Lenders, the Synthetic Investors
and the Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
modified from time to time.
"Alternate Base Rate": for any day, a rate per annum (rounded
-------------------
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a)
the Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate
----------
of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in
New York City (the Prime Rate not being intended to be the lowest rate of
interest charged by the Administrative Agent in connection with extensions
of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product
------------
of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the C/D Reserve
Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate"
-----------------------------
shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day) by
the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of
the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately 10:00
A.M., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the
<PAGE>
4
Administrative Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it; and "Federal Funds
-------------
Effective Rate" shall mean, for any day, 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 on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day
of such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"Alternate Base Rate Loans": Loans at such time as they are made
-------------------------
and/or being maintained at a rate of interest based upon the Alternate Base
Rate.
"Ancillary Businesses": any businesses ancillary to the operation of
--------------------
a Health Care Facility such as the rehabilitative therapy, home healthcare
and pharmaceutical businesses associated therewith.
"Applicable Margin": for Term Loans, Revolving Credit Loans and Swing
-----------------
Line Loans of the Types set forth below, the rate per annum set forth under
the relevant column heading opposite such Loans below:
Alternate
Base Rate Eurodollar
Loans Loans
---------- ----------------
Term Loans: 1.25% 2.25%
Revolving Credit Loans: 1.25% 2.25%
Swing Line Loans: 1.25% Not applicable;
provided that the Applicable Margin with respect to the Loans will be
--------
adjusted on each Adjustment Date (as defined below) occurring after the
completion of four fiscal quarters of the Company after the Closing Date to
the applicable rate per annum set forth in the pricing grid attached hereto
as Schedule III based on the Leverage Ratio as determined from the relevant
financial statements delivered pursuant to subsection 6.1. Changes in the
Applicable Margin resulting from changes in the Leverage Ratio shall become
effective on each date (an "Adjustment Date") on which such financial
---------------
statements are delivered to the Lenders (but in any event not later than
the 45th day after the end of each of the first three quarterly periods of
each fiscal year or the 90th day after the end of each fiscal year as the
case may be) and shall remain in effect until the next change to be
effected pursuant to this definition; provided that (a) the Applicable
--------
Margin shall be initially the rate per annum set forth under the relevant
column heading above; (b) if for any reason the financial statements
required by subsection 6.1 are not timely delivered to the Lenders, (i)
during the period from the
<PAGE>
5
date upon which such financial statements were required to be delivered
until the date upon which they actually are delivered, the Applicable
Margin shall be the Applicable Margin in effect immediately prior to the
date such financial statements were due, and (ii) if such financial
statements, when actually delivered, would have required an increase in the
Applicable Margin over the Applicable Margin in effect immediately prior to
the date such financial statements were due, the Company shall promptly
following the delivery of such financial statements pay to the Lenders and
the Administrative Agent any additional amounts of interest or fees which
would have been payable on any previous Interest Payment Date had such
higher Applicable Margin been in effect from the date such financial
statements were required to be delivered; (c) any change in the Applicable
Margin as a result of a change in the Leverage Ratio shall apply to all
Loans for each day during the period commencing on the effective date of
such change and ending on the date immediately preceding the effective date
of the next such change in the Applicable Margin; and (d) if an Event of
Default exists on any Adjustment Date or other date upon which the
Applicable Margin would otherwise be adjusted hereunder, the Applicable
Margin shall in no event be reduced on such Adjustment Date or other date
from the Applicable Margin in effect immediately prior to such Adjustment
Date or other date.
"Arranger": as defined in the Preamble hereto.
--------
"Asset Sale": any sale, sale-leaseback, or other disposition by the
----------
Company or any Subsidiary restricted by subsection 7.5 of any of its
property or assets, including the stock of any Subsidiary, except sales and
dispositions permitted by subsections 7.5(a), (b), (c), (f), (g), (i) and
(k).
"Assignee": as defined in subsection 9.6(c).
--------
"Assignment and Acceptance": an assignment and acceptance
-------------------------
substantially in the form of Exhibit D.
"Authorized Officer": each of Steven L. Guillard, William H. Stephan
------------------
and each additional or substitute officer as the Company notifies the
Administrative Agent in writing.
"Available Revolving Credit Commitment": as to any Lender, at a
-------------------------------------
particular time, an amount equal to (a) the amount of such Lender's
Revolving Credit Commitment at such time less (b) the sum of (i) the
----
aggregate unpaid principal amount at such time of all Revolving Credit
Loans made by such Lender pursuant to subsection 2.1, (ii) such Lender's
Revolving Credit Percentage of the aggregate unpaid principal amount at
such time of all Swing Line Loans, provided that for purposes of
--------
calculating the Revolving Credit Commitments pursuant to subsection 2.2 the
amount referred to in this clause (ii) shall be zero, (iii) such Lender's
L/C Participating Interest in the aggregate amount available to be drawn at
such time under all outstanding Letters of Credit issued by the Issuing
Lender, (iv) such Lender's Revolving Credit Percentage of the aggregate
outstanding amount of L/C Obligations
<PAGE>
6
and (v) such Lender's Revolving Credit Percentage of the then aggregate
principal amount of the Synthetic Lease Obligations; collectively, as to
all the Lenders, the "Available Revolving Credit Commitments".
--------------------------------------
"Bankruptcy Code": Title I of the Bankruptcy Reform Act of 1978, as
---------------
amended and codified at Title 11 of the United States Code.
"Board": the Board of Governors of the Federal Reserve System of the
-----
United States, together with any successor.
"Borrower" and "Borrowers": as defined in the Preamble hereto.
-------- ---------
"Borrowing Date": any Business Day specified in a notice pursuant to
--------------
(a) subsection 2.4 or 3.1 as a date on which the Company requests the Swing
Line Lender or the Lenders to make Loans hereunder or (b) subsection 2.5 as
a date on which the Company requests the Issuing Lender to issue a Letter
of Credit hereunder.
"Bridge Commitment Letter": the Commitment Letter and term sheet
------------------------
thereto dated as of April 30, 1998 by and between Investcorp Investment
Equity Limited, on its behalf and on behalf of certain of its affiliates
and other investors and Morgan Stanley Bridge Fund L.L.C., Chase
Securities, Inc. and Bankers Trust Corporation.
"Bridge Junior Subordinated Debt": the junior subordinated unsecured
-------------------------------
bridge loans or exchange or rollover notes of the Company outstanding from
time to time pursuant to the Bridge Loan Agreement or the Indenture
contemplated thereby.
"Bridge Loan Agreement": the Bridge Loan Agreement that may be
---------------------
entered into pursuant to the Bridge Commitment Letter among Morgan Stanley
Bridge Fund L.L.C., Chase Securities, Inc., Bankers Trust Corporation and
an affiliate of AcquisitionCo, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its terms and the
terms of this Agreement.
"Bridge Senior Subordinated Debt": the senior subordinated unsecured
-------------------------------
bridge loans or exchange or rollover notes of the Company outstanding from
time to time pursuant to the Bridge Loan Agreement or the Indenture
contemplated thereby.
"Business Day": (a) for all purposes other than as covered by clause
------------
(b) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (b) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (a) and which is also a day for
trading by and between banks in Dollar deposits in the interbank eurodollar
market in London.
"Capital Expenditures": for any period, all amounts which would, in
--------------------
accordance with GAAP, be set forth as capital expenditures (exclusive of
any amount
<PAGE>
7
attributable to capitalized interest) on the consolidated statement of cash
flows or other similar statement of the Company and its Subsidiaries for
such period but shall exclude (a) any expenditures made with the proceeds
of condemnation or eminent domain proceedings affecting real property or
with insurance proceeds, provided that any Capital Expenditures financed
--------
with the proceeds of any Indebtedness permitted hereunder (other than
Indebtedness incurred hereunder) shall be deemed to be a Capital
Expenditure only in the period in which, and by the amount which, any
principal of such Indebtedness is repaid, (b) any expenditures constituting
a reinvestment contemplated by subsection 7.5(e), 7.5(h)(i) or 7.5(j), (c)
expenditures made in connection with acquisitions permitted by subsection
7.6(g) (other than subsection 7.6(g)(ii)(B)) and (d) with respect to any
acquired Person or assets operating or including, as the case may be, a
Health Care Facility, any capital expenditures with respect thereto that
have been identified by the acquiring Person at the time of the acquisition
of such Person or assets so long as the aggregate amount of such capital
expenditures does not exceed an amount equal to the greater of (i) 10% of
the Acquisition Consideration for such acquired Person or assets and (ii)
$3,000,000.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of
the foregoing.
"Cash Equivalents": (a) securities issued or directly and fully
----------------
guaranteed or insured by the United States or any agency or instrumentality
thereof having maturities of not more than six months from the date of
acquisition, (b) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any Lender or with any domestic (in the case of
any investments, acquisitions or holdings by the Company or its Domestic
Subsidiaries) commercial bank or trust company having capital and surplus
in excess of $300,000,000, (c) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (a) and (b) entered into with any financial institution meeting the
qualifications specified in clause (b) above, (d) commercial paper having
the highest rating obtainable from S&P or Moody's and in each case maturing
within one year after date of acquisition, (e) investment funds investing
95% of their assets in securities of the type described in clauses (a)-(d)
above, (f) readily marketable direct obligations issued by any state of the
United States or any political subdivision thereof having one of the two
highest rating categories obtainable from either S&P or Moody's and (g)
indebtedness with a rating of "A" or higher from S&P or "A2" or higher from
Moody's.
"C/D Assessment Rate": for any day the net annual assessment rate
-------------------
(rounded upwards, if necessary, to the next 1/100 of 1%) determined by the
Administrative Agent to be payable on such day to the Federal Deposit
Insurance Corporation or any successor ("FDIC") for FDIC's insuring time
----
deposits made in Dollars at offices of the Administrative Agent in the
United States.
<PAGE>
8
"C/D Reserve Percentage": for any day, that percentage (expressed as
----------------------
a decimal) which is in effect on such day, as prescribed by the Board for
determining maximum reserve requirement for a Depositary Institution (as
defined in Regulation D of the Board) in respect of new non-personal time
deposits in Dollars having a maturity of 30 days or more.
"Change in Law": with respect to any Lender, the adoption of, or
-------------
change in, any law, rule, regulation, policy, guideline or directive
(whether or not having the force of law) or any change in the
interpretation or application thereof by any Governmental Authority having
jurisdiction over such Lender, in each case after the Closing Date.
"Change of Control": the occurrence of any of the following events:
-----------------
(a) at any time prior to an IPO by the Company, Investcorp or any of its
Affiliates (provided that for purposes of this definition only the
--------
reference to 25% in the definition of Affiliate shall be deemed to be 51%)
or Subsidiaries, any Person that is a member of the senior management of
the Company, or any entity the majority of the equity ownership interests
of which is owned by such senior management of the Company, shall cease to
own, directly or indirectly, in the aggregate, at least 51% of the issued
and outstanding voting stock of the Company, free and clear of all Liens or
(b) at any time after an IPO by the Company, any Person (other than
Investcorp, any of its Affiliates or Subsidiaries, any Person that is a
member of the senior management of the Company, any entity the majority of
the equity ownership interests of which is owned by such senior management
of the Company or any Person acting in the capacity of an underwriter),
whether singly or in concert with one or more Persons, shall, directly or
indirectly, have acquired, or acquire the power (i) to vote or direct the
voting of 30% or more, on a fully diluted basis, of the outstanding common
stock of the Company or (ii) to elect or designate for election a majority
of the Board of Directors of the Company by voting power, contract or
otherwise.
"Chase": The Chase Manhattan Bank, a New York banking corporation,
-----
and its successors.
"Closing Date": the date (which shall be on or prior to September 30,
------------
1998) on which the Lenders make their initial Loans or the Issuing Lender
issues the initial Letter of Credit.
"Co-Arrangers": as defined in the Preamble hereto.
------------
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all assets of the Credit Parties, now owned or
----------
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Collateral Agreement": the Collateral Agreement, substantially in
--------------------
the form of Exhibit E, to be made by the Company and the Subsidiaries from
time to time parties
<PAGE>
9
thereto in favor of the Administrative Agent, for the benefit of the
Lenders, as the same may be amended, supplemented or otherwise modified
from time to time.
"Commercial L/C": a commercial documentary Letter of Credit under
--------------
which the Issuing Lender agrees to make payments in Dollars for the account
of the Company, on behalf of the Company or a Subsidiary, in respect of
obligations of the Company or such Subsidiary in connection with the
purchase of goods or services in the ordinary course of business.
"Commitment": as to any Lender at any time, such Lender's Swing Line
----------
Commitment and Revolving Credit Commitment; collectively, as to all the
Lenders, the "Commitments".
-----------
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
which is under common control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414(b) or (c) of the
Code.
"Company": as defined in the Preamble hereto.
-------
"Confidential Information Memorandum": the Confidential Information
-----------------------------------
Memorandum dated May 1998 titled Harborside Healthcare Corporation
$250,000,000 Senior Secured Credit Facility.
"Consolidated Current Assets": at a particular date, all amounts
---------------------------
which would, in conformity with GAAP, be included under current assets on a
consolidated balance sheet of the Company and its Subsidiaries as at such
date.
"Consolidated Current Liabilities": at a particular date, all amounts
--------------------------------
which would, in conformity with GAAP, be included under current liabilities
on a consolidated balance sheet of the Company and its Subsidiaries as at
such date, excluding the current portion of long-term debt and the entire
outstanding principal amount of the Revolving Credit Loans.
"Consolidated EBITDA": for any period, the Consolidated Net Income of
-------------------
the Company and its Subsidiaries for such period, plus, without duplication
and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) total income tax
expense (including any tax benefit or expense related to the dividend on
any preferred stock), (b) interest expense, amortization or writeoff of
debt discount, debt issuance, warrant and other equity (including any
preferred stock) issuance costs and commissions, discounts, redemption
premium and other fees and charges associated with the Loans, letters of
credit permitted hereunder, Financing Leases (including commitment fees and
other periodic bank charges), Standby L/Cs, the Subordinated Debt or with
the acquisition or repayment of any debt securities of the Company
permitted hereunder, and net costs associated with Interest Rate Agreements
to which the Company is a party in respect of the Loans, (c) costs of
<PAGE>
10
surety bonds, (d) depreciation and amortization expense, (e) amortization
of intangibles (including, but not limited to, goodwill and costs of
interest-rate caps, leasehold interests and the cost of non-competition
agreements) and organization costs, (f) non-cash amortization of Financing
Leases, (g) franchise taxes, (h) management fees paid as contemplated by
subsection 9.14(a) and charges relating to management fees prepaid in
connection with the Merger, (i) all cash dividend payments and non-cash
dividend expenses on any series of preferred stock, (j) any fees and
expenses incurred in connection with any merger, acquisition, joint venture
or financing permitted hereunder, the Merger and, in each case, the related
financing thereof (excluding general business development expenses), (k)
any other write-downs, write-offs, minority interests and other non-cash
charges or expenses, (l) any non-cash restructuring or non-recurring charge
or reserve, (m) expenses and charges related to any equity offering, (n)
expenses consisting of internal software development costs that are
expensed during the period but could have been capitalized in accordance
with GAAP, (o) securitization expenses, (p) nonrecurring litigation or
claim settlement charges or expenses relating to activities or matters
outside of the ordinary course of business of the Company and its
Subsidiaries and (q) synthetic lease rent expense less any amortization of
principal included in such expense; provided that in determining such
--------
Consolidated EBITDA for such period (i) the cumulative effect of a change
in accounting principles (effected either through cumulative effect
adjustment or a retroactive application) shall be excluded, (ii) the impact
of foreign currency and hedging shall be excluded and (iii) the aggregate
amount of cash expenditures during such period relating to matters for
which non-cash restructuring or non-recurring charges or reserves shall
have been made or created shall be deducted.
"Consolidated Indebtedness": at a particular date, all Indebtedness
-------------------------
(including Synthetic Lease Obligations and any other obligations in respect
of synthetic leases but excluding any other Indebtedness described in
clauses (b) or (c) of the definition of Indebtedness), of the Company and
its Subsidiaries determined on a consolidated basis in accordance with GAAP
at such date.
"Consolidated Net Income": with respect to any Person and any period,
-----------------------
the net income (or loss) of such Person for such period, determined in
accordance with GAAP and before any reduction in respect of Preferred Stock
dividends, excluding, however, (i) any extraordinary or non-recurring gains
or losses or charges and gains or losses or charges from the sale of assets
outside the ordinary course of business, together with any related
provision for taxes on such gain or loss or charges, (ii) deferred
financing costs written off in connection with the early extinguishment of
Indebtedness; provided, however, that Consolidated Net Income shall be
-------- -------
deemed to include any increases during such period to shareholder's equity
of such Person attributable to tax benefits from net operating losses and
the exercise of stock options that are not otherwise included in
Consolidated Net Income for such period; and further provided that (a) the
------- --------
net income (but not loss) of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
Company or a wholly owned Subsidiary and (b) the net income of any
Subsidiary shall be excluded to the
<PAGE>
11
extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that net income is prohibited or not
permitted at the date of determination.
"Consolidated Senior Indebtedness": at a particular date, all
--------------------------------
Consolidated Indebtedness other than Subordinated Debt.
"Contingent Obligation": as to any Person, any obligation of such
---------------------
Person guaranteeing or in effect guaranteeing any Indebtedness ("primary
-------
obligations") of any other Person (the "primary obligor") in any manner,
----------- ---------------
whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent (a) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided that the term Contingent Obligation shall not include
--------
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount (based on
the maximum reasonably anticipated net liability in respect thereof as
determined by the Company in good faith) of the primary obligation or
portion thereof in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated net
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by the Company in good faith.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Coverage Ratio": on the last day of any fiscal quarter of the
--------------
Company ending on or after December 31, 1998, the ratio of (a) the sum of
Consolidated EBITDA plus rental expense, in each case for the period of
----
four fiscal quarters ending on such day to (b) the sum of cash interest
expense (excluding (i) fees payable on account of letters of credit, (ii)
to the extent included in interest expense in accordance with GAAP, net
costs associated with Interest Rate Agreements to which the Company is
party in respect of the Loans and other periodic bank charges and
amortization of debt discount (including discount of liabilities and
reserves established under APB 16), (iii) costs of debt issuance and
interest expense on customer deposits and (iv) costs of debt issuance and
interest expense on any Bridge Junior Subordinated Debt) net of interest
income, in each case, for or during such period on a consolidated basis for
the Company and its Subsidiaries plus rental expense for such period on a
----
consolidated basis for the Company and its Subsidiaries; provided, however,
-------- -------
that on (A) the last
<PAGE>
12
day of the 1998 fourth fiscal quarter of the Company such ratio shall
measure the period of two fiscal quarters ending on such day and (B) on the
last day of the 1999 first fiscal quarter of the Company such ratio shall
measure the period of three fiscal quarters ending on such day. For
clarification, cash interest expense does not include the accretion of
interest expense.
"Credit Documents": the collective reference to this Agreement, the
----------------
Notes, the Mortgages, the Collateral Agreement, the Trust Guarantee, the
Intercreditor Agreement and the Agency and Intercreditor Agreement.
"Credit Parties": the collective reference to the Company, the other
--------------
Borrowers and each other Subsidiary which may from time to time be party to
a Credit Document.
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Documentation Agent": as defined in the Preamble hereto.
-------------------
"Dollars" and "$": dollars in lawful currency of the United States.
------- -
"Domestic Subsidiary": any Subsidiary other than a Foreign
-------------------
Subsidiary.
"Encumbered Subsidiary": at any time, any Domestic Subsidiary (a) as
---------------------
to which the Administrative Agent does not have a first priority Lien, for
the benefit of the Lenders, on all or substantially all of the accounts
receivable and real property owned in fee of such Subsidiary or (b) which
is not a Borrower hereunder or a guarantor of the obligations hereunder and
under the Synthetic Lease Facility, provided that the limitation set forth
--------
in subsection 9.15 shall not cause any Domestic Subsidiary to be deemed an
Encumbered Subsidiary.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority or Requirements of
Law (including, without limitation, common law) regulating or imposing
liability or standards of conduct concerning environmental or public health
protection matters, including, without limitation, Hazardous Materials, as
now or may at any time hereafter be in effect.
"Environmental Permits": any and all permits, licenses,
---------------------
registrations, notifications, exemptions and any other authorizations
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
<PAGE>
13
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each Interest
--------------------
Period pertaining to a Eurodollar Loan, the rate per annum determined on
the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period
appearing on Page 3750 of the Dow Jones Markets screen as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period. In the event that such rate does not appear on Page 3750 of the
Dow Jones Markets screen (or otherwise on such screen), the "Eurodollar
----------
Base Rate" for purposes of this definition shall be determined by reference
---------
to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where its eurodollar and foreign
currency and exchange operations are then being conducted for delivery on
the first day of such Interest Period for the number of days comprised
therein.
"Eurodollar Lending Office": as to any Lender the office of such
-------------------------
Lender which shall be making or maintaining Eurodollar Loans.
"Eurodollar Loans": Loans for which the applicable rate of interest
----------------
is based upon a Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time,
--------
or both, has been satisfied.
"Excess Cash Flow": at the end of any fiscal year of the Company
----------------
ending on or after December 31, 1999, the excess of (a) Consolidated EBITDA
for the period from January 1, 1999 to the end of such fiscal year plus any
extraordinary or non-recurring gains for such period over (b) the sum,
without duplication, of (i) the aggregate amount actually paid by the
Company and its Subsidiaries in cash since
<PAGE>
14
January 1, 1999 on account of capital expenditures or acquisitions
permitted hereunder (other than capital expenditures made with the proceeds
of eminent domain or condemnation proceedings to the extent such proceeds
are not included in the determination of Consolidated EBITDA for such
period), (ii) the aggregate amount of payments of principal in respect of
any Indebtedness since January 1, 1999 (other than any such payments of
principal pursuant to subsections 3.4(b)(i), (ii), (iii) and (iv) or any
such payment of principal in respect of any revolving credit facility to
the extent that there is not an equivalent reduction in such facility),
(iii) increases in working capital (calculated as Consolidated Current
Assets at the end of such period minus Consolidated Current Liabilities as
-----
at the end of such period) of the Company and its Subsidiaries since
January 1, 1999 (excluding any increase in cash or Cash Equivalents above
an increase deemed in good faith by the Company to be necessary or
desirable for the operation of the business of the Company and its
Subsidiaries), (iv) cash interest expense (including fees paid in
connection with Letters of Credit, surety bonds, commitment fees and other
periodic bank charges) of the Company since January 1, 1999, (v) any
dividends actually paid in cash by the Company since January 1, 1999 as
permitted by subsection 7.11, (vi) the amount of taxes actually paid in
cash by the Company and its Subsidiaries since January 1, 1999 either
during such period or within a normal payment period thereof, (vii) the
amount of cash actually paid to repurchase Capital Stock of the Company
pursuant to subsection 7.11 since January 1, 1999, (viii) any fees and
expenses incurred in connection with any merger, acquisition, joint venture
or financing permitted hereunder, the Merger and, in each case, the related
financing thereof and charges relating to management fees prepaid in
connection with the Merger, (ix) to the extent used in computing
Consolidated Net Income of the Company and its Subsidiaries, (A) the net
income of any Person acquired in a pooling of interests transaction for any
period prior to the date of acquisition and (B) any increases during such
period to shareholder's equity of such Person attributable to tax benefits
from net operating losses and the exercise of stock options that are not
otherwise included in Consolidated Net Income for such period, (x) to the
extent added to Consolidated Net Income of the Company and its Subsidiaries
in calculating Consolidated EBITDA for such period, the net cost of
Interest Rate Agreements, franchise taxes and management fees, (xi) the net
income of any Subsidiary to the extent that such amount is accounted for
under the equity method and to the extent cash dividends are not paid or
the declaration or payment of dividends is not permitted without prior
governmental approval (which has not been obtained), (xii) the amount
(without duplication) of cash actually paid by the Company in connection
with clauses (b), (h), (k), (m), (n), (o) and (p) in the definition of
Consolidated EBITDA, (xiii) any non-cash restructuring or non-recurring
charge or reserve (net of cash payments during such period with respect to
such charge or reserve), (xiv) any extraordinary or non-recurring losses
for such period and (xv) any cash synthetic lease rent expense (less any
amortization of principal included in such expense) since January 1, 1999,
provided that such excess, if any, shall be reduced by the amount of any
--------
payments previously made pursuant to subsection 3.4(b)(iv).
<PAGE>
15
"Exchange Debentures": to the extent permitted to be issued
-------------------
hereunder, the exchange debentures which shall have material terms and
conditions as described in the Offering Memorandum (or any refinancing
thereof permitted hereunder).
"Existing Credit Agreement": the Credit Agreement dated as of April
-------------------------
14, 1997, as amended to date, among the Company, the other borrowers
specified therein, the lenders parties thereto and Chase, as administrative
agent.
"Existing Shareholders": as defined in the Recitals hereto.
---------------------
"Fee Property": as defined in subsection 4.13.
------------
"Financing Lease": (a) any lease of property, real or personal, the
---------------
obligations under which are capitalized on a consolidated balance sheet of
the Company and its consolidated Subsidiaries and (b) any other such lease
to the extent that the then present value of any rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance
sheet of the lessee.
"Foreign Subsidiary": any Subsidiary which is not organized under the
------------------
laws of the United States or any state thereof or the District of Columbia.
"Form S-4": the Registration Statement on Form S-4 dated May 1, 1998
--------
and as amended, filed by the Company with the Securities and Exchange
Commission in connection with the Merger.
"GAAP": generally accepted accounting principles in the United States
----
in effect from time to time.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Materials": any hazardous materials, hazardous wastes,
-------------------
hazardous pesticides or hazardous or toxic substances, and any other
material that may give rise to liability under any Environmental Law,
including, without limitation, asbestos, petroleum, any other petroleum
products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls and urea-formaldehyde insulation.
"Health Care Business": the business of operating a Health Care
--------------------
Facility or any Ancillary Businesses.
"Health Care Facility": any skilled nursing, assisted living,
--------------------
retirement or congregate care facility.
"Health Care Permit": every accreditation, authorization, certificate
------------------
of need, license or permit that is required by any applicable Governmental
Authority to own,
<PAGE>
16
lease, operate or manage a Health Care Facility or Ancillary Business of
the Company or any of its Subsidiaries.
"Indebtedness": of a Person, at a particular date, (a) all
------------
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (b) the undrawn face amount of all letters
of credit issued for the account of such Person and, without duplication,
all drafts drawn thereunder and unpaid reimbursement obligations with
respect thereto, (c) all liabilities (other than Lease Obligations and
liabilities in connection with reserves established in accordance with
GAAP) secured by any Lien on any property owned by such Person, even though
such Person has not assumed or become liable for the payment thereof, (d)
Financing Leases and (e) all indebtedness of such Person arising under
acceptance facilities, but excluding (i) trade and other accounts payable
and accrued expenses payable in the ordinary course of business which are
not overdue for a period of more than 120 days or, if overdue for more than
120 days, as to which a dispute exists and adequate reserves in conformity
with GAAP have been established on the books of such Person and (ii)
letters of credit supporting the purchase of goods in the ordinary course
of business and expiring no more than six months from the date of issuance;
provided that (x) obligations in respect of Interest Rate Agreements and
--------
(y) obligations relating to Bowie Center L.P. in an aggregate principal
amount not to exceed $7,000,000 at any time shall not be included in this
definition and that interest expense in respect of the obligations
described in clause (y) shall be excluded from all calculations of
financial tests under this Agreement; and provided, further, that
-------- -------
Indebtedness shall at all times be reduced by amounts outstanding under the
Promissory Note.
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intercreditor Agreement": the collective reference to the Lease
-----------------------
Intercreditor Agreement and the Loan Intercreditor Agreement.
"Interest Payment Date": (a) as to Alternate Base Rate Loans, the
---------------------
last day of each March, June, September and December, commencing on the
first such day to occur after any Alternate Base Rate Loans are made or any
Eurodollar Loans are converted to Alternate Base Rate Loans, and the
Termination Date, (b) as to any Eurodollar Loan in respect of which the
Company, as agent for the Borrowers, has selected an Interest Period of
one, two or three months, the last day of such Interest Period, (c) as to
any Eurodollar Loan in respect of which the Company, as agent for the
Borrowers, has selected a longer Interest Period than the periods described
in clause (b), the last day of each three calendar month interval during
such Interest Period and, in addition, the last day of such Interest Period
and (d) as to any Loan (other than any Revolving Credit Loan that is an
Alternate Base Rate Loan and any Swing Line Loan), the date of any
repayment or prepayment made in respect thereof.
<PAGE>
17
"Interest Period": with respect to any Eurodollar Loan:
---------------
(a) initially, the period commencing on, as the case may be, the
Borrowing Date or conversion date with respect to such Eurodollar Loan
and ending one, two, three or six months thereafter (or, if and when
available to all the relevant Lenders, nine or twelve months
thereafter) as selected by the Company, as agent for the Borrowers, in
its notice of borrowing as provided in subsection 3.1 or its notice of
conversion as provided in subsection 3.2; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter (or, if and when
available to all the relevant Lenders, nine or twelve months
thereafter) as selected by the Company, as agent for the Borrowers, by
irrevocable notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current Interest
Period with respect to such Eurodollar Loan;
provided that the foregoing provisions relating to Interest Periods are
--------
subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension
would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Business Day ;
(ii) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date, or if the
Termination Date shall not be a Business Day, on the next preceding
Business Day;
(iii) if the Company shall fail to give notice as provided above
in clause (b), it shall be deemed to have selected a conversion of a
Eurodollar Loan into an Alternate Base Rate Loan (which conversion
shall occur automatically and without need for compliance with the
conditions for conversion set forth in subsection 3.2);
(iv) any Interest Period that begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(v) the Company shall select Interest Periods so as not to
require a prepayment (to the extent practicable) or a scheduled
payment of a Eurodollar Loan during an Interest Period for such
Eurodollar Loan.
<PAGE>
18
"Interest Rate Agreement": any interest rate swap agreement, interest
-----------------------
rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement.
"Investcorp": Investcorp S.A., a Luxembourg corporation.
----------
"Investment Grade Securities": (a) securities issued or directly and
---------------------------
fully guaranteed or insured by the United States government or any agency
or instrumentality thereof (other than Cash Equivalents), (b) debt
securities or debt instruments with a rating of BBB- or higher by S&P or
Baa3 by Moody's or the equivalent of such rating by such rating
organization, or if no rating of S&P's or Moody's then exists, the
equivalent of such rating by any other nationally recognized securities
rating agency, but excluding any debt securities or instruments
constituting loans or advances among the Company and its Subsidiaries and
(c) investments in any fund that invests exclusively in investments of the
type described in clauses (a) and (b) which fund may also hold immaterial
amounts of cash pending investment and/or distribution.
"Investor Contributions": as defined in the Participation Agreement,
----------------------
dated as of the date hereof, among the Company, the Trust, the Synthetic
Investors, the Lenders and the Administrative Agent.
"Investors": Investcorp S.A., certain of its affiliated entities and
---------
other initial investors arranged by Investcorp S.A.
"IPO": any sale by the Company through a public offering of its
---
common (or other voting) stock pursuant to an effective registration
statement (other than a registration statement on Form S-4, S-8 or any
successor or similar form) filed under the Securities Act of 1933, as
amended.
"Issuing Lenders": Chase and any of its Affiliates, including Chase
---------------
Manhattan Bank Delaware, as issuer of the Letters of Credit; with respect
to any Letter of Credit, the term "Issuing Lender" shall mean the Issuing
Lender with respect to such Letter of Credit.
"L/C Application": as defined in subsection 2.5(a).
---------------
"L/C Obligations": the obligations of the Company to reimburse the
---------------
Issuing Lender for any payments made by the Issuing Lender under any Letter
of Credit that have not been reimbursed by the Company pursuant to
subsection 2.8(a).
"L/C Participating Interest": an undivided participating interest in
--------------------------
the face amount of each issued and outstanding Letter of Credit and the L/C
Application relating thereto.
"L/C Participation Certificate": a certificate in substantially the
-----------------------------
form of Exhibit G.
<PAGE>
19
"Leased Property": as defined in subsection 4.13.
---------------
"Lease Intercreditor Agreement": the Accounts Receivable
-----------------------------
Intercreditor Agreement (Leased Facilities), substantially in the form of
Exhibit M-1, to be executed and delivered by Meditrust Company LLC, the
Administrative Agent, the Trust and the Synthetic Investors, as the same
may be amended, supplemented or otherwise modified from time to time.
"Lease Obligations": as of the date of any determination thereof, the
-----------------
rental commitments, if any, of the Company and its Subsidiaries determined
on a consolidated basis under leases for real and/or personal property (net
of rental commitments from sub-leases thereof), excluding however,
obligations under Financing Leases.
"Lenders": as defined in the Preamble hereto.
-------
"Letters of Credit": the collective reference to the Commercial L/Cs
-----------------
and the Standby L/Cs; individually, a "Letter of Credit".
----------------
"Leverage Ratio": as defined in subsection 7.9; provided that for
-------------- --------
purposes of calculating the Leverage Ratio on any date, the unencumbered
(other than Liens permitted pursuant to subsection 7.2(f)) cash and Cash
Equivalent balances of the Company and its Subsidiaries on such date, and
any Bridge Junior Subordinated Debt outstanding on such date, shall be
deducted from the amount of Consolidated Indebtedness on such date.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing,
except for the filing of financing statements in connection with Lease
Obligations incurred by the Company or its Subsidiaries to the extent that
such financing statements relate to the property subject to such Lease
Obligations).
"Loan Intercreditor Agreement": the Accounts Receivable Intercreditor
----------------------------
Agreement (Mortgaged Facilities), substantially in the form of Exhibit M-2,
to be executed and delivered by Meditrust Mortgage Investments, Inc., the
Administrative Agent, the Trust and the Synthetic Investors, as the same
may be amended, supplemented or otherwise modified from time to time.
"Loans": the collective reference to the Swing Line Loans, the Term
-----
Loans and the Revolving Credit Loans; individually, a "Loan".
----
<PAGE>
20
"Meditrust": any one or more of the following entities: Meditrust
---------
Mortgage Investments, Inc., Meditrust Company LLC (as successor by merger
to 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.
"Meditrust Entities": the collective reference to HHCI Limited
------------------
Partnership, Harborside Toledo Limited Partnership, Harborside of New
Hampshire Limited Partnership, Harborside Toledo Corp., Countryside Care
Center Corp., Bay Tree Nursing Center Corp., West Bay Nursing Center Corp.
and Sunset Point Nursing Center Corp.
"Merger": as defined in the Recitals hereto.
------
"Merger Agreement": as defined in the Recitals hereto.
----------------
"Moody's": Moody's Investors Service, Inc.
-------
"Mortgaged Properties": (a) the Real Property designated as
--------------------
"Mortgaged Property" on Schedule 4.13 and (b) any fee Real Property covered
by a Mortgage delivered pursuant to subsection 6.9(c).
"Mortgages": as defined in subsection 6.12.
---------
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Net Proceeds": the aggregate cash proceeds received by the Company
------------
or any Subsidiary in respect of:
(a) (i) any issuance or borrowing of any debt securities or
loans by the Company or any Subsidiary other than debt or loans
permitted to be incurred or borrowed pursuant to subsection 7.1 or
(ii) any issuance of Capital Stock (excluding any such issuance to any
Investor or any Affiliate thereof);
(b) any Asset Sale, excluding (i) any net proceeds received upon
any condemnation or exercise of rights of eminent domain to the extent
the same shall be deemed not to constitute Net Proceeds pursuant to
the proviso to subsection 7.5(d) and (ii) any proceeds of insurance
received upon any casualty or loss;
(c) any substantially like-kind exchanges of property to the
extent provided in subsection 7.5(e); and
(d) any promissory notes delivered to the Company or such
Subsidiary in respect of an Asset Sale;
<PAGE>
21
in each case net of (without duplication) (A) the amount required to repay
any Indebtedness (other than the Loans) secured by a Lien on any assets of
the Company or a Subsidiary that are collateral for any such debt
securities or loans that are sold or otherwise disposed of in connection
with such Asset Sale, (B) liabilities associated with the assets that are
the subject of any such Asset Sale that are not assumed by the purchaser in
connection with such Asset Sale, (C) the reasonable expenses (including
legal fees and brokers' and underwriters' commissions, lenders' fees or
credit enhancement fees, in any case, paid to third parties or, to the
extent permitted hereby, Affiliates) incurred in effecting such issuance or
sale and (D) any taxes reasonably attributable to such sale and reasonably
estimated by the Company or such Subsidiary to be actually payable.
"Non-Funding Lender": as defined in subsection 3.9(c).
------------------
"Notes": the collective reference to the Swing Line Note, the
-----
Revolving Credit Notes and the Term Loan Notes; each of the Notes, a
"Note".
----
"Offering Memorandum": the offering memorandum dated July 29, 1998
-------------------
with respect to the Senior Subordinated Discount Notes and the Preferred
Stock.
"Participants": as defined in subsection 9.6(b).
------------
"Participating Lender": any Lender (other than the Issuing Lender)
--------------------
with respect to its L/C Participating Interest in each Letter of Credit.
"Payment Sharing Notice": a written notice from the Company or any
----------------------
Lender informing the Administrative Agent that an Event of Default has
occurred and is continuing and directing the Administrative Agent to
allocate payments thereafter received from or on behalf of any Borrower in
accordance with the provisions of subsection 3.9.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA or any successor.
"Permanent Junior Subordinated Debt": (a) unsecured notes or
----------------------------------
debentures of the Company, subordinated to the prior payment of the Loans,
the other obligations under the Credit Documents, the Synthetic Lease
Obligations and related Interest Rate Agreements, provided that (i) such
--------
notes or debentures have terms which are as favorable to the Lenders as the
terms relating to the Exchange Debentures set forth in the Offering
Memorandum and the conditions contained in clauses (a)(ii)(C) and (D) of
this definition are met or (ii) (A) unless otherwise agreed to by the
Required Lenders, no part of the principal amount of any such notes or
debentures shall have a scheduled maturity date earlier than the date that
is one year after the Scheduled Termination Date, (B) unless otherwise
agreed to by the Required Lenders, (I) the subordination provisions of
which are as favorable to the Lenders as such provisions set forth in the
Offering Memorandum relating to the Exchange Debentures, (II) the
<PAGE>
22
terms and conditions thereof (including, without limitation, subordination,
covenant and event of default provisions thereof but excluding any call
protection provisions) taken as a whole shall be at least as favorable to
the Company and the Lenders as such terms and conditions set forth with
respect to the Bridge Junior Subordinated Debt in the Bridge Commitment
Letter (or in the Bridge Loan Agreement if entered into by the parties
thereto), and (III) no cash interest shall be payable thereon for a period
of five years commencing on the Closing Date and, thereafter, the non-
default cash interest rate thereon shall not exceed 16% per annum and the
total non-default interest rate shall not exceed 18% per annum, (C) no
covenant contained in this Agreement or any of the other Credit Documents
would be violated on the proposed issuance date after giving effect to (I)
the issuance of such notes or debentures, (II) the payment of all issuance
costs, commissions, discounts, redemption premiums and other fees and
charges associated therewith, (III) the use of proceeds thereof and (IV)
the redemption, repayment, retirement and repurchase of all Indebtedness of
the Company and its Subsidiaries to be redeemed, repaid or repurchased in
connection therewith and (D) substantially final drafts of the
documentation governing any such notes or debentures, showing the terms
thereof, shall have been furnished to the Arranger and the Co-Arrangers at
least 5 days prior to the date of issuance of such notes or debentures and
(b) unsecured notes or debentures of the Company, subordinated to the prior
payment of the Loans, the other obligations under the Credit Documents, the
Synthetic Lease Obligations and related Interest Rate Agreements, that may
be issued by the Company to refinance previously issued Bridge Junior
Subordinated Debt or Permanent Junior Subordinated Debt, provided that (i)
--------
unless otherwise agreed to by the Required Lenders, (A) no part of the
principal amount of any such notes or debentures shall have a scheduled
amortization date earlier than the date that is one year after the
Scheduled Termination Date and (B) the interest rate and subordination
provisions shall be at least as favorable to the Company and the Lenders as
such provisions of such refinanced Bridge Junior Subordinated Debt or
Permanent Junior Subordinated Debt, as the case may be, and the other terms
and conditions thereof (including, without limitation, the covenant and
event of default provisions thereof but excluding any call protection
provisions and provisions relating to accretion or accrual of interest
without cash payments thereof) taken as a whole shall be at least as
favorable to the Company and the Lenders as such refinanced Bridge Junior
Subordinated Debt or Permanent Junior Subordinated Debt, as the case may
be, and (ii) the conditions contained in clause (a)(ii)(C) and (D) of this
definition shall be met.
"Permanent Senior Subordinated Debt": (a) unsecured notes or
----------------------------------
debentures of the Company, subordinated to the prior payment of the Loans,
the other obligations under the Credit Documents, the Synthetic Lease
Obligations and related Interest Rate Agreements, provided that either (i)
--------
such notes or debentures (excluding, in the case of Cash Pay Permanent
Senior Subordinated Debt (as defined below), provisions relating to
accretion or accrual of interest without cash payments thereof) have terms
which are as favorable to the Lenders as the terms with respect to the
Senior Subordinated Discount Notes set forth in the Offering Memorandum and
the conditions contained in clauses (a)(ii)(C) and (D) of this definition
are met or (ii) (A) unless otherwise agreed to by the Required Lenders, no
part of the principal amount of any such notes or
<PAGE>
23
debentures shall have a scheduled maturity date earlier than the date that
is one year after the Scheduled Termination Date, (B) unless otherwise
agreed to by the Required Lenders, (I) the subordination provisions of
which are as favorable to the Lenders as such provisions with respect to
the Senior Subordinated Discount Notes set forth in the Offering
Memorandum, (II) the terms and conditions thereof (including, without
limitation, subordination, covenant and event of default provisions thereof
but excluding any call protection provisions) taken as a whole shall be at
least as favorable to the Company and the Lenders as such terms and
conditions with respect to the Bridge Senior Subordinated Debt set forth in
the Bridge Commitment Letter (or in the Bridge Loan Agreement if entered
into by the parties thereto), and (III) no cash interest shall be payable
thereon for a period of five years commencing on the Closing Date (except
in the case of Permanent Senior Subordinated Debt issued to refinance
Bridge Senior Subordinated Debt (any such cash pay Permanent Senior
Subordinated Debt being referred to as "Cash Pay Permanent Senior
-------------------------
Subordinated Debt")) and, thereafter, the non-default cash interest rate
-----------------
thereon shall not exceed 16% per annum and the total non-default interest
rate shall not exceed 18% per annum, (C) no covenant contained in this
Agreement or any of the other Credit Documents would be violated on the
proposed issuance date after giving effect to (I) the issuance of such
notes or debentures, (II) the payment of all issuance costs, commissions,
discounts, redemption premiums and other fees and charges associated
therewith, (III) the use of proceeds thereof and (IV) the redemption,
repayment, retirement and repurchase of all Indebtedness of the Company and
its Subsidiaries to be redeemed, repaid or repurchased in connection
therewith and (D) substantially final drafts of the documentation governing
any such notes or debentures, showing the terms thereof, shall have been
furnished to the Arranger and the Co-Arrangers at least 5 days prior to the
date of issuance of such notes or debentures; and (b) unsecured notes or
debentures of the Company, subordinated to the prior payment of the Loans,
the other obligations under the Credit Documents, the Synthetic Lease
Obligations and related Interest Rate Agreements, that may be issued by the
Company to refinance previously issued Bridge Senior Subordinated Debt or
Permanent Senior Subordinated Debt, provided that (i) unless otherwise
--------
agreed to by the Required Lenders, (A) no part of the principal amount of
any such notes or debentures shall have a scheduled amortization date
earlier than the date that is one year after the Scheduled Termination Date
and (B) the interest rate and subordination provisions shall be at least as
favorable to the Company and the Lenders as such provisions of such
refinanced Bridge Senior Subordinated Debt or Permanent Senior Subordinated
Debt, as the case may be, and the other terms and conditions thereof
(including, without limitation, the covenant and event of default
provisions thereof but excluding any call protection provisions and
provisions relating to accretion or accrual of interest without cash
payments thereof) taken as a whole shall be at least as favorable to the
Company and the Lenders as such refinanced Bridge Senior Subordinated Debt
or Permanent Senior Subordinated Debt, as the case may be, and (ii) the
conditions contained in clauses (a)(ii)(C) and (D) of this definition shall
be met.
"Permitted Liens": Liens permitted to exist under subsection 7.2.
---------------
<PAGE>
24
"Person": an individual, partnership, corporation, business trust,
------
joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
----
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Preferred Stock": the Company's exchangeable preferred stock,
---------------
provided that (a) such preferred stock shall not have a scheduled
--------
redemption date earlier than the date that is one year after the Scheduled
Termination Date, (b) the terms of such preferred stock are substantially
as set forth with respect to preferred stock in the Offering Memorandum and
(c) substantially final drafts of the documentation governing any such
preferred stock, showing the terms thereof, shall have been furnished to
the Arranger and the Co-Arrangers at least 5 days prior to the date of
issuance of such preferred stock.
"Promissory Note": the promissory note in the original principal
---------------
amount of $7,487,000, dated December 12, 1997, made by Harold J. Moffie and
certain other entities listed therein for the benefit of the Company.
"Purchase Option Acquisition": as defined in subsection 7.6.
---------------------------
"Real Property": each Fee Property and Leased Property listed on
-------------
Schedule 4.13.
"Refunded Swing Line Loans": as defined in subsection 2.4(b).
-------------------------
"Register": as defined in subsection 9.6(d).
--------
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization as such term is used in
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
----------------
ERISA, other than those events as to which the thirty day notice is waived
under subpart B of PBGC Reg. (S) 4042.
"Required Lenders": at a particular time, the holders of at least 51%
----------------
of the sum of (a) the aggregate unpaid principal amount of the Term Loans,
if any, (b) the aggregate unpaid principal amount of the Term Synthetic
Lease Obligations, if any, and (c) the Revolving Credit Commitments or, if
the Revolving Credit Commitments are terminated, the aggregate unpaid
principal amount of the Revolving Credit Loans, and participations in Swing
Line Loans and the aggregate amount available to be drawn at such time
under all outstanding Letters of Credit and L/C Obligations. The Term
Loans, the Term Synthetic Lease Obligations and the Revolving Credit
<PAGE>
25
Commitments (or, if the Revolving Credit Commitments are terminated, the
aggregate unpaid principal amount of the Revolving Credit Loans, and
participations in Swing Line Loans and the aggregate amount available to be
drawn at such time under all outstanding Letters of Credit and L/C
Obligations) of any Non-Funding Lender shall be disregarded in determining
Required Lenders at any time.
"Requirement of Law": as to any Person, the Articles or Certificate
------------------
of Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation, order or
determination of an arbitrator or a court or other Governmental Authority,
in each case, applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the president,
-------------------
chief executive officer, the chief operating officer, the chief financial
officer, treasurer, controller or any vice president of such Person.
"Revolving Credit Commitment": as to any Lender, its obligations to
---------------------------
make Revolving Credit Loans to the Company pursuant to subsection 2.1 and
participate in Swing Line Loans and Letters of Credit, in an aggregate
principal and/or face amount not to exceed the amount set forth under such
Lender's name in Schedule II opposite the caption "Revolving Credit
Commitment" or in Schedule 1 to the Assignment and Acceptance by which such
Lender acquired its Revolving Credit Commitment, as the same may be reduced
from time to time pursuant to subsection 2.15, 3.3 or 3.4(b) or adjusted
pursuant to subsection 9.6(c); collectively, as to all the Lenders, the
"Revolving Credit Commitments".
-----------------------------
"Revolving Credit Commitment Period": the period from and including
----------------------------------
the Closing Date to but not including the Termination Date.
"Revolving Credit Lender": any Lender with a Revolving Credit
-----------------------
Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loan" and "Revolving Credit Loans": as defined in
--------------------- ----------------------
subsection 2.1(a).
"Revolving Credit Note": as defined in subsection 3.13(e).
---------------------
"Revolving Credit Percentage": as to any Revolving Credit Lender at
---------------------------
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the total Revolving Credit Commitments (or, at any time
after the Revolving Credit Commitments shall have expired or terminated,
the percentage which the aggregate principal amount of such Lender's
Revolving Credit Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Credit Loans then outstanding).
<PAGE>
26
"Revolving Synthetic Lease Obligations": at any time, Synthetic Lease
-------------------------------------
Obligations that have not been converted to term obligations pursuant to
the provisions of the relevant documentation with respect to the Synthetic
Lease Facility and in accordance with subsection 2.15.
"Scheduled Termination Date": August 11, 2004.
--------------------------
"Security Documents": the collective reference to the Collateral
------------------
Agreement, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any property of
any Person to secure the obligations and liabilities of any Credit Party
under any Credit Document.
"Senior Subordinated Discount Notes": the senior subordinated
----------------------------------
discount notes (or any refinancing thereof permitted hereunder) which: (a)
shall be issued under the Indenture, dated as of July 31, 1998 and as
supplemented by Supplemental Indenture dated as of August 11, 1998, between
the Company and United States Trust Company of New York, as Trustee, (b)
shall not be mandatorily redeemable or mandatorily purchasable (except upon
the occurrence of a change of control and assets sales (as defined therein)
at a purchase price not in excess of the principal amount thereof plus
redemption premium, if any, plus accrued and unpaid interest plus
liquidated damages, if any) and shall not have any scheduled amortization
or maturity prior to the date that is one year after the Scheduled
Termination Date, and (c) shall have material terms and conditions as
described in the Offering Memorandum.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"S&P": Standard and Poor's Ratings Services, a division of McGraw-
---
Hill Companies, Inc.
"Standby L/C": an irrevocable letter of credit under which the
-----------
Issuing Lender agrees to make payments in Dollars for the account of the
Company, on behalf of the Company or any Subsidiary in respect of
obligations of the Company or such Subsidiary incurred pursuant to
contracts made or performances undertaken or to be undertaken or like
matters relating to contracts to which the Company or such Subsidiary is or
proposes to become a party in the ordinary course of the Company's or such
Subsidiary's business, including, without limiting the foregoing, for
insurance purposes or in respect of advance payments or as bid or
performance bonds or for any other purpose for which a standby letter of
credit might customarily be issued.
"Subordinated Debt": collectively, any Bridge Senior Subordinated
-----------------
Debt, Bridge Junior Subordinated Debt, Senior Subordinated Discount Notes,
Exchange Debentures, Permanent Junior Subordinated Debt and Permanent
Senior Subordinated Debt.
"Subsection 3.11(d)(2) Certificate": as defined in subsection
---------------------------------
3.11(d).
<PAGE>
27
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock of each class or
other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, by such Person
or by one or more Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person. A Subsidiary shall be deemed wholly
owned by a Person who owns directly or indirectly all of the voting shares
of stock or other interests of such Subsidiary having voting power under
ordinary circumstances to vote for directors or other managers of such
corporation, partnership or other entity, except for directors' qualifying
shares. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company. Notwithstanding anything to the contrary in
this definition, "Subsidiary" shall not include Bowie Center L.P.
"Supermajority Lenders": at a particular time, the holders of at
---------------------
least 66-2/3% of the sum of (a) the aggregate unpaid principal amount of
the Term Loans, if any, and (b) the Revolving Credit Commitments or, if the
Revolving Credit Commitments are terminated, the aggregate unpaid principal
amount of the Revolving Credit Loans, and participations in Swing Line
Loans and the aggregate amount available to be drawn at such time under all
outstanding Letters of Credit and L/C Obligations. The Term Loans and the
Revolving Credit Commitments (or, if the Revolving Credit Commitments are
terminated, the aggregate unpaid principal amount of the Revolving Credit
Loans, and participations in Swing Line Loans and the aggregate amount
available to be drawn at such time under all outstanding Letters of Credit
and L/C Obligations) of any Non-Funding Lender shall be disregarded in
determining Supermajority Lenders at any time.
"Swing Line Commitment": the Swing Line Lender's obligation to make
---------------------
Swing Line Loans pursuant to subsection 2.4.
"Swing Line Lender": Chase in its capacity as the lender of the Swing
-----------------
Line Loans.
"Swing Line Loan Participation Certificate": a certificate in
-----------------------------------------
substantially the form of Exhibit H.
"Swing Line Loans": as defined in subsection 2.4(a).
----------------
"Swing Line Note": as defined in subsection 3.13(e).
---------------
"Syndication Agent": as defined in the Preamble hereto.
-----------------
"Synthetic Investors": as defined in the Agency and Intercreditor
-------------------
Agreement.
<PAGE>
28
"Synthetic Lease Facility": the synthetic lease facility provided for
------------------------
in (a) the Participation Agreement, dated as of the date hereof, among the
Company, the Trust, the Synthetic Investors, the Lenders and the
Administrative Agent, (b) the Lease, dated as of the date hereof, between
Harborside of Dayton Limited Partnership, as lessee, and the Trust, as the
lessor, and (c) the Credit Agreement, dated as of the date hereof, among
the Trust, as borrower, the Lenders, the Arranger, the Co-Arrangers, the
Syndication Agent, the Documentation Agent and the Administrative Agent.
"Synthetic Lease Obligations": the collective reference to (a)
---------------------------
outstanding obligations under the Synthetic Lease Facility and (b)
unreturned Investor Contributions.
"Termination Date": the earlier of (a) the Scheduled Termination Date
----------------
and (b) such earlier date as the Revolving Credit Commitments shall
terminate hereunder.
"Term Loan Lender": any Lender which is the holder of a Term Loan.
----------------
"Term Loan Note": as defined in subsection 3.13(e).
--------------
"Term Loans": as defined in subsection 2.15.
-----------
"Term Synthetic Lease Obligations": as defined in subsection 2.15.
---------------------------------
"Transferee": as defined in subsection 9.6(f).
----------
"Trust": HHC 1998-1 Trust, a Delaware business trust.
-----
"Trust Guarantee": the Guarantee, substantially in the form of
---------------
Exhibit N, to be made by the Trust in favor of the Administrative Agent for
the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Type": as to any Loan, its nature as an Alternate Base Rate Loan or
----
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any amendments thereof.
"United States": the United States of America.
-------------
"1997 Form 10-K": the annual report on Form 10-K of the Company filed
--------------
with the Securities and Exchange Commission on March 31, 1998.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes,
<PAGE>
29
any other Credit Document or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, any other Credit Document and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Company and its Subsidiaries not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP. To the extent
there are any changes in GAAP from the date of this Agreement, the financial
covenants set forth herein at the option of the Company will either (i) continue
to be determined in accordance with GAAP in effect on the Closing Date, as
applicable, or (ii) be adjusted or reset to reflect such changes in GAAP, such
adjustments or resets to be mutually agreed to by the Company, as agent for the
Borrowers, and the Administrative Agent.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF REVOLVING
CREDIT COMMITMENTS
-------------------------------------
2.1 Revolving Credit Commitments. (a) Subject to the terms and
----------------------------
conditions hereof, each Lender severally agrees to the extent of its Revolving
Credit Commitment to extend credit to the Borrowers from time to time on any
Borrowing Date during the Revolving Credit Commitment Period (i) by purchasing
an L/C Participating Interest in each Letter of Credit issued by the Issuing
Lender and (ii) by making loans in Dollars (individually, such a Loan is a
"Revolving Credit Loan", and collectively such Loans are the "Revolving Credit
- ---------------------- ----------------
Loans"; for purposes of clarity, Revolving Credit Loans do not include any
- -----
Synthetic Lease Obligations) to the Borrowers from time to time; provided,
--------
however, that in no event shall any Revolving Credit Loans be made, or Letter of
- -------
Credit be issued, if the aggregate amount of the Revolving Credit Loans to be
made or Letter of Credit to be issued would, after giving effect to the use of
proceeds, if any, thereof, exceed the aggregate Available Revolving Credit
Commitments, and no Letter of Credit shall be issued if after giving effect
thereto the sum of the undrawn amount of all outstanding Letters of Credit and
the amount of all L/C Obligations would exceed $25,000,000. During the
Revolving Credit Commitment Period, the Borrowers may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof,
and/or by having the Issuing Lender issue Letters of Credit, having such Letters
of Credit expire undrawn upon or if drawn upon, reimbursing the Issuing Lender
for such drawing, and having the Issuing Lender issue new Letters of Credit.
<PAGE>
30
(b) Each borrowing of Revolving Credit Loans pursuant to the
Revolving Credit Commitments shall be in an aggregate principal amount of the
lesser of (i) $1,000,000 or a whole multiple of $100,000 in excess thereof in
the case of Alternate Base Rate Loans, and $2,000,000 or a whole multiple of
$1,000,000 in excess thereof, in the case of Eurodollar Loans and (ii) the
Available Revolving Credit Commitments, except that any borrowing of Revolving
Credit Loans to be used solely to pay a like amount of Swing Line Loans may be
in the aggregate principal amount of such Swing Line Loans.
2.2 Commitment Fee. The Company agrees to pay to the Administrative
--------------
Agent for the account of each Lender (other than any Non-Funding Lender) a
commitment fee from and including the Closing Date to and including the
Termination Date computed at the applicable rate (on each Adjustment Date
pursuant to the guidelines set forth in the definition of Applicable Margin) per
annum set forth on Schedule III on the average daily amount of the Available
Revolving Credit Commitment of such Lender during the period for which payment
is made (whether or not the Company shall have satisfied the applicable
conditions to borrow or for the issuance of a Letter of Credit set forth in
Section 5); provided that (a) from the Closing Date until the first Adjustment
--------
Date occurring after the completion of four fiscal quarters of the Company after
the Closing Date, the rate at which the commitment fee shall be calculated (the
"Commitment Fee Rate") shall be 0.50% per annum and (b) if a Default or an Event
-------------------
of Default shall have occurred and be continuing on any Adjustment Date or other
date upon which the Commitment Fee Rate would otherwise be adjusted hereunder,
the Commitment Fee Rate shall in no event be reduced on such Adjustment Date or
other date from the Commitment Fee Rate in effect immediately prior to such
Adjustment Date or other date. Such commitment fee shall be payable quarterly
in arrears on the last day of each March, June, September and December and on
the Termination Date, commencing on the later of (a) the first such date to
occur on or following the Closing Date (or, if earlier, the Termination Date)
and (b) September 30, 1998.
2.3 Proceeds of Revolving Credit Loans. The Borrowers shall use the
----------------------------------
proceeds of Revolving Credit Loans (a) to finance a portion of the cash
consideration payable in the Merger and other payments pursuant to the Merger
Agreement and to pay fees, expenses and financing costs in connection therewith,
(b) to refinance certain of the existing Indebtedness of the Company and its
Subsidiaries, (c) for working capital purposes of the Company and its
Subsidiaries, (d) to finance acquisitions permitted by subsection 7.6(g) or
other provisions of this Agreement, (e) to finance capital expenditures
permitted hereunder and (f) for general corporate purposes.
2.4 Swing Line Commitment. (a) Subject to the terms and conditions
---------------------
hereof, the Swing Line Lender agrees, so long as the Administrative Agent has
not received notice that an Event of Default has occurred and is continuing, to
make swing line loans (individually, a "Swing Line Loan"; collectively, the
---------------
"Swing Line Loans") to the Company from time to time during the Revolving Credit
- -----------------
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed $10,000,000, provided that no Swing Line Loan may be made if the
--------
aggregate principal amount of the Swing Line Loans to be made would exceed the
aggregate Available Revolving Credit Commitments at such time. Amounts borrowed
by the Company under this subsection 2.4 may be repaid and, through but
<PAGE>
31
excluding the Termination Date, reborrowed. All Swing Line Loans shall be made
as Alternate Base Rate Loans and shall not be entitled to be converted into
Eurodollar Loans. The Company shall give the Swing Line Lender irrevocable
notice (which notice must be received by the Swing Line Lender prior to 3:00
p.m., New York City time) on the requested Borrowing Date specifying the amount
of each requested Swing Line Loan, which shall be in an aggregate minimum amount
of $250,000 or a whole multiple of $100,000 in excess thereof. The proceeds of
each Swing Line Loan will be made available by the Swing Line Lender to the
Company by crediting the account of the Company at the office of the Swing Line
Lender with such proceeds. The proceeds of Swing Line Loans may be used solely
for the purposes referred to in subsection 2.3.
(b) The Swing Line Lender at any time in its sole and absolute
discretion may, and on the fifteenth day (or if such day is not a Business Day,
the next Business Day) and last Business Day of each month shall, on behalf of
the Company (which hereby irrevocably directs the Swing Line Lender to act on
its behalf) request each Revolving Credit Lender, including the Swing Line
Lender, to make a Revolving Credit Loan in an amount equal to such Lender's
Revolving Credit Percentage of the amount of the Swing Line Loans (the "Refunded
--------
Swing Line Loans") outstanding on the date such notice is given. Unless any of
- ----------------
the events described in paragraph (f) of Section 8 shall have occurred (in which
event the procedures of paragraph (c) of this subsection 2.4 shall apply) each
such Lender shall make the proceeds of its Revolving Credit Loan available to
the Swing Line Lender for the account of the Swing Line Lender at the office of
the Swing Line Lender specified in subsection 9.2 (or such other location as the
Swing Line Lender may direct) prior to 12:00 noon (New York City time) in funds
immediately available on the Business Day next succeeding the date such notice
is given. The proceeds of such Revolving Credit Loans shall be immediately
applied to repay the Refunded Swing Line Loans.
(c) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of this subsection 2.4 one of the events described in paragraph
(f) of Section 8 shall have occurred, each Revolving Credit Lender will, on the
date such Loan was to have been made, purchase an undivided participating
interest in the Refunded Swing Line Loan in an amount equal to its Revolving
Credit Percentage of such Refunded Swing Line Loan. Each such Lender will
immediately transfer to the Swing Line Lender in immediately available funds,
the amount of its participation and upon receipt thereof the Swing Line Lender
will deliver to such Lender a Swing Line Loan Participation Certificate dated
the date of receipt of such funds and in such amount.
(d) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Lender's participating interest in a
Refunded Swing Line Loan, the Swing Line Lender receives any payment on account
thereof, the Swing Line Lender will distribute to such Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender's participating
interest was outstanding and funded) in like funds as received; provided that in
--------
the event that such payment received by the Swing Line Lender is required to be
returned, such Lender will return to the Swing Line Lender any portion thereof
previously distributed
<PAGE>
32
by the Swing Line Lender to it in like funds as such payment is required to be
returned by the Swing Line Lender.
(e) The obligation of each Revolving Credit Lender to purchase
participating interests pursuant to subsection 2.4(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, any Borrower or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of an
Event of Default, (iii) any adverse change in the condition (financial or
otherwise) of any Borrower, (iv) any breach of this Agreement by any Borrower or
any other Lender or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.5 Issuance of Letters of Credit. (a) The Company, as agent for
-----------------------------
the Borrowers, may from time to time request the Issuing Lender to issue a
Standby L/C or a Commercial L/C by delivering to the Administrative Agent at its
address specified in subsection 9.2 a letter of credit application in the
Issuing Lender's then customary form (the "L/C Application") completed to the
---------------
satisfaction of the Issuing Lender, together with the proposed form of such
Letter of Credit (which shall comply with the applicable requirements of
paragraph (b) below) and such other certificates, documents and other papers and
information as the Issuing Lender may reasonably request; provided that if the
--------
Issuing Lender informs the Company that it is for any reason unable to open such
Letter of Credit, the Company, as agent for the Borrowers, may request any
Lender to open such Letter of Credit upon the same terms offered to the Issuing
Lender and each reference to the Issuing Lender for purposes of subsections 2.5
through 2.14, 5.1 and 5.2 shall be deemed to be a reference to such issuing
Lender. The letters of credit identified on Schedule 2.5 shall at all times on
and after the Closing Date be deemed to be a "Letter of Credit" or "Letters of
Credit" for all purposes of this Agreement and the other Loan Documents.
(b) Each Standby L/C and Commercial L/C issued hereunder shall, among
other things, (i) be for the account of the Company, (ii) be in such form
requested by the Company as shall be acceptable to the Issuing Lender in its
sole discretion and (iii) have an expiry date occurring (A) in the case of any
Standby L/C, not later than 365 days (or such later date as may be agreed to by
the Issuing Lender) after the date of issuance of such Standby L/C and (B) in
the case of any Commercial L/C, not later than 120 days (or such later date as
may be agreed to by the Issuing Lender) after the date of issuance of such
Commercial L/C. Each Letter of Credit issued hereunder may be automatically
renewed on its expiry date for an additional period equal to the initial term,
but in no case shall any Letter of Credit have an expiry date, or permit payment
of any draft drawn thereunder on any date, occurring later than the Termination
Date. Except as otherwise provided for in any Letter of Credit, each Letter of
Credit shall be subject to the Uniform Customs and, to the extent not
inconsistent therewith, the laws of the State of New York.
2.6 Participating Interests. Effective in the case of each Standby
-----------------------
L/C and Commercial L/C (if applicable) as of the date of the opening thereof,
the Issuing Lender agrees to allot and does allot, to itself and each other
Revolving Credit Lender, and each such
<PAGE>
33
Lender severally and irrevocably agrees to take and does take in such Letter of
Credit and the related L/C Application (if applicable), an L/C Participating
Interest in a percentage equal to such Lender's Revolving Credit Percentage.
2.7 Procedure for Opening Letters of Credit. Upon receipt of any L/C
---------------------------------------
Application from the Company, the Issuing Lender will process such L/C
Application, and the other certificates, documents and other papers delivered to
the Issuing Lender in connection therewith, in accordance with its customary
procedures and, subject to the terms and conditions hereof, shall promptly open
such Letter of Credit by issuing the original of such Letter of Credit to the
beneficiary thereof and by furnishing a copy thereof to the Company and, after
the end of the calendar month in which such Letter of Credit was opened, to the
other Lenders, provided that no such Letter of Credit shall be issued if
--------
subsection 2.1 would be violated thereby. The Issuing Lender shall promptly
furnish to the Administrative Agent, which shall in turn promptly furnish to the
Lenders, notice of the issuance of each Letter of Credit (including the amount
thereof). To the extent that any provision of any L/C Application related to
any Letter of Credit is inconsistent with the provisions of this Section 2, the
provisions of this Section 2 shall apply.
2.8 Payments in Respect of Letters of Credit. (a) The Company
----------------------------------------
agrees forthwith upon demand by the Issuing Lender and otherwise in accordance
with the terms of the L/C Application relating thereto, (i) to reimburse the
Issuing Lender for any payment made by the Issuing Lender under any Letter of
Credit issued for the account of the Company and (ii) to pay interest on any
unreimbursed portion of any such payment from the date of such payment until
reimbursement in full thereof at a rate per annum equal to (A) on or prior to
the date which is one Business Day after the day on which the Issuing Lender
demands reimbursement from the Company for such payment, the Alternate Base Rate
plus the Applicable Margin for the Revolving Credit Loans and (B) thereafter,
the Alternate Base Rate plus the Applicable Margin for the Revolving Credit
Loans plus 2%.
(b) In the event that the Issuing Lender makes a payment under any
Letter of Credit and is not reimbursed in full therefor forthwith upon demand of
the Issuing Lender, and otherwise in accordance with the terms of the L/C
Application relating to such Letter of Credit, the Issuing Lender will promptly
notify each other Revolving Credit Lender. Forthwith upon its receipt of any
such notice, each such other Lender will transfer to the Issuing Lender, in
immediately available funds, an amount equal to such other Lender's pro rata
--- ----
share (based on its Revolving Credit Percentage) of the L/C Obligation arising
from such unreimbursed payment. Promptly upon its receipt from such other
Lender of such amount, the Issuing Lender will complete, execute and deliver to
such other Lender an L/C Participation Certificate dated the date of such
receipt and in such amount.
(c) Whenever, at any time after the Issuing Lender has made a payment
under any Letter of Credit and has received from any other Revolving Credit
Lender such other Lender's pro rata share of the L/C Obligation arising
--- ----
therefrom, the Issuing Lender receives any reimbursement on account of such L/C
Obligation or any payment of interest on account thereof, the Issuing Lender
will distribute to such other Lender its pro rata share thereof in like funds as
--- ----
received; provided that in the event that the receipt by the Issuing Lender of
--------
<PAGE>
34
such reimbursement or such payment of interest (as the case may be) is required
to be returned, such other Lender will return to the Issuing Lender any portion
thereof previously distributed by the Issuing Lender to it in like funds as such
reimbursement or payment is required to be returned by the Issuing Lender.
2.9 Letter of Credit Fees. (a) In lieu of any letter of credit
---------------------
commissions and fees provided for in any L/C Application relating to Standby or
Commercial L/Cs (other than standard issuance, amendment and negotiation fees),
the Company agrees to pay the Administrative Agent, for the account of the
Issuing Lender and the Participating Lenders, with respect to each Standby or
Commercial L/C issued for the account of the Company, a Standby or Commercial
L/C fee, as the case may be, at a per annum rate equal to the Applicable Margin
for Revolving Credit Loans which are Eurodollar Loans (of which the Issuing
Lender shall retain for its own account, as the issuing bank and not on account
of its L/C Participating Interest therein, 1/4 of 1% per annum) on the daily
average amount available to be drawn under each Standby L/C in the case of a
Standby L/C and on the maximum face amount of each Commercial L/C in the case of
a Commercial L/C, in either case, payable, in arrears, on the last day of each
March, June, September and December and on the Termination Date.
Notwithstanding the foregoing, the Company agrees to pay standard
administrative, issuance, amendment, payment and negotiation fees to the Issuing
Lender.
(b) For purposes of any payment of fees required pursuant to this
subsection 2.9, the Administrative Agent agrees to provide to the Company a
statement of any such fees to be so paid; provided that the failure by the
--------
Administrative Agent to provide the Company with any such invoice shall not
relieve the Company of its obligation to pay such fees.
2.10 Letter of Credit Reserves. (a) If any Change in Law shall
-------------------------
either (i) impose, modify, deem or make applicable any reserve, special deposit,
assessment or similar requirement against letters of credit issued by the
Issuing Lender or (ii) impose on the Issuing Lender any other condition
regarding this Agreement (with respect to Letters of Credit) or any Letter of
Credit, and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost of the Issuing Lender of issuing or maintaining
any Letter of Credit (which increase in cost shall be the result of the Issuing
Lender's reasonable allocation of the aggregate of such cost increases resulting
from such events), then, upon demand by the Issuing Lender, the Company shall
immediately pay to the Issuing Lender, from time to time as specified by the
Issuing Lender, additional amounts which shall be sufficient to compensate the
Issuing Lender for such increased cost, together with interest on each such
amount from the date demanded until payment in full thereof at a rate per annum
equal to the rate applicable to Alternate Base Rate Loans pursuant to subsection
3.5(b). The Company shall not be required to make any payments to the Issuing
Lender for any additional amounts pursuant to this subsection 2.10(a) unless the
Issuing Lender has given written notice to the Company of its intent to request
such payments prior to or within 60 days after the date on which the Issuing
Lender incurred such amounts. A certificate, setting forth in reasonable detail
the calculation of the amounts involved, submitted by the Issuing Lender to the
Company concurrently with any such demand by the Issuing Lender, shall be
conclusive, absent manifest error, as to the amount thereof.
<PAGE>
35
(b) In the event that any Change in Law with respect to the Issuing
Lender shall, in the opinion of the Issuing Lender, require that any obligation
under any Letter of Credit be treated as an asset or otherwise be included for
purposes of calculating the appropriate amount of capital to be maintained by
the Issuing Lender or any corporation controlling the Issuing Lender, and such
Change in Law shall have the effect of reducing the rate of return on the
Issuing Lender's or such corporation's capital, as the case may be, as a
consequence of the Issuing Lender's obligations under such Letter of Credit to a
level below that which the Issuing Lender or such corporation, as the case may
be, could have achieved but for such Change in Law (taking into account the
Issuing Lender's or such corporation's policies, as the case may be, with
respect to capital adequacy) by an amount deemed by the Issuing Lender to be
material, then from time to time following notice by the Issuing Lender to the
Company of such Change in Law, within 15 days after demand by the Issuing
Lender, the Company shall pay to the Issuing Lender such additional amount or
amounts as will compensate the Issuing Lender or such corporation, as the case
may be, for such reduction. The Issuing Lender agrees that, upon the occurrence
of any event giving rise to the operation of paragraph (a) or (b) of this
subsection 2.10 with respect to the Issuing Lender, it will, if requested by the
Company and to the extent permitted by law or by the relevant Governmental
Authority, endeavor in good faith to avoid or minimize the increase in costs or
reduction in payments resulting from such event; provided that such avoidance or
--------
minimization can be made in such a manner that the Issuing Lender, in its sole
determination, suffers no economic, legal or regulatory disadvantage. The
Company shall not be required to make any payments to the Issuing Lender for any
additional amounts pursuant to this subsection 2.10(b) unless the Issuing Lender
has given written notice to the Company of its intent to request such payments
prior to or within 60 days after the date on which the Issuing Lender incurred
such amounts. A certificate, in reasonable detail setting forth the calculation
of the amounts involved, submitted by the Issuing Lender to the Company
concurrently with any such demand by the Issuing Lender, shall be conclusive,
absent manifest error, as to the amount thereof.
(c) The Company and each Participating Lender agree that the
provisions of the foregoing paragraphs (a) and (b) shall apply equally to each
Participating Lender in respect of its L/C Participating Interest in such Letter
of Credit, as if the references in such paragraphs and provisions referred to,
where applicable, such Participating Lender or, in the case of paragraph (b),
any corporation controlling such Participating Lender.
2.11 Further Assurances. The Company hereby agrees, from time to
------------------
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by the Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of Letters of Credit hereunder.
2.12 Obligations Absolute. The payment obligations of the Company
--------------------
under this Agreement with respect to the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
<PAGE>
36
(a) the existence of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries may have at any time against
any beneficiary, or any transferee, of any Letter of Credit (or any Persons
for whom any such beneficiary or any such transferee may be acting), the
Issuing Lender, the Administrative Agent or any Lender, or any other
Person, whether in connection with this Agreement, any Credit Document, the
transactions contemplated herein, or any unrelated transaction;
(b) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent or invalid or any
statement therein being untrue or inaccurate in any respect;
(c) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate or other document which does
not comply with the terms of such Letter of Credit or is insufficient in
any respect, except where such payment constitutes gross negligence or
willful misconduct on the part of the Issuing Lender; or
(d) any other circumstances or happening whatsoever, whether or
not similar to any of the foregoing, except for any such circumstances or
happening constituting gross negligence or willful misconduct on the part
of the Issuing Lender.
2.13 Assignments. No Participating Lender's participation in any
-----------
Letter of Credit or any of its rights or duties hereunder shall be subdivided,
assigned or transferred (other than in connection with a transfer of part or all
of such Participating Lender's Revolving Credit Commitment in accordance with
subsection 9.6(c)) without the prior written consent of the Issuing Lender,
which consent will not be unreasonably withheld. Such consent may be given or
withheld without the consent or agreement of any other Participating Lender.
Notwithstanding the foregoing, a Participating Lender may subparticipate its L/C
Participating Interest without obtaining the prior written consent of the
Issuing Lender.
2.14 Participations. The obligation of each Revolving Credit Lender
--------------
to purchase participating interests pursuant to subsection 2.6 shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (a) any set-off, counterclaim, recoupment, defense or other
right which such Lender may have against the Issuing Lender, any Borrower or any
other Person for any reason whatsoever, (b) the occurrence or continuance of an
Event of Default, (c) any adverse change in the condition (financial or
otherwise) of any Borrower, (d) any breach of this Agreement by any Borrower or
any other Lender or (e) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.15 Conversion to Term Loans. If, on any anniversary of the Closing
------------------------
Date, the sum of (a) the then outstanding Revolving Credit Loans and Swing Line
Loans and (b) the then outstanding Revolving Synthetic Lease Obligations exceeds
$75,000,000 (the "Excess Amount"), then the following actions shall be taken (if
-------------
applicable) in the following order:
<PAGE>
37
(i) the Revolving Credit Commitments shall be automatically reduced
by an amount equal to the Excess Amount,
(ii) any amount of outstanding Revolving Synthetic Lease Obligations
up to the Excess Amount shall be converted to term loans (the "Term
----
Synthetic Lease Obligations") in accordance with the terms of the Synthetic
---------------------------
Lease Facility and
(iii) Revolving Credit Loans in an amount equal to (A) the Excess
Amount minus (B) the amount of the Revolving Synthetic Lease Obligations
-----
converted to Term Synthetic Lease Obligations on such date shall be
automatically converted to term loans (any such Revolving Credit Loans so
converted being herein called the "Term Loans").
----------
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOANS
--------------------------------------
3.1 Procedure for Borrowing. (a) The Borrowers may borrow under the
-----------------------
Commitments during the Revolving Credit Commitment Period on any Business Day,
provided that, with respect to any borrowing, the Company, as agent for the
- --------
Borrowers, shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 10:00 a.m. (or, with
respect to Swing Line Loans, 3:00 p.m.), New York City time, (i) three Business
Days prior to the requested Borrowing Date if all or any part of the Loans are
to be Eurodollar Loans and (ii) one Business Day prior to the requested
Borrowing Date (or, in the case of Swing Line Loans and, if the Closing Date
occurs on the date this Agreement is executed and delivered, Loans made on the
Closing Date, on the requested Borrowing Date) if the borrowing is to be solely
of Alternate Base Rate Loans) and specifying (A) the amount of the borrowing,
(B) whether such Loans are initially to be Eurodollar Loans or Alternate Base
Rate Loans or a combination thereof, (C) if the borrowing is to be entirely or
partly Eurodollar Loans, the length of the Interest Period for such Eurodollar
Loans, (D) whether the Loan is a Swing Line Loan or a Revolving Credit Loan, (E)
the requested Borrowing Date and (F) the Borrower with respect to such
borrowing. Upon receipt of such notice the Administrative Agent shall promptly
notify each Lender. Not later than 12:00 noon, New York City time, on the
Borrowing Date specified in such notice, each Lender shall make available to the
Administrative Agent at the office of the Administrative Agent specified in
subsection 9.2 (or at such other location as the Administrative Agent may
direct) an amount in immediately available funds equal to the amount of the Loan
to be made by such Lender (except that proceeds of Swing Line Loans will be made
available to the Company in accordance with subsection 2.4(a)). Loan proceeds
received by the Administrative Agent hereunder shall promptly be made available
to the Company, by the Administrative Agent's crediting the account of the
Company, at the office of the Administrative Agent specified in subsection 9.2,
with the aggregate amount actually received by the Administrative Agent from the
Lenders and in like funds as received by the Administrative Agent.
(b) Any borrowing of Eurodollar Loans hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (i) the aggregate
<PAGE>
principal amount of all Eurodollar Loans having the same Interest Period shall
not be less than $2,000,000 or a whole multiple of $1,000,000 in excess thereof
and (ii) no more than 16 Interest Periods shall be in effect at any one time.
3.2 Conversion and Continuation Options. (a) Subject to subsection
-----------------------------------
3.12, the Company, as agent for the Borrowers, may elect from time to time to
convert Eurodollar Loans into Alternate Base Rate Loans by giving the
Administrative Agent irrevocable notice of such election, to be received by the
Administrative Agent prior to 12:00 noon, New York City time, at least three
Business Days prior to the proposed conversion date. The Company, as agent for
the Borrowers, may elect from time to time to convert all or a portion of the
Alternate Base Rate Loans (other than Swing Line Loans) then outstanding to
Eurodollar Loans by giving the Administrative Agent irrevocable notice of such
election, to be received by the Administrative Agent prior to 12:00 noon, New
York City time, at least three Business Days prior to the proposed conversion
date, specifying the Interest Period selected therefor, and, if no Default or
Event of Default has occurred and is continuing, such conversion shall be made
on the requested conversion date or, if such requested conversion date is not a
Business Day, on the next succeeding Business Day. Upon receipt of any notice
pursuant to this subsection 3.2, the Administrative Agent shall promptly notify
each Lender thereof. All or any part of the outstanding Loans (other than Swing
Line Loans) may be converted as provided herein, provided that partial
--------
conversions of Alternate Base Loans shall be in the aggregate principal amount
of $1,000,000 or a whole multiple of $100,000 in excess thereof and the
aggregate principal amount of the resulting Eurodollar Loans outstanding in
respect of any one Interest Period shall be at least $2,000,000 or a whole
multiple of $1,000,000 in excess thereof; and provided, further, that no
-------- -------
Alternate Base Rate Loan may be converted into a Eurodollar Loan (i) when any
Event of Default has occurred and is continuing and the Administrative Agent has
or the Required Lenders have, by written notice to the Company, determined that
such a continuation is not appropriate or (ii) after the date that is one month
prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Company, as
agent for the Borrowers, giving notice to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in subsection 1.1, of the length of the next Interest Period to be
applicable to such Loans, provided that no Eurodollar Loan may be continued as
--------
such (i) when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Required Lenders have, by written notice to the
Company, determined that such a continuation is not appropriate, (ii) if, after
giving effect thereto, subsection 3.1(b) would be contravened or (iii) after the
date that is one month prior to the Termination Date.
3.3 Changes of Commitment Amounts. (a) The Company, as agent for
-----------------------------
the Borrowers, shall have the right, upon not less than three Business Days'
notice to the Administrative Agent, to terminate or from time to time to
permanently reduce the Revolving Credit Commitments, subject to the provisions
of this subsection 3.3. To the extent, if any, that the sum of the amount of
the Revolving Credit Loans, Swing Line Loans, L/C Obligations then outstanding,
amounts then available to be drawn under outstanding Letters of Credit and
Revolving Synthetic Lease Obligations then outstanding exceeds the amount of the
<PAGE>
39
Revolving Credit Commitments as then reduced, the Company, as agent for the
Borrowers, shall be required to apply an amount equal to such excess amount (i)
to prepay, in the order set forth in this subsection 3.3(a), the obligations
hereunder and/or, at its option, (ii) to cash collateralize the Revolving
Synthetic Lease Obligations and/or repurchase properties subject to the
Synthetic Lease Facility. If the Company elects to have such amount applied as
set forth in clause (i) of this subsection 3.3(a), such amount shall be applied,
first, to payment of the Swing Line Loans then outstanding, second, to payment
- ----- ------
of the Revolving Credit Loans then outstanding, third, to payment of any L/C
-----
Obligations then outstanding, and fourth, to cash collateralize any outstanding
------
Letters of Credit on terms reasonably satisfactory to the Administrative Agent.
Any such termination of the Revolving Credit Commitments shall be accompanied by
prepayment in full of the Revolving Credit Loans, Swing Line Loans and L/C
Obligations then outstanding, by cash collateralization of any outstanding
Letters of Credit on terms reasonably satisfactory to the Administrative Agent
and by payment in full of the Synthetic Lease Obligations. Upon termination of
the Revolving Credit Commitments, any Letter of Credit then outstanding that has
been so cash collateralized shall no longer be considered a "Letter of Credit"
as defined in subsection 1.1, and any L/C Participating Interests heretofore
granted by the Issuing Lender to the Lenders in such Letter of Credit shall be
deemed terminated (subject to automatic reinstatement in the event that such
cash collateral is returned and the Issuing Lender is not fully reimbursed for
any such L/C Obligations) but the Letter of Credit fees payable under subsection
2.9 shall continue to accrue to the Issuing Lender and the Participating Lenders
(or, in the event of any such automatic reinstatement, as provided in subsection
2.9) with respect to such Letter of Credit until the expiry thereof (provided
--------
that in lieu of paying a Standby or Commercial L/C fee, as the case may be, at a
rate per annum equal to the Applicable Margin for Revolving Credit Loans which
are Eurodollar Loans, the Company shall pay to the Administrative Agent an
amount equal to .25% per annum).
(b) In the case of termination of the Revolving Credit Commitments,
interest accrued on the amount of any prepayment relating thereto and any unpaid
commitment fee accrued hereunder shall be paid on the date of such termination.
Any such partial reduction of the Revolving Credit Commitments shall be in an
amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof and
shall, in each case, reduce permanently the amount of the Revolving Credit
Commitments then in effect.
3.4 Optional and Mandatory Prepayments; Repayments of Term Loans.
------------------------------------------------------------
(a) Subject to subsection 3.12, the Company, as agent for the Borrowers, may at
any time and from time to time prepay Loans, in whole or in part, without
premium or penalty, by irrevocable notice to the Administrative Agent by 10:00
a.m., New York City time, on the same Business Day (or, in the case of Swing
Line Loans, by irrevocable notice to the Administrative Agent by 12:00 noon, New
York City time, on the same Business Day) in the case of Alternate Base Rate
Loans, and three Business Days' irrevocable notice to the Administrative Agent
in the case of Eurodollar Loans, specifying the date and amount of prepayment,
the applicable Borrower of the Loans being prepaid and whether the prepayment is
of Revolving Credit Loans or Term Loans. Upon receipt of such notice the
Administrative Agent shall promptly notify each Lender thereof. If such notice
is given, the Borrowers specified in such prepayment notice shall make such
prepayment, and the payment amount
<PAGE>
40
specified in such notice shall be due and payable, on the date specified
therein. Partial prepayments (i) of Term Loans shall be in an aggregate
principal amount equal to the lesser of (A) (I) $2,000,000, or a whole multiple
of $1,000,000 in excess thereof with respect to Eurodollar Loans or (II)
$1,000,000, or a whole multiple of $100,000 in excess thereof with respect to
Alternate Base Rate Loans and (B) the aggregate unpaid principal amount of the
Term Loans, and (ii) of Revolving Credit Loans shall be in an aggregate
principal amount equal to the lesser of (A) (I) $2,000,000, or a whole multiple
of $1,000,000 in excess thereof with respect to Eurodollar Loans or (II)
$1,000,000 or a whole multiple of $100,000 in excess thereof with respect to
Alternate Base Rate Loans and (B) the aggregate unpaid principal amount of the
Revolving Credit Loans, as the case may be.
(b) (i) If, subsequent to the Closing Date, the Company or any of
its Subsidiaries shall issue any Capital Stock, 50% of the Net Proceeds thereof
(excluding (A) amounts provided by the Investors or their Affiliates or by
management employees of such issuer and (B) Net Proceeds in an aggregate amount
not to exceed $35,000,000 of any issuance of preferred stock) shall be promptly
applied toward the prepayment of the Term Loans, the reduction of the Revolving
Credit Commitments, the cash collateralization of the Synthetic Lease
Obligations and the repurchase of properties subject to the Synthetic Lease
Facility, in each case as set forth in clause (v) of this subsection 3.4(b);
provided that Net Proceeds of such issuance shall be deemed to be Net Proceeds
- --------
of such issuance for purposes of this subsection 3.4(b)(i) only after deducting
therefrom the redemption of the Subordinated Debt under any "equity clawback"
provisions, the redemption of the Bridge Junior Subordinated Debt with the
proceeds of preferred stock, the redemption of the Preferred Stock in its
entirety (but only with the proceeds of common stock or other preferred stock),
the redemption of preferred stock with the proceeds of other preferred stock,
and the payment of any premium or penalties or accrued interest with respect
thereto.
(ii) If, subsequent to the Closing Date, the Company or any of its
Subsidiaries shall incur any Indebtedness (other than Indebtedness permitted
pursuant to subsection 7.1), 100% of the Net Proceeds thereof shall be promptly
applied toward the prepayment of the Term Loans, the reduction of the Revolving
Credit Commitments, the cash collateralization of the Synthetic Lease
Obligations and the repurchase of properties subject to the Synthetic Lease
Facility, in each case as set forth in clause (v) of this subsection 3.4(b).
(iii) If, subsequent to the Closing Date, the Company or any of
its Subsidiaries shall receive Net Proceeds from any Asset Sale, 100% of the Net
Proceeds thereof shall be promptly applied toward the prepayment of the Term
Loans, the reduction of Revolving Credit Commitments, the cash collateralization
of the Synthetic Lease Obligations and the repurchase of properties subject to
the Synthetic Lease Facility, in each case as set forth in clause (v) of this
subsection 3.4(b); provided that such Net Proceeds need not be so applied until
--------
the earlier of the date that the aggregate amount of Net Proceeds received by
the Company or any of its Subsidiaries from any Asset Sales exceeds $2,000,000
(and has not yet been applied as set forth in clause (v) of this subsection
3.4(b)) and the date which is six months after the last application of Net
Proceeds pursuant to this subsection 3.4(b)(iii).
<PAGE>
41
(iv) If for any fiscal year commencing with its fiscal year ending
December 31, 1999, there shall be Excess Cash Flow for such fiscal year, 50% of
such Excess Cash Flow shall be applied toward the prepayment of the Term Loans,
the reduction of the Revolving Credit Commitments, the cash collateralization of
the Synthetic Lease Obligations and the repurchase of properties subject to the
Synthetic Lease Facility, in each case as set forth in clause (v) of this
subsection 3.4(b). Each such prepayment shall be made not later than 120 days
after the end of such fiscal year.
(v) Amounts to be applied by any Borrower pursuant to subsections
3.4(b)(i), (ii), (iii) or (iv) shall be applied (A) to prepay the Term Loans and
reduce the Revolving Credit Commitments and/or, at the option of the Company,
(B) to cash collateralize the Synthetic Lease Obligations and/or repurchase
properties subject to the Synthetic Lease Facility. If the Company elects to
have such amounts applied as set forth in clause (A) of this subsection
3.4(b)(v), such amounts shall be applied, first, to the prepayment of the Term
-----
Loans and, second, to reduce permanently the Revolving Credit Commitments. Any
------
such reduction of the Revolving Credit Commitments shall be accompanied by
prepayment of, first, the Swing Line Loans, second, the Revolving Credit Loans
----- ------
and, third, the L/C Obligations to the extent, if any, that the sum of the
-----
aggregate outstanding principal amount of Revolving Credit Loans, the aggregate
outstanding principal amount of all Swing Line Loans, the aggregate amount
available to be drawn under all outstanding Letters of Credit, the aggregate
outstanding amount of all L/C Obligations and the aggregate then outstanding
amount of Revolving Synthetic Lease Obligations, in each case of all Lenders,
exceeds the amount of the aggregate Revolving Credit Commitments as so reduced,
provided that if the aggregate principal amount of Revolving Credit Loans, Swing
- --------
Line Loans, L/C Obligations and Revolving Synthetic Lease Obligations then
outstanding is less than the amount of such excess (because Letters of Credit
constitute a portion thereof), the Company shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established for the benefit of the Lenders.
(vi) The Company, as agent for the Borrowers, shall give the
Administrative Agent (which shall promptly notify each Lender) at least one
Business Day's notice of each prepayment or mandatory reduction pursuant to this
subsection 3.4(b) setting forth the date, amount and applicable Borrower thereof
and the amount, if any, that has been applied to cash collateralize the
Synthetic Lease Obligations or repurchase any properties subject to the
Synthetic Lease Facility. Except as otherwise may be agreed by the Company, as
agent for the Borrowers, and the Required Lenders, and subject to subsection
3.4(b)(v), any prepayment of Loans pursuant to this subsection 3.4 shall be
applied, first, to any Alternate Base Rate Loans then outstanding and the
-----
balance of such prepayment, if any, to the Eurodollar Loans then outstanding;
provided that prepayments of Eurodollar Loans, if not on the last day of the
- --------
Interest Period with respect thereto, shall, at the option of the Company, as
agent for the Borrowers, be prepaid subject to the provisions of subsection 3.12
or the amount of such prepayment (after application to any Alternate Base Rate
Loans) shall be deposited with the Administrative Agent as cash collateral for
the Loans on terms reasonably satisfactory to the Administrative Agent and
thereafter shall be applied in the order of the Interest Periods next ending
most closely to the date such prepayment is required to be made and on the last
day
<PAGE>
42
of each such Interest Period. After such application, unless an Event of
Default shall have occurred and be continuing, any remaining interest earned on
such cash collateral shall be paid to the Company, as agent for the Borrowers.
(c) Amounts repaid on account of the Term Loans pursuant to this
subsection 3.4 or otherwise may not be reborrowed. Accrued interest on the
amount of any prepayments shall be paid on the Interest Payment Date next
succeeding the date of any partial prepayment and on the date of such prepayment
in the case of a prepayment in full of the Term Loans.
3.5 Interest Rates and Payment Dates. (a) Eurodollar Loans shall
--------------------------------
bear interest for each day during each Interest Period applicable thereto,
commencing on (and including) the first day of such Interest Period to, but
excluding, the last day of such Interest Period, on the unpaid principal amount
thereof at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Margin from time to time in effect.
(b) Alternate Base Rate Loans shall bear interest for the period from
and including the date such Loans are made to, but excluding, the maturity date
thereof, or to, but excluding, the conversion date if such Loans are earlier
converted into Eurodollar Loans on the unpaid principal amount thereof at a rate
per annum equal to the Alternate Base Rate plus the Applicable Margin from time
to time in effect.
(c) If all or a portion of (i) the principal amount of any of the
Loans or (ii) any interest payable thereon shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise) such Loan, if a Eurodollar
Loan, shall be converted into an Alternate Base Rate Loan at the end of the
then-current Interest Period for said Eurodollar Loan (which conversion shall
occur automatically and without need for compliance with the conditions for
conversion set forth in subsection 3.2), and any such overdue amount shall,
without limiting the rights of the Lenders under Section 8, bear interest (which
shall be payable on demand) at a rate per annum which is 2% plus the Alternate
Base Rate plus the Applicable Margin (or, in the case of a Eurodollar Loan, the
Eurodollar Rate for the Interest Period plus the Applicable Margin from time to
time in effect plus 2%, if higher) from the date of such non-payment until paid
in full (as well after as before judgment).
(d) Except as otherwise expressly provided for in this subsection
3.5, interest shall be payable in arrears on each Interest Payment Date.
3.6 Computation of Interest and Fees. (a) Interest in respect of
--------------------------------
Alternate Base Rate Loans, at any time that the Alternate Base Rate is
determined by reference to the Prime Rate, and all fees hereunder shall be
calculated on the basis of a 365 (or 366 as the case may be) day year for the
actual days elapsed. Interest in respect of Eurodollar Loans and in respect of
Alternate Base Rate Loans at any time that the Alternate Base Rate is determined
by reference to the Base CD Rate or the Federal Funds Effective Rate shall be
calculated on the basis of a 360 day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Company and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in
<PAGE>
43
the Alternate Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change in the
Alternate Base Rate is announced or such change in the Eurocurrency Reserve
Requirements becomes effective, as the case may be. The Administrative Agent
shall as soon as practicable notify the Company and the Lenders of the effective
date and the amount of each such change.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Company, as agent for the
Borrowers, or any Lender, deliver to the Company or such Lender a statement
showing the quotations used by the Administrative Agent in determining the
Eurodollar Rate.
3.7 Certain Fees. The Borrowers agree to pay to the Administrative
------------
Agent, for its own account, a non-refundable agent's fee in an amount previously
agreed to with the Administrative Agent, payable in advance on the Closing Date
and on the first day of each fiscal year of the Company thereafter.
3.8 Inability to Determine Interest Rate. In the event that the
------------------------------------
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrowers) that (a) by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Interest Period with respect
to (i) proposed Loans that the Company, as agent for the Borrowers, has
requested be made as Eurodollar Loans, (ii) any Eurodollar Loans that will
result from the requested conversion of all or part of the Alternate Base Rate
Loans into Eurodollar Loans or (iii) the continuation of any Eurodollar Loan as
such for an additional Interest Period, or (b) dollar deposits in the relevant
amount and for the relevant period with respect to any such Eurodollar Loan are
not generally available to the Lenders in their respective Eurodollar Lending
Offices' interbank eurodollar markets, the Administrative Agent shall forthwith
give telecopy notice of such determination, confirmed in writing, to the Company
and the Lenders at least one day prior to, as the case may be, the requested
Borrowing Date, the conversion date or the last day of such Interest Period. If
such notice is given (i) any requested Eurodollar Loans shall be made as
Alternate Base Rate Loans, (ii) any Alternate Base Rate Loans that were to have
been converted to Eurodollar Loans shall be continued as Alternate Base Rate
Loans and (iii) any outstanding Eurodollar Loans shall be converted on the last
day of the then current Interest Period applicable thereto into Alternate Base
Rate Loans. Until such notice has been withdrawn by the Administrative Agent,
no further Eurodollar Loans shall be made and no Alternate Base Rate Loans shall
be converted to Eurodollar Loans.
3.9 Pro Rata Treatment and Payments. (a) Except to the extent
-------------------------------
otherwise provided herein, each borrowing of Loans by the Borrowers from the
Lenders, each conversion of Revolving Credit Loans to Term Loans and any
reduction of the Revolving Credit Commitments of the Lenders hereunder shall be
made pro rata according to the relevant Revolving Credit Percentages of the
--- ----
Lenders with respect to the Loans borrowed or converted or the Revolving Credit
Commitments to be reduced.
<PAGE>
44
(b) Whenever any payment received by the Administrative Agent under
this Agreement or any Note or any other Credit Document is insufficient to pay
in full all amounts then due and payable to the Administrative Agent and the
Lenders under this Agreement:
(i) If the Administrative Agent has not received a Payment
Sharing Notice (or, if the Administrative Agent has received a Payment
Sharing Notice but the Event of Default specified in such Payment Sharing
Notice has been cured or waived in accordance with the provisions of this
Agreement), such payment shall be distributed by the Administrative Agent
and applied by the Administrative Agent and the Lenders in the following
order: first, to the payment of fees and expenses due and payable to the
-----
Administrative Agent under and in connection with this Agreement and the
other Credit Documents; second, to the payment of all expenses due and
------
payable under subsection 9.5, ratably among the Lenders in accordance with
the aggregate amount of such payments owed to each such Lender; third, to
-----
the payment of fees due and payable under subsections 2.2 and 2.9, ratably
among the Lenders in accordance with the Revolving Credit Percentage of
each Lender of the Revolving Credit Commitment for which such payment is
owed and, in the case of the Issuing Lender, the amount retained by the
Issuing Lender for its own account pursuant to subsection 2.9; fourth, to
------
the payment of interest then due and payable on the Loans and the L/C
Obligations ratably in accordance with the aggregate amount of interest
owed to each such Lender; and fifth, to the payment of the principal amount
-----
of the Loans and the L/C Obligations which is then due and payable ratably
among the Lenders in accordance with the aggregate principal amount owed to
each such Lender; or
(ii) If the Administrative Agent has received a Payment Sharing
Notice which remains in effect, all payments received by the Administrative
Agent under this Agreement or any Note shall be distributed by the
Administrative Agent and applied by the Administrative Agent and the
Lenders in the following order: first, to the payment of all amounts
-----
described in clauses "first" through "third" of the foregoing clause (i) in
----- -----
the order set forth therein; second, to the payment of the interest accrued
------
on all Loans and L/C Obligations, regardless of whether any such amount is
then due and payable, ratably among the Lenders in accordance with the
aggregate accrued interest plus the aggregate principal amount of all Loans
and L/C Obligations then due and payable and owed to such Lender; and
third, to the payment of the principal amount of all Loans and L/C
-----
Obligations, regardless of whether any such amount is then due and payable,
ratably among the Lenders in accordance with the aggregate principal amount
owed to such Lender.
(c) If any Lender (a "Non-Funding Lender") has (x) failed to make a
------------------
Revolving Credit Loan required to be made by it hereunder, and the
Administrative Agent has determined that such Lender is not likely to make such
Revolving Credit Loan or (y) given notice to the Company or the Administrative
Agent that it will not make, or that it has disaffirmed or repudiated any
obligation to make, any Revolving Credit Loan, in each case by reason of the
provisions of the Financial Institutions Reform, Recovery and Enforcement Act
<PAGE>
45
of 1989, as amended, or otherwise, (i) any payment made on account of the
principal of the Revolving Credit Loans outstanding shall be made as follows:
(A) in the case of any such payment made on any date when and to the
extent that in the determination of the Administrative Agent the Borrowers
would be able under the terms and conditions hereof to reborrow the amount
of such payment under the Commitments and to satisfy any applicable
conditions precedent set forth in Section 5 to such reborrowing, such
payment shall be made on account of the outstanding Revolving Credit Loans
held by the Lenders other than the Non-Funding Lender pro rata according to
--- ----
the respective outstanding principal amounts of the Revolving Credit Loans
of such Lenders; and
(B) otherwise, such payment shall be made on account of the
outstanding Revolving Credit Loans held by the Lenders pro rata according
--- ----
to the respective outstanding principal amounts of such Revolving Credit
Loans; and
(ii) any payment made on account of interest on the Revolving Credit Loans shall
be made pro rata according to the respective amounts of accrued and unpaid
--- ----
interest due and payable on the Revolving Credit Loans with respect to which
such payment is being made. Each Borrower agrees to give the Administrative
Agent such assistance in making any determination pursuant to subparagraph
(i)(A) of this paragraph as the Administrative Agent may reasonably request.
Any such determination by the Administrative Agent shall be conclusive and
binding on the Lenders.
(d) All payments (including prepayments) to be made by any Borrower
on account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to the Administrative Agent, for the account of
the Lenders at the Administrative Agent's office located at 270 Park Avenue, New
York, New York 10017, in lawful money of the United States and in immediately
available funds. The Administrative Agent shall promptly distribute such
payments in accordance with the provisions of subsection 3.9(b) upon receipt in
like funds as received. If any payment hereunder (other than payments on
Eurodollar Loans) would become due and payable on a day other than a Business
Day, such payment shall become due and payable on the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day (and with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension), unless the result of such extension
would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount which would constitute its Revolving Credit Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent in
accordance with subsection 3.1 and the
<PAGE>
46
Administrative Agent may, in reliance upon such assumption, make available to
the Company, as agent for the Borrowers, a corresponding amount. If such amount
is not made available to the Administrative Agent by the required time on the
Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on
demand, such amount with interest thereon at a rate equal to the daily average
Federal Funds Effective Rate for the period until such Lender makes such amount
immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection 3.9(e) shall be conclusive absent manifest error. If such
Lender's Revolving Credit Percentage of such borrowing is not in fact made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Alternate Base Rate Loans hereunder (in lieu of any otherwise applicable
interest), on demand, from the Borrowers, without prejudice to any rights which
any such Borrower or the Administrative Agent may have against such Lender
hereunder. Nothing contained in this subsection 3.9 shall relieve any Lender
which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(f) The failure of any Lender to make the Loan to be made by it on
any Borrowing Date shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on such Borrowing Date.
(g) All payments and optional prepayments (other than prepayments as
set forth in subsection 3.11 with respect to increased costs) of Eurodollar
Loans hereunder shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Loans with the same Interest Period shall not be less than $2,000,000
or a whole multiple of $1,000,000 in excess thereof.
3.10 Illegality. Notwithstanding any other provision herein, if any
----------
Change in Law occurring after the date that any lender becomes a Lender party to
this Agreement, shall make it unlawful for such Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, the commitment of such
Lender hereunder to make Eurodollar Loans or to convert all or a portion of
Alternate Base Rate Loans into Eurodollar Loans shall forthwith be suspended
until such time, if any, as such illegality shall no longer exist, and such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Alternate Base Rate Loans for the duration of the respective
Interest Periods (or, if permitted by applicable law, at the end of such
Interest Periods) and all payments of principal which would otherwise be applied
to such Eurodollar Loans shall be applied instead to such Lender's Alternate
Base Rate Loans. The Borrowers hereby agree to pay any Lender, promptly upon
its demand, any amounts payable pursuant to subsection 3.12 in connection with
any conversion in accordance with this subsection 3.10 (such Lender's notice of
such costs, as certified in reasonable detail as to such amounts to the Company
through the Administrative Agent, to be conclusive absent manifest error).
<PAGE>
47
3.11 Requirements of Law. (a) In the event that any Change in Law
-------------------
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority
occurring after the date that any lender becomes a Lender party to this
Agreement:
(i) does or shall subject any such Lender or its Eurodollar
Lending Office to any tax of any kind whatsoever with respect to this
Agreement, any Note or any Eurodollar Loans made by it, or change the basis
of taxation of payments to such Lender or its Eurodollar Lending Office of
principal, the commitment fee, interest or any other amount payable
hereunder (except for (x) net income and franchise taxes imposed on the net
income of such Lender or its Eurodollar Lending Office by the jurisdiction
under the laws of which such Lender is organized or any political
subdivision or taxing authority thereof or therein, or by any jurisdiction
in which such Lender's Eurodollar Lending Office is located or any
political subdivision or taxing authority thereof or therein, including
changes in the rate of tax on the overall net income of such Lender or such
Eurodollar Lending Office, and (y) taxes resulting from the substitution of
any such system by another system of taxation, provided that the taxes
--------
payable by Lenders subject to such other system of taxation are not
generally charged to borrowers from such Lenders having loans or advances
bearing interest at a rate similar to the Eurodollar Rate);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of such Lender which are not otherwise included in
the determination of the Eurodollar Rate; or
(iii) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender or
its Eurodollar Lending Office of making, converting, renewing or maintaining
advances or extensions of credit or to reduce any amount receivable hereunder,
in each case, in respect of its Eurodollar Loans, then, in any such case, the
Borrowers shall promptly pay such Lender, upon its demand, any additional
amounts necessary to compensate such Lender for such additional cost or reduced
amount receivable which such Lender deems to be material as determined by such
Lender with respect to such Eurodollar Loans, together with interest on each
such amount from the date demanded until payment in full thereof at a rate per
annum equal to the Alternate Base Rate plus 1%.
(b) In the event that any Change in Law occurring after the date that
any lender becomes a Lender party to this Agreement with respect to any such
Lender shall, in the opinion of such Lender, require that any Commitment of such
Lender be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by such Lender or
any corporation controlling such Lender, and such Change in Law shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of such Lender's obligations
<PAGE>
48
hereunder to a level below that which such Lender or such corporation, as the
case may be, could have achieved but for such Change in Law (taking into account
such Lender's or such corporation's policies, as the case may be, with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time following notice by such Lender to the Borrowers of such
Change in Law as provided in paragraph (c) of this subsection 3.11, within 15
days after demand by such Lender, the Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such corporation
on an after-tax basis, as the case may be, for such reduction.
(c) The Borrowers shall not be required to make any payments to any
Lender for any additional amounts pursuant to this subsection 3.11 unless such
Lender has given written notice to the Company, through the Administrative
Agent, of its intent to request such payments prior to or within 60 days after
the date on which such Lender incurred such amounts. If any Lender has notified
the Company through the Administrative Agent of any increased costs pursuant to
paragraph (a) of this subsection 3.11, the Borrowers at any time thereafter may,
upon at least three Business Days' notice to the Administrative Agent (which
shall promptly notify the Lenders thereof), and subject to subsection 3.12,
prepay (or convert into Alternate Base Rate Loans) all (but not a part) of the
Eurodollar Loans then outstanding. Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of paragraph (a) of this subsection
3.11 with respect to such Lender, it will, if requested by the Company, as agent
for the Borrowers, and to the extent permitted by law or by the relevant
Governmental Authority, endeavor in good faith to avoid or minimize the increase
in costs or reduction in payments resulting from such event (including, without
limitation, endeavoring to change its Eurodollar Lending Office); provided, that
--------
such avoidance or minimization can be made in such a manner that such Lender, in
its sole determination, suffers no economic, legal or regulatory disadvantage.
If any Lender requests compensation from any Borrower under this subsection
3.11, the Company, as agent for the Borrowers, may, by notice to such Lender
(with a copy to the Administrative Agent), suspend the obligation of such Lender
thereafter to make or continue Loans of the Type with respect to which such
compensation is requested, or to convert Loans of any other Type into Loans of
such Type, until the Requirement of Law giving rise to such request ceases to be
in effect, provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
(d) Each Lender (and in case of an Assignee on the date it becomes a
Lender) that is not a United States Person (as defined in Section 7701(a)(30) of
the Code) for federal income tax purposes either (1) in the case of a Lender
that is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i)
represents to each Borrower (for the benefit of the Borrowers and the
Administrative Agent) that under applicable law and treaties no taxes are
required to be withheld by any Borrower or the Administrative Agent with respect
to any payments to be made to such Lender in respect of the Loans or the L/C
Participating Interests, (ii) agrees to furnish to the Company, with a copy to
the Administrative Agent, either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein such Lender claims entitlement to
complete exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) agrees (for the benefit of the Borrowers and the
Administrative Agent), to the extent it may lawfully do so at such times, to
provide the Company, with a copy to the Administrative Agent, a new Form 4224 or
Form
<PAGE>
49
1001 upon the expiration or obsolescence of any previously delivered form and
comparable statements in accordance with applicable U.S. laws and regulations
and amendments duly executed and completed by such Lender, and to comply from
time to time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption or (2) in the case of a Lender that is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, (i) represents to each
Borrower (for the benefit of the Borrowers and the Administrative Agent) that it
is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii)
agrees to furnish to the Company, with a copy to the Administrative Agent, (A) a
certificate substantially in the form of Exhibit I hereto (any such certificate,
a "Subsection 3.11(d)(2) Certificate") and (B) two accurate and complete
---------------------------------
original signed copies of Internal Revenue Service Form W-8, certifying to such
Lender's legal entitlement at the Closing Date to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with respect
to all payments to be made under this Agreement, and (iii) agrees, to the extent
legally entitled to do so, upon reasonable request by the Company, to provide to
the Company (for the benefit of the Borrowers and the Administrative Agent) such
other forms as may be required in order to establish the legal entitlement of
such Lender to an exemption from withholding with respect to payments under this
Agreement. Notwithstanding any provision of this subsection 3.11 or 3.9(d) to
the contrary, the Borrowers shall have no obligation to pay any amount to or for
the account of any Lender (or the Eurodollar Lending Office of any Lender) on
account of any taxes pursuant to this subsection 3.11, to the extent that such
amount results from (i) the failure of any Lender to comply with its obligations
pursuant to this subsection 3.11, (ii) any representation or warranty made or
deemed to be made by any Lender pursuant to this subsection 3.11(d) proving to
have been incorrect, false or misleading in any material respect when so made or
deemed to be made or (iii) any Change in Law or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority, the effect of which would be to
subject to any taxes any payment made pursuant to this Agreement to any Lender
making the representation and covenants set forth in subsection 3.11(d)(2),
which payment would not be subject to such taxes were such Lender eligible to
make and comply with, and actually made and complied with, the representation
and covenants set forth in subsection 3.11(d)(1) hereinabove.
(e) A certificate in reasonable detail as to any amounts submitted by
such Lender, through the Administrative Agent, to the Company, shall be
conclusive in the absence of manifest error. The covenants contained in this
subsection 3.11 shall survive the termination of this Agreement and repayment of
the Loans.
3.12 Indemnity. The Borrowers agree to indemnify each Lender and to
---------
hold such Lender harmless from any loss or expense (but without duplication of
any amounts payable as default interest) which such Lender may sustain or incur
as a consequence of (a) default by any Borrower in payment of the principal
amount of or interest on any Eurodollar Loans of such Lender, including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to make or maintain its
Eurodollar Loans hereunder, (b) default by any Borrower in making a borrowing
after the Company, as agent for the Borrowers, has given a notice in accordance
with subsection 3.1 or in making a conversion of Alternate Base Rate Loans to
Eurodollar Loans
<PAGE>
50
or in continuing Eurodollar Loans as such, in either case, after the Company, as
agent for the Borrowers, has given notice in accordance with subsection 3.2, (c)
default by any Borrower in making any prepayment after the Company, as agent for
the Borrower, has given a notice in accordance with subsection 3.4 or (d) a
payment or prepayment of a Eurodollar Loan or conversion (including without
limitation, as a result of subsection 3.4 and/or a conversion pursuant to
subsection 3.10) of any Eurodollar Loan into an Alternate Base Rate Loan, in
either case on a day which is not the last day of an Interest Period with
respect thereto, including, but not limited to, any such loss or expense arising
from interest or fees payable by such Lender to lenders of funds obtained by it
in order to maintain its Eurodollar Loans hereunder (but excluding loss of
profit). This covenant shall survive termination of this Agreement and
repayment of the Loans.
3.13 Repayment of Loans; Evidence of Debt. (a) The Borrowers hereby
------------------------------------
unconditionally promise to pay to the Administrative Agent for the account of
each Lender (i) the then unpaid principal amount of each Revolving Credit Loan
of such Lender on the Termination Date, (ii) the then unpaid principal amount of
the Term Loans of such Lender on the Termination Date and (iii) the then unpaid
principal amount of the Swing Line Loans of the Swing Line Lender on the
Termination Date. The Borrowers hereby further agree to pay interest on the
unpaid principal amount of the Loans from time to time outstanding from the date
hereof until payment in full thereof at the rates per annum and on the dates set
forth in subsection 3.5.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrowers to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 9.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan and Term Loan made
hereunder, the Type thereof and each Interest Period applicable thereto, (ii)
the applicable Borrower, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to each Lender hereunder
and (iv) both the amount of any sum received by the Administrative Agent
hereunder from the Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 3.13(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
----- -----
obligations of the Borrowers therein recorded; provided that the failure of any
--------
Lender or the Administrative Agent to maintain the Register or any such account,
or any error therein, shall not in any manner affect the obligation of any
Borrower to repay (with applicable interest) the Loans made to such Borrower by
such Lender or to repay any other obligations in accordance with the terms of
this Agreement.
(e) Each Borrower agrees that, upon the request to the Administrative
Agent by any Lender, such Borrower will execute and deliver to such Lender (i) a
promissory note
<PAGE>
51
of such Borrower evidencing the Revolving Credit Loans of such Lender,
substantially in the form of Exhibit A with appropriate insertions as to date
and principal amount (a "Revolving Credit Note"), and/or (ii) a promissory note
---------------------
of such Borrower evidencing the Term Loan of such Lender, substantially in the
form of Exhibit B with appropriate insertions as to date and principal amount (a
"Term Loan Note"), and/or (iii) in the case of the Swing Line Lender, a
--------------
promissory note of the Company evidencing the Swing Line Loans of the Swing Line
Lender, substantially in the form of Exhibit C with appropriate insertions as to
date and principal amount (the "Swing Line Note").
---------------
3.14 Replacement of Lenders. In the event any Lender or the Issuing
----------------------
Lender is a Non-Funding Lender, exercises its rights pursuant to subsection
3.10 or requests payments pursuant to subsections 2.10 or 3.11, the Company, as
agent for the Borrowers, may require, at the Borrowers' expense (including
payment of any processing fees under subsection 9.6(e)) and subject to
subsection 3.12, such Lender or the Issuing Lender to assign, at par plus
accrued interest and fees, without recourse (in accordance with subsection 9.6)
all of its interests, rights and obligations hereunder (including all of its
Commitments and the Loans and other amounts at the time owing to it hereunder
and its Notes and its interest in the Letters of Credit) to a bank, financial
institution or other entity specified by the Company, provided that (i) such
--------
assignment shall not conflict with or violate any law, rule or regulation or
order of any court or other Governmental Authority, (ii) the Company shall have
received the written consent of the Administrative Agent, which consent shall
not unreasonably be withheld, to such assignment, (iii) the Borrowers shall have
paid to the assigning Lender or the Issuing Lender all monies other than
principal, interest and fees accrued and owing hereunder to it (including
pursuant to subsections 2.10, 3.10, 3.11 and 3.12) and (iv) in the case of a
required assignment by the Issuing Lender, the Letters of Credit shall be
canceled and returned to the Issuing Lender.
3.15 Appointment of the Company and Reliance on Representation of the
----------------------------------------------------------------
Company. Each Borrower hereby appoints the Company as its agent for all
- -------
purposes hereunder, and each Borrower agrees that the Administrative Agent and
the Lenders may rely on any representations, warranty, certificate, notice,
document or telephone request which purports to be executed or made, and which
the Administrative Agent or the Lenders in good faith believe to have been
executed or made, by the Company or any of its Authorized Officers, and each
Borrower further agrees to indemnify and hold the Administrative Agent and the
Lenders harmless for any action, including the making of the 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.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lenders to enter into this Agreement and to make the
Loans and to induce the Issuing Lender to issue, and the Participating Lenders
to participate in, the
<PAGE>
52
Letters of Credit, each Borrower hereby represents and warrants to each Lender
and the Administrative Agent as of the Closing Date and as of the making of any
extension of credit hereunder:
4.1 Financial Condition. (a) The consolidated audited balance
-------------------
sheets of the Company and its consolidated Subsidiaries as at December 31, 1995,
December 31, 1996 and December 31, 1997 the related consolidated statements of
operations and of cash flows for the fiscal years ended on each such dates,
audited by Coopers & Lybrand LLP, copies of which have heretofore been furnished
to each Lender, present fairly in accordance with GAAP the consolidated
financial condition of the Company and its consolidated Subsidiaries as at such
dates, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended. All such financial statements have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by such accountants and as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries had, at
the date of each balance sheet referred to above, any material Contingent
Obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
material interest rate or foreign currency swap or exchange transaction, which
is not reflected in the foregoing statements or in the notes thereto or
expressly permitted to be incurred hereunder.
(b) The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at March 31, 1998 and the related consolidated
statements of operations and of cash flows for the three-month period then
ended, certified by a Responsible Officer of the Company, copies of which have
heretofore been furnished to each Lender, present fairly in accordance with GAAP
the financial position of the Company and its consolidated Subsidiaries as at
such date and the consolidated results of their operations and their
consolidated cash flows for the three-month period then ended (subject to normal
year-end adjustments). Such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP (except
as approved by such Responsible Officer and disclosed therein). The Company and
its consolidated Subsidiaries did not have at the date of such balance sheet,
any material Contingent Obligation, contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency exchange transaction,
which is not reflected in such balance sheet or in the notes thereto or in the
notes to the Company's audited financial statements. During the period from
December 31, 1997 to the Closing Date, no dividends or other distributions have
been declared, paid or made upon the Capital Stock of the Company or any of its
consolidated Subsidiaries nor has any of the Capital Stock of the Company or any
of its consolidated Subsidiaries been redeemed, retired, purchased or otherwise
acquired for value by the Company or any of its consolidated Subsidiaries,
respectively, in each case, except as contemplated in connection with the
Merger.
(c) The unaudited consolidated pro forma balance sheet of the Company
--- -----
and its consolidated Subsidiaries, as of March 31, 1998, certified by a
Responsible Officer of the Company (the "Pro Forma Balance Sheet"), copies of
-----------------------
which have been furnished to each Lender, is the unaudited balance sheet of the
Company and its consolidated Subsidiaries
<PAGE>
53
adjusted to give effect (as if such events had occurred on the date set forth
therein) to (i) the Merger and each of the transactions contemplated by the
Merger Agreement and (ii) the incurrence of the Loans and the issuance of the
Letters of Credit to be incurred or issued, as the case may be, on the Closing
Date, and all Indebtedness that the Company and its consolidated Subsidiaries
expect to incur, and the payment of all amounts the Company and its consolidated
Subsidiaries expect to pay, in connection with the Merger. The Pro Forma
Balance Sheet, together with the notes thereto, was prepared based on good faith
assumptions in accordance with GAAP and is based on the best information
available to the Company as of the date of delivery thereof and reflects on a
pro forma basis the financial position of the Company and its consolidated
- --- -----
Subsidiaries as of March 31, 1998, as adjusted, as described above, assuming
that the events specified in the preceding sentence had actually occurred as of
March 31, 1998.
4.2 No Change. Since December 31, 1997, (a) there has been no
---------
change, and (as of the Closing Date only) no development or event which has had
or could reasonably be expected to have a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries taken as a whole, (ii) the ability of the
Company and its Subsidiaries to perform their obligations under the Credit
Documents and with respect to the other financings contemplated hereby or (iii)
the rights and remedies of the Lenders under the Credit Documents and (b) no
dividends or other distributions have been declared, paid or made upon the
Capital Stock of the Company nor has any of the Capital Stock of the Company
been redeemed, retired, repurchased or otherwise acquired for value by the
Company or any of its Subsidiaries, except as permitted by subsection 7.11 and,
in each case, except as contemplated in connection with the Merger.
4.3 Corporate Existence; Compliance with Law. Each of the Company
----------------------------------------
and its Subsidiaries (a) is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation, (b) has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to use its
corporate name and to own, lease or otherwise hold its properties and assets and
to carry on its business as presently conducted other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
or in the aggregate, would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, (c) is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary, except such jurisdictions where the failure so to
qualify would not have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole, and (d) is in compliance with all applicable
statutes, laws, ordinances, rules, orders, permits and regulations of any
governmental authority or instrumentality, domestic or foreign (including,
without limitation, those related to Hazardous Materials and substances), except
where noncompliance would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole. Neither the Company nor any of
its Subsidiaries has received prior to the date hereof any written communication
from a Governmental Authority that alleges that the Company or any of its
<PAGE>
54
Subsidiaries is not in compliance, in all material respects, with all material
federal, state, local or foreign laws, ordinances, rules and regulations, which
alleged non-compliance has not been remedied.
4.4 Corporate Power; Authorization. Each of the Company and its
------------------------------
Subsidiaries has the corporate power and authority to make, deliver and perform
each of the Credit Documents to which it is a party, each Borrower has the
corporate power and authority and legal right to borrow hereunder, and the
Company has the corporate power and authority to have Letters of Credit issued
for its account hereunder. Each of the Company and its Subsidiaries has taken
all necessary corporate action to authorize the execution, delivery and
performance of each of the Credit Documents to which it is or will be a party,
each Borrower has taken all necessary corporate action to authorize the
borrowings hereunder, and the Company has taken all necessary corporate action
to authorize the issuance of Letters of Credit for its account hereunder. No
consent or authorization of, or filing with, any Person (including, without
limitation, any Governmental Authority) is required in connection with the
execution, delivery or performance by the Company or any of its Subsidiaries, or
for the validity or enforceability against the Company or any of its
Subsidiaries, of any Credit Document except for consents, authorizations and
filings which have been obtained or made and are in full force and effect and
except (a) such consents, authorizations and filings, the failure to obtain or
perform (i) which would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole and (ii) which would not adversely
affect the validity or enforceability of any of the Credit Documents or the
rights or remedies of the Administrative Agent or the Lenders thereunder, and
(b) such filings as are necessary to perfect the Liens of the Lenders created
pursuant to this Agreement and the Security Documents.
4.5 Enforceable Obligations. This Agreement and the Merger Agreement
-----------------------
have been, and each of the other Credit Documents and any other agreement to be
entered into by any Credit Party pursuant to the Merger Agreement will be, duly
executed and delivered on behalf of such Credit Party that is party thereto.
The Merger Agreement has been duly executed and delivered on behalf of the
Company and AcquisitionCo. This Agreement and the Merger Agreement each
constitutes, and each of the other Credit Documents and any other agreement to
be entered into by any Credit Party pursuant to the Merger Agreement will
constitute upon execution and delivery, the legal, valid and binding obligation
of such Credit Party, enforceable against such Credit Party in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law). The Merger
Agreement constitutes the legal, valid and binding obligation of (a) the Company
enforceable against the Company in accordance with its terms and (b)
AcquisitionCo enforceable against AcquisitionCo in accordance with its terms,
except, in each case, as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).
<PAGE>
55
4.6 No Legal Bar. The execution, delivery and performance of each
------------
Credit Document, the incurrence or issuance of and use of the proceeds of the
Loans, the Subordinated Debt, the Preferred Stock and drawings under the Letters
of Credit, and the transactions contemplated by the Merger Agreement, the Credit
Documents and the documentation for the Subordinated Debt and the Preferred
Stock, (a) will not violate any Requirement of Law or any Contractual Obligation
applicable to or binding upon AcquisitionCo, the Company or any Subsidiary or
any of their respective properties or assets, in any manner which, individually
or in the aggregate, (i) would have a material adverse effect on the ability of
AcquisitionCo, the Company or any such Subsidiary to perform its obligations
under the Credit Documents, the Merger Agreement, and any other agreement to be
entered into pursuant to the Merger Agreement or in connection with the
Subordinated Debt or the Preferred Stock, to which it is a party, (ii) would
give rise to any liability on the part of the Administrative Agent or any Lender
or (iii) would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, and (b) will not result in the creation or
imposition of any Lien on any of its properties or assets pursuant to any
Requirement of Law applicable to it, as the case may be, or any of its
Contractual Obligations, except for the Liens arising under the Security
Documents (some of which may be the subject of the Intercreditor Agreement or
the Agency and Intercreditor Agreement).
4.7 No Material Litigation. No litigation by, investigation known to
----------------------
the Company by, or proceeding of, any Governmental Authority is pending against
the Company or any of its Subsidiaries (including after giving effect to the
Merger) that could reasonably be expected to affect (a) the validity, binding
effect or enforceability of the Merger Agreement or any Credit Document, (b) the
Loans made hereunder or the use of proceeds thereof, of the Subordinated Debt,
of the Preferred Stock or of any drawings under a Letter of Credit or (c) the
other transactions contemplated hereby or by the Merger Agreement. No lawsuits,
claims, proceedings or investigations are pending or, to the best knowledge of
the Company, threatened as of the Closing Date against or affecting the Company
or a Subsidiary or any of their respective properties, assets, operations or
businesses (including after giving effect to the Merger), in which there is a
probability of an adverse determination, and is reasonably likely, if adversely
decided, to have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole.
4.8 Investment Company Act. Neither the Company nor any Subsidiary
----------------------
is an "investment company" or a company "controlled" by an "investment company"
(as each of the quoted terms is defined or used in the Investment Company Act of
1940, as amended).
4.9 Federal Regulation. No part of the proceeds of any of the Loans
------------------
or Subordinated Debt or any drawing under a Letter of Credit will be used for
any purpose which violates the provisions of Regulation T, U or X of the Board.
Neither the Company nor any of its Subsidiaries is engaged or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under said Regulation U.
Following application of the proceeds of each Loan, not more than 25% of the
<PAGE>
56
value of the assets (either of the Company only or the Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2, or subject to any restriction contained in any agreement or instrument
between the Company and any Lender or any affiliate of any Lender relating to
Indebtedness within the scope of Section 8(d), will be "margin stock".
4.10 No Default. The Company and each of its Subsidiaries have
----------
performed all material obligations required to be performed by them under their
respective Contractual Obligations (including after giving effect to the Merger)
and they are not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any respect thereunder, except to the extent that
such breach or default would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole. Neither the Company nor any of
its Subsidiaries (including after giving effect to the Merger) is in default
under any material judgment, order or decree of any Governmental Authority,
domestic or foreign, applicable to it or any of its respective properties,
assets, operations or business, except to the extent that any such breaches or
defaults would not, in the aggregate, have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole.
4.11 Taxes. Except as set forth on Schedule 4.11, each of the Company
-----
and its Subsidiaries (including after giving effect to the Merger) has filed or
caused to be filed all material tax returns which, to the knowledge of the
Company, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves (or other sufficient provisions) in conformity with
GAAP have been provided on the books of the Company or its Subsidiaries
(including after giving effect to the Merger), as the case may be); and no tax
Lien has been filed, and, to the knowledge of the Company, no written claim is
being asserted, with respect to any such tax, fee or other charges.
4.12 Subsidiaries. After giving effect to the consummation of the
------------
Merger, the Subsidiaries and their respective jurisdictions of incorporation
shall be as set forth on Schedule 4.12.
4.13 Ownership of Property; Liens. As of the Closing Date and as of
----------------------------
the making of any extension of credit hereunder (subject to transfers and
dispositions of property permitted under subsection 7.5), each of the Company
and its Subsidiaries has good and valid title to all of its material assets
(other than real property or interests in real property) in each case free and
clear of all mortgages, liens, security interests or encumbrances of any nature
whatsoever except Permitted Liens. With respect to real property or interests
in real property, as of the Closing Date, each of the Company and its
Subsidiaries has (a) fee title to all of the real property listed on Schedule
4.13 under the heading "Fee Properties" (each, a "Fee Property"), and (b) good
------------
and valid title to the leasehold estates in all of the real property leased by
it and listed on Schedule 4.13 under the heading "Leased Properties" (each, a
<PAGE>
57
"Leased Property"), in each case, free and clear of all mortgages, liens,
---------------
security interests, easements, covenants, rights-of-way and other similar
restrictions of any nature whatsoever, except (i) Permitted Liens and (ii) as to
Leased Property, the terms and provisions of the respective lease therefor,
including, without limitation, the matters set forth on Schedule 4.13, and any
matters affecting the fee title and any estate superior to the leasehold estate
related thereto. The Fee Properties and the Leased Properties constitute, as of
the Closing Date, all of the real property owned in fee or leased by the Company
and its Subsidiaries.
4.14 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan that would result
in a material liability to the Company or any of its Subsidiaries, and each Plan
has complied with the applicable provisions of ERISA and the Code except to the
extent that any non-compliance would not result in a material liability to the
Company. Neither the Company nor any Commonly Controlled Entity has: been
involved in any transaction that would cause the Company or any of its
Subsidiaries to be subject to material liability with respect to a Plan to which
the Company or any Commonly Controlled Entity contributed or was obligated to
contribute during the six-year period ending on the date this representation is
made or deemed made; or incurred any material liability under Title IV of ERISA
which would become or remain a material liability of the Company or any of its
Subsidiaries after the Closing Date. No termination of a Single Employer Plan
has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period that would result in a material liability to the Company or any
of its Subsidiaries. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits that would result in a material
liability to the Company or any of its Subsidiaries. Neither the Company nor
any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made, in either case that would result in a
material liability to the Company or any of its Subsidiaries. To the knowledge
of the Company, no such Multiemployer Plan is in Reorganization or Insolvent.
The present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Company and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits by an amount that would result in a material liability to the Company
or any of its Subsidiaries, except as disclosed in the Company's audited
financial statements for the fiscal year ended December 31, 1997 provided to the
Lenders prior to the Closing Date. For purposes of this subsection 4.14, a
material liability shall exceed $7,500,000.
<PAGE>
58
4.15 Security Documents. (a) Upon execution and delivery thereof by
------------------
the parties thereto, the Collateral Agreement will be effective to create in
favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable security interest in the Collateral described therein.
When stock certificates representing or constituting the pledged stock described
in the Collateral Agreement are delivered to the Administrative Agent, such
security interest shall constitute a perfected first lien on, and security
interest in, all right, title and interest of the grantors party thereto in the
pledged stock described therein to the extent that such liens and security
interests are in accordance with the provisions of the Intercreditor Agreement
and the Agency and Intercreditor Agreement. In the case of the other Collateral
described in the Collateral Agreement, when Uniform Commercial Code financing
statements have been filed in each of the jurisdictions listed on Schedule
4.15(a), or arrangements have been made for such filing in such jurisdictions,
and upon such filing, and upon the taking of possession by the Administrative
Agent of any such Collateral the security interests in which may be perfected
only by possession, such security interests will, subject to the existence of
Permitted Liens and the provisions of the Intercreditor Agreement, constitute
perfected first priority liens on, and security interests in, all right, title
and interest of the grantors' party thereto in such other Collateral, to the
extent that such liens and security interests are in accordance with the
provisions of the Intercreditor Agreement and the Agency and Intercreditor
Agreement and except to the extent that a security interest cannot be perfected
therein by the filing of a financing statement or the taking of possession under
the Uniform Commercial Code of the relevant jurisdiction.
(b) Upon execution and delivery thereof by the applicable Credit
Party, each Mortgage will be effective to create in favor of the Administrative
Agent, for the benefit of the Lenders, a legal, valid and enforceable security
interest in the collateral described therein, and upon recording the Mortgages
in the jurisdictions listed on Schedule 4.13 (or, in the case of a Mortgage
delivered pursuant to subsection 6.9(c), the jurisdiction in which the property
covered by such Mortgage is located), such security interests will, subject to
the existence of Permitted Liens and the provisions of the Intercreditor
Agreement, constitute first (or, in the case of the Mortgages granted by
Meditrust Entities, second) priority liens on, and perfected security interests
in, all rights, title and interest of the debtor party thereto in the collateral
described therein to the extent that such liens and security interests are in
accordance with the provisions of the Intercreditor Agreement and the Agency and
Intercreditor Agreement.
4.16 Copyrights, Patents, Permits, Trademarks and Licenses. Schedule
-----------------------------------------------------
4.16 sets forth a true and complete list as of the Closing Date of all material
trademarks (registered or unregistered), trade names, service marks, patents,
pending patent applications and copyrights and applications therefor owned, used
or filed by or licensed to the Company and its Subsidiaries (after giving effect
to the Merger) and, with respect to registered trademarks (if any), contains a
list of all jurisdictions in which such trademarks are registered or applied for
and all registration and application numbers. Except as set forth on Schedule
4.16, the Company or a Subsidiary (after giving effect to the Merger) owns or
has the right to use, trademarks (registered or unregistered), trade names,
service marks, patents, pending patent applications and copyrights and
applications therefor referred to in such Schedule. Except as set forth on
Schedule 4.16, to the best knowledge of the Company, no claims are pending by
<PAGE>
59
any Person with respect to the ownership, validity, enforceability or the
Company's or any Subsidiary's use of any such trademarks (registered or
unregistered), trade names, service marks, patents, pending patent applications
and copyrights, or applications therefor, challenging or questioning the
validity or effectiveness of any of the foregoing, in any jurisdiction, domestic
or foreign, except to the extent such claims could not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
4.17 Environmental Matters. Except insofar as any exceptions to the
---------------------
following, individually or in the aggregate, could not reasonably be expected to
result in a material adverse effect on the business, assets, conditions
(financial or otherwise) or operations of the Company and its Subsidiaries,
taken as a whole:
(a) to the best knowledge of the Company, the properties owned,
leased, or otherwise operated by the Company or any of its Subsidiaries do
not contain, and have not previously contained, in, on or under, including,
without limitation, the soil and groundwater thereunder, any Hazardous
Materials in amounts or concentrations that constitute or constituted a
violation of, or could reasonably give rise to liability under,
Environmental Laws;
(b) to the best knowledge of the Company, the properties owned or
leased, or otherwise operated by the Company or any of its Subsidiaries and
all operations and facilities at such properties are in compliance with all
Environmental Laws, and there is no contamination or violation of any
Environmental Law which could interfere with the continued operation of, or
impair the fair saleable value of, such property;
(c) neither the Company nor any of its Subsidiaries has received or
is aware of any written complaint, notice of violation, alleged violation,
or notice of investigation or of potential liability under Environmental
Laws with regard to the Company or its Subsidiaries, nor does the Company
or any of its Subsidiaries have knowledge that any such action is being
contemplated, considered or threatened;
(d) to the best knowledge of the Company, Hazardous Materials have
not been generated, treated, stored or disposed of at, on or under any
properties presently or formerly owned, leased, or otherwise operated by
the Company or any of its Subsidiaries, nor have any Hazardous Materials
been transported from any such property, or come to be located at any other
property, in violation of or in a manner that could reasonably give rise to
liability under any Environmental Laws; and
(e) there are no governmental administrative actions or judicial
proceedings pending or, to the best knowledge of the Company and its
Subsidiaries, threatened under any Environmental Law to which the Company
or any of its Subsidiaries is a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements, other than permits
authorizing operations by the Company or any of its Subsidiaries,
outstanding under any Environmental Law.
<PAGE>
60
4.18 Accuracy and Completeness of Information. The factual
----------------------------------------
statements contained in the financial statements referred to in subsection 4.1,
the Form S-4, the 1997 Form 10-K, the Credit Documents (including the schedules
thereto), the Merger Agreement and any other certificates or documents furnished
or to be furnished by any Credit Party or any of their representatives or
advisors to the Administrative Agent or the Lenders from time to time in
connection with this Agreement, taken as a whole, do not and will not, to the
best knowledge of the Company, as of the date when made, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances in which the same were made, all except as otherwise qualified
herein or therein, such knowledge qualification being given only with respect to
factual statements made by Persons other than the Company or any of its
Subsidiaries.
4.19 AcquisitionCo. To the best knowledge of the Company,
-------------
AcquisitionCo is a Delaware corporation organized on behalf of the Investors to
effect the Merger and has not carried on any activities, incurred any
liabilities, assumed any obligations or acquired any assets prior to the Closing
Date other than those incident to its formation and the transactions
contemplated by the Merger Agreement or by the Credit Documents.
4.20 Health Care Permits. (a) Except as, in the aggregate, would not
-------------------
reasonably be expected to have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole: (i) each of the Company and its
Subsidiaries now has (after giving effect to the Merger), and has no reason to
believe it will not be able to maintain in effect, all Health Care Permits
necessary for the lawful conduct of its business or operations wherever now
conducted and as planned to be conducted, including without limitation, the
ownership and operation of its Health Care Facilities and Ancillary Businesses
pursuant to all Requirements of Law, (ii) all such Health Care Permits are in
full force and effect and have not been amended or otherwise modified,
rescinded, revoked or assigned, (iii) the Company and each of its Subsidiaries
is substantially complying with the requirements of each such Health Care
Permit, and no event has occurred, and no condition exists, which, with the
giving of notice, the passage of time, or both, would constitute a violation
thereof, (iv) neither the Company nor any of its Subsidiaries, has received any
written notice of any violation of any Requirement of Law, (v) to the knowledge
of the Company, no condition exists or event has occurred which in itself or
with the giving of notice or the lapse of time, or both, would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such Health
Care Permit, (vi) there is no claim filed with any Governmental Authority of
which the Company or any of its Subsidiaries has been notified in writing
challenging the validity of any such Health Care Permit and (vii) the
continuation, validity and effectiveness of all such Health Care Permits will
not be adversely affected by the Merger or the execution and performance of any
of the Credit Documents.
(b) All Health Care Facilities and Ancillary Businesses owned,
leased, managed or operated by the Company or any of its Subsidiaries are
entitled to participate in, and receive payment under, the appropriate Medicare,
Medicaid and related reimbursement programs, and any similar state or local
government-sponsored program, to the extent that the
<PAGE>
61
Company or any of its Subsidiaries has decided to participate in any such
program with respect to such Health Care Facility or Ancillary Business, as the
case may be, and to receive reimbursement from private and commercial payers and
health maintenance organizations to the extent applicable thereto. There are no
proceedings pending or, to the knowledge of the Company, any proceedings
threatened or investigations pending or threatened, by any Governmental
Authority with respect to the Company's or any of its Subsidiaries'
participation in the Medicare, Medicaid or related reimbursement programs and
which would reasonably be expected to have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole.
4.21 Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (a) the Borrowers' computer
systems and (b) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrowers' systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed in all material respects by September 30, 1999. The cost to the
Borrowers of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Borrowers (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) would not
reasonably be expected to result in a Default or Event of Default or a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole.
Except for such of the reprogramming referred to in the preceding sentence as
may be necessary, the computer and management information systems of the
Borrowers are and, with ordinary course upgrading and maintenance, will continue
for the term of this Agreement to be, sufficient to permit the Borrowers to
conduct their respective businesses without resulting in a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.
SECTION 5. CONDITIONS PRECEDENT
--------------------
5.1 Conditions to Initial Revolving Credit Loans and Letters of
-----------------------------------------------------------
Credit. The obligation of each Lender to make its Revolving Credit Loans, and
- ------
the obligation of the Issuing Lender to issue any Letter of Credit, on the
Closing Date are subject to the satisfaction, or waiver by such Lender,
immediately prior to or concurrently with the making of such Revolving Credit
Loans or the issuance of such Letters of Credit, as the case may be, of the
following conditions:
(a) Agreement; Notes; Merger Agreement. The Administrative Agent
----------------------------------
shall have received (i) a counterpart of this Agreement for each Lender
duly executed and delivered by a duly authorized officer of each Borrower
and (ii) for the account of each Revolving Credit Lender requesting the
same pursuant to subsection 3.13, a Revolving Credit Note of the Borrowers
conforming to the requirements hereof and executed by a duly authorized
officer of each Borrower. The Administrative Agent shall have received a
copy of the Merger Agreement.
<PAGE>
62
(b) Merger. (i) The Merger shall be consummated simultaneously
------
pursuant to the Merger Agreement with all fees, costs and expenses incurred
in connection therewith not to exceed approximately $45,000,000, all of the
conditions precedent set forth in Article 6 of the Merger Agreement shall
have been satisfied or waived by AcquisitionCo and no material provision of
the Merger Agreement shall have been amended, supplemented, waived or
otherwise modified without the prior written consent of the Administrative
Agent, which consent shall not be unreasonably withheld.
(ii) No more than approximately $362,000,000 exclusive of fees
and expenses (which amount includes (A) the value attributable to common
stock of the Company retained by the Existing Shareholders, (B) the
aggregate amount expended in connection with the exercise of purchase
options with respect to the properties, or the equity interests in the
Persons that are the owners of such properties, that are the subject of the
documentation relating to the Company's existing synthetic lease facility
and (C) the assumption, repayment, maintenance and/or amendment of certain
existing Indebtedness) shall be expended to repurchase shares of the
Company's common stock from existing holders thereof and refinance existing
Indebtedness.
(c) Capitalization; Capital Structure (i) (A) The Company shall
---------------------------------
have been capitalized by the Investors (directly or indirectly through
AcquisitionCo) with at least approximately $157,000,000 in cash from the
issuance of its common stock as described in the Form S-4 (or otherwise
having material terms satisfactory to the Arranger and representing at
least 90% of the voting Capital Stock of the Company) and (B) the value of
the common stock of the Company held by Existing Shareholders (valued at a
price per share equal to the price at which the Investors purchased their
common stock), when added to the amount referred to in clause (A) above,
shall equal at least $175,000,000; provided, however, that the common
-------- -------
equity ownership amounts referred to in clauses (A) and (B) above shall
each be reduced by an amount approximately equal to the excess of (x) the
gross cash proceeds from the issuance by the Company on the Closing Date of
Preferred Stock over (y) $40,000,000.
(ii) The Company shall have received at least approximately
$100,000,000 in gross cash proceeds from the issuance by the Company of (A)
Bridge Senior Subordinated Debt pursuant to a Bridge Loan Agreement
executed and delivered by the parties thereto in form and substance
satisfactory to the Lenders, which Bridge Loan Agreement shall be in full
force and effect and none of the provisions thereof shall have been
amended, waived, supplemented or otherwise modified without the prior
written consent of the Administrative Agent, (B) Senior Subordinated
Discount Notes or (C) Permanent Senior Subordinated Debt.
(iii) The Company shall have received approximately
$40,000,000 (or at least such amount, in the case of the issuance of
Preferred Stock) in gross cash proceeds from the issuance by the Company of
(A) Bridge Junior Subordinated Debt pursuant to a Bridge Loan Agreement
executed and delivered by the parties thereto in form and substance
satisfactory to the Lenders, which Bridge Loan Agreement shall be
<PAGE>
63
in full force and effect and none of the provisions thereof shall have been
amended, waived, supplemented or otherwise modified without the prior
written consent of the Administrative Agent or (B) Preferred Stock;
provided, however, that in the event that the gross cash proceeds received
-------- -------
by the Company in accordance with subsection 5.1(c)(ii) are more than
$100,000,000 but less than or equal to $105,000,000, the gross cash
proceeds required to be received by the Company pursuant to this subsection
5.1(c)(iii) shall be reduced by an amount equal to the amount by which such
gross cash proceeds received in accordance with subsection 5.1(c)(ii)
exceed $100,000,000; provided further, that in the event that the gross
-------- -------
cash proceeds received by the Company in accordance with subsection
5.1(c)(i)(A) are more than $157,000,000, the gross cash proceeds required
to be received by the Company pursuant to this subsection 5.1(c)(iii) from
the issuance of Preferred Stock shall be reduced by an amount equal to the
amount by which such gross cash proceeds received in accordance with
subsection 5.1(c)(i)(A) exceed $157,000,000.
(iv) The terms, conditions and documentation of all equity
securities of the Company or any of its Subsidiaries to be outstanding at
or after the Closing Date, the certificate of incorporation, by-laws, other
governing documents and the corporate and capital structure of the Company
and its Subsidiaries (excluding the identity and amount of equity
contribution of any Investor), in each case after giving effect to the
consummation of the Merger, shall be in form and substance satisfactory to
the Administrative Agent.
The execution and delivery of this Agreement by the Lenders and the
Administrative Agent shall be deemed to evidence the satisfaction of the
Lenders and the Administrative Agent with such of the matters referenced
and in clauses (i) through (iv) of this paragraph (c) as shall have been
disclosed and made available to the Administrative Agent prior to the date
hereof.
(d) Financial Statements. (i) The Lenders shall have received
--------------------
audited consolidated financial statements of the Company for the 1995, 1996
and 1997 fiscal years, which financial statements shall have been prepared
in accordance with GAAP; (ii) the Lenders shall have received unaudited
interim consolidated financial statements of the Company for the quarterly
period ended March 31, 1998, and such financial statements shall not
reflect any material adverse change in the consolidated financial condition
of the Company as reflected in the financial statements or projections
previously delivered to the Lenders; and (iii) the Lenders shall have
received a satisfactory pro forma balance sheet on a consolidated basis of
--- -----
the Company and its Subsidiaries as of March 31, 1998 reflecting and giving
effect to the Merger and the other transactions contemplated hereby.
(e) Fees. The Administrative Agent, the Arranger and the Lenders
----
shall have received all fees required to be paid, and all expenses and
other consideration for which invoices have been presented, on or before
the Closing Date.
<PAGE>
64
(f) Lien Searches; Lien Perfection. (i) The Administrative Agent
------------------------------
shall have received the results of a search of Uniform Commercial Code, tax
and judgment filings made with respect to each of the Company and its
Subsidiaries in the jurisdictions set forth on Schedule 4.15(a), together
with copies of financing statements disclosed by such searches, and such
searches shall disclose no Liens on any assets encumbered by any Security
Document, except for Liens permitted hereunder or, if unpermitted Liens are
disclosed, the Administrative Agent shall have received satisfactory
evidence of the release of such Liens and (ii) the Administrative Agent
shall have received duly executed financing statements on Form UCC-1,
necessary or, in the opinion of the Administrative Agent, desirable to
perfect the Liens created by the Security Documents.
(g) Environmental. The Lenders shall be reasonably satisfied, based
-------------
upon the results of the environmental diligence conducted by the
Administrative Agent and its advisors in cooperation with the Company, with
respect to environmental hazards, conditions or liabilities to which the
Company or any of its Subsidiaries may be subject (the execution and
delivery of this Agreement by the Lenders and the Administrative Agent
being deemed to evidence the satisfaction of the Administrative Agent with
such due diligence as shall have been disclosed and made available to the
Administrative Agent prior to the date hereof).
(h) Employee Benefit Matters. The Lenders shall be reasonably
------------------------
satisfied with all employee benefit matters involving the Company or any of
its Subsidiaries.
(i) Collateral Agreement. The Administrative Agent shall have
--------------------
received the Collateral Agreement executed and delivered by a duly
authorized officer of each of the parties thereto, together with stock
certificates representing 100% of all issued and outstanding shares of
Capital Stock of each of the Domestic Subsidiaries listed on Part A of
Schedule V thereto, and undated stock powers for each certificate, executed
in blank and delivered by a duly authorized officer of the applicable
pledgor and the acknowledgment and consent of the issuer thereunder in the
form annexed thereto.
(j) Legal Opinion. The Administrative Agent shall have received,
-------------
dated the Closing Date and addressed to the Administrative Agent and the
Lenders, an opinion of (i) Gibson, Dunn & Crutcher LLP, counsel to the
Credit Parties, in substantially the form of Exhibit J-1, with such changes
thereto as may be approved by the Administrative Agent and its counsel and
(ii) in-house counsel to the Company or special Massachusetts counsel, in
substantially the form of Exhibit J-2, with such changes thereto as may be
approved by the Administrative Agent and its counsel.
(k) Closing Certificate. The Administrative Agent shall have
-------------------
received a Closing Certificate of each Credit Party dated the Closing Date,
in substantially the form of Exhibits K-1 and K-2, respectively, with
appropriate insertions and attachments, in form and substance satisfactory
to the Administrative Agent and its counsel, executed by the President or
any Vice President and the Secretary or any Assistant Secretary of the
Company and its Subsidiaries, respectively.
<PAGE>
65
(l) Solvency Certificate. The Administrative Agent shall have
--------------------
received a certificate of the chief financial officer of the Company, in
form and substance reasonably satisfactory to the Administrative Agent,
which shall document the solvency of the Company and its Subsidiaries after
giving effect to the consummation of the Merger and the other transactions
and related financings contemplated hereby.
(m) Insurance. The Administrative Agent shall have received (i) a
---------
schedule describing all insurance maintained by the Company and its
Subsidiaries pursuant to subsection 6.5, Section 5(h) of the Collateral
Agreement and Section 5 of the Mortgages and (ii) binders (or other
customary evidence as to the obtaining and maintenance by the Company of
such insurance) for each policy set forth on such schedule insuring against
casualty and other usual and customary risks.
(n) Other Agreements. The Administrative Agent shall have received
----------------
each additional legal opinion, document or instrument reasonably requested
by the Required Lenders.
(o) Litigation. On the Closing Date, there shall be no actions,
----------
suits, injunctions, restraining orders or proceedings pending or threatened
against any Credit Party (i) with respect to this Agreement or any other
Credit Document or the transactions contemplated hereby or thereby
(including the Merger) which would be reasonably expected to have a
material adverse effect on the rights or remedies of the Lenders under the
Credit Documents or on the ability of any Credit Party to perform its
respective obligations to the Lenders hereunder or under any other Credit
Document or (ii) which the Administrative Agent or the Required Lenders
shall determine could reasonably be expected to have a material adverse
effect on the rights or remedies of the Lenders hereunder or under any
other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Lenders hereunder or under any other Credit
Document.
(p) Consents, Approvals and Filings. Except for the financing
-------------------------------
statements contemplated by the Collateral Agreement and the Mortgages, on
the Closing Date, all necessary governmental and other third party filings,
authorizations, consents, approvals or waivers required in connection with
the execution, delivery and performance by the Credit Parties, and the
validity and enforceability against the Credit Parties, of the Credit
Documents to which any of them is a party, or otherwise in connection with
the transactions contemplated by the Credit Documents and the Merger
Agreement, shall have been obtained or made and remain in full force and
effect (except where the failure to do so would not reasonably be expected
to have a material adverse effect on (i) the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, or (ii) (A) the validity or enforceability
of this Agreement, any of the Notes or the other Credit Documents or (B)
the rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder), and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains
or prevents such
<PAGE>
66
transactions or imposes materially adverse conditions upon the consummation
of such transactions.
(q) Contractual Restrictions. The Company and its Subsidiaries shall
------------------------
not be subject to any contractual or other restrictions that would be
violated by the Merger or the other transactions contemplated hereby,
including the granting of security interests and guarantees under the
Credit Documents and the documentation with respect to the Synthetic Lease
Facility, except to the extent that any such violation would not reasonably
be expected to have a material adverse effect on (i) the business, assets,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries, taken as a whole, (ii) (A) the validity or
enforceability of this Agreement, any of the Notes or the other Credit
Documents or (B) the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder, or (iii) the ability of the Borrowers to
satisfy their obligations hereunder or thereunder.
(r) Existing Credit Agreement. (i) On the Closing Date, the
-------------------------
commitments under the Existing Credit Agreement shall have been terminated,
all loans thereunder shall have been repaid in full, together with interest
thereon, all letters of credit issued thereunder shall have been terminated
or incorporated hereunder as, or supported hereunder by, Letters of Credit,
and all other amounts owing pursuant to the Existing Credit Agreement shall
have been repaid in full, and the Administrative Agent shall have received
evidence in form, scope and substance reasonably satisfactory to it that
the matters set forth in this subsection have been satisfied at such time.
(ii) On the Closing Date, the creditors under the Existing Credit
Agreement shall have terminated and released, or assigned to the
Administrative Agent for the benefit of the Lenders, all Liens on the
capital stock of and assets owned by the Company and its Subsidiaries, and
the Administrative Agent shall have received all such releases as may have
been requested by the Administrative Agent, which releases shall be in form
and substance reasonably satisfactory to the Administrative Agent.
(s) Intercreditor Agreement. The Administrative Agent shall have
-----------------------
received the Intercreditor Agreement executed and delivered by a duly
authorized officer of each of the parties thereto.
(t) Agency and Intercreditor Agreement. The Administrative Agent
----------------------------------
shall have received the Agency and Intercreditor Agreement executed and
delivered by a duly authorized officer of each of the parties thereto.
(u) Trust Guarantee. The Administrative Agent shall have received
---------------
the Trust Guarantee executed and delivered by a duly authorized officer of
the Trust.
5.2 Conditions to All Loans and Letters of Credit. The obligation of
---------------------------------------------
each Lender to make any Loan (other than any Revolving Credit Loan the proceeds
of which are to be used to repay Refunded Swing Line Loans) and the obligation
of the Issuing Lender to
<PAGE>
67
issue any Letter of Credit are subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made in or pursuant to Section 4 or which are contained in any
other Credit Document shall be true and correct in all material respects on
and as of the date of such Loan or of the issuance of such Letter of Credit
as if made on and as of such date (unless stated to relate to a specific
earlier date, in which case, such representations and warranties shall be
true and correct in all material respects as of such earlier date).
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing on such Borrowing Date or after
giving effect to such Loan to be made or such Letter of Credit to be issued
on such Borrowing Date.
Each borrowing by the Company hereunder and the issuance of each Letter of
Credit by the Issuing Lender hereunder shall constitute a representation and
warranty by the Company as of the date of such borrowing or issuance that the
conditions in clauses (a) and (b) and of this subsection 5.2 have been
satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
---------------------
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note or L/C Obligation remains outstanding and unpaid, any
amount (unless cash in an amount equal to such amount has been deposited to a
cash collateral account established by the Administrative Agent) remains
available to be drawn under any Letter of Credit or any other amount is owing to
any Lender or the Administrative Agent hereunder or under any of the other
Credit Documents, it shall, and, in the case of the agreements contained in
subsections 6.3 through 6.6, and 6.8 through 6.10, the Company shall cause each
of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent (with
--------------------
sufficient copies for each Lender which the Administrative Agent shall promptly
furnish to each Lender):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at the end of
such fiscal year and the related consolidated statements of stockholders'
equity and cash flows and the consolidated statements of income of the
Company and its Subsidiaries for such fiscal year, setting forth in each
case in comparative form the figures for the previous year and, in the case
of the consolidated balance sheet referred to above, reported on, without a
"going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, or qualification which would affect
the computation of financial covenants, by independent certified public
accountants of nationally recognized standing; provided
--------
<PAGE>
68
that delivery within the time period specified above of copies of the
Annual Report on Form 10-K of the Company 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 Meditrust) shall be deemed to
satisfy the requirements of this subsection 6.1(a) so long as such Form 10-
K as so adjusted shall contain the information referred to in this
subsection 6.1(a);
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and the portion of
the fiscal year of the Company through such date, setting forth in each
case in comparative form the figures for the corresponding quarter in, and
year to date portion of, the previous year, and the figures for such
periods in the budget prepared by the Company and furnished to the
Administrative Agent, certified by the chief financial officer, controller
or treasurer of the Company as being fairly stated in all material
respects; provided that delivery within the time period specified above of
--------
copies of the Quarterly Report on Form 10-Q of the Company 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 Meditrust) shall
be deemed to satisfy the requirements of this subsection 6.1(b) so long as
such Form 10-K as so adjusted shall contain the information referred to in
this subsection 6.1(b);
(c) as soon as available, but in any event not later than 45 days
after the beginning of each fiscal year of the Company to which such budget
relates, a preliminary consolidated operating budget for the Company and
its Subsidiaries taken as a whole; and as soon as available, any material
revision to or any final revision of any such preliminary annual operating
budget or any such consolidated operating budget; and
(d) concurrently with the delivery of financial statements pursuant
to subsection 6.1(a) or (b), a certificate of the chief financial officer
or treasurer of the Company setting forth, in reasonable detail, the
computations of Capital Expenditures as of the last day of the fiscal
period covered by such financial statements, the Leverage Ratio as of such
last day, and the Coverage Ratio as of such last day;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and (except in the case of
the statements referred to in paragraphs (c) and (d) of this subsection 6.1) in
accordance with GAAP.
<PAGE>
69
6.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent (with sufficient copies for each Lender which the Administrative Agent
shall promptly deliver to each Lender):
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 6.1(a), a letter from the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary to express their opinion on such
financial statements no knowledge was obtained of any Default or Event of
Default under subsections 3.4(b), 7.1, 7.3, and 7.5 through 7.11, except as
specified in such letter;
(b) within 15 days of the delivery of the financial statements
referred to in subsections 6.1(a) and (b) (except that the certificate as
to the statements referred to in clause (iii) below shall be delivered
concurrently with such financial statements), a certificate of the chief
financial officer or treasurer of the Company stating that, to the best of
such officer's knowledge, during such period (i) no Subsidiary has been
formed or acquired (or, if any such Subsidiary has been formed or acquired,
the Company has complied with the requirements of subsection 6.9 with
respect thereto), (ii) neither the Company nor any of its Subsidiaries has
changed its name, its principal place of business, its chief executive
office or the location of any material amount of tangible Collateral
without complying with the requirements of this Agreement and the Security
Documents with respect thereto, (iii) each of the Company and its
Subsidiaries has observed or performed all of its respective covenants and
other agreements, and satisfied every material condition, contained in this
Agreement, the Notes and the other Credit Documents to be observed,
performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate, (iv) showing in detail as of the end of the related fiscal
period the figures and calculations supporting such statement in respect of
clauses (c), (e), (f), (h), (i), (j), (k), (l), (m), (n) and (o) of
subsection 7.1, clauses (b), (c), (d), (f) and (i) of subsection 7.3 and
subsections 7.5 through 7.11 and any other calculations reasonably
requested by the Administrative Agent with respect to the quantitative
aspects of the other covenants contained herein, (v) if not specified in
the financial statements delivered pursuant to subsection 6.1, specifying
the aggregate amount of interest paid or accrued by the Company and its
Subsidiaries, and the aggregate amount of depreciation, depletion and
amortization charged on the books of the Company and its Subsidiaries,
during such accounting period, and (vi) (A) identify any owned Real
Property of the Company or a Subsidiary acquired during such accounting
period that, together with any improvements thereon, has a value of at
least $2,500,000 and (B) in the event that the aggregate value of all Real
Properties (other than Real Properties for which the granting of an
Additional Mortgage would be prohibited under the circumstances set forth
in clause (i) or (ii) of the proviso to subsection 6.9(c)) for which
Additional Mortgages are not granted hereunder is $10,000,000, identify any
owned Real Property of the Company or a Subsidiary acquired during such
accounting period;
<PAGE>
70
(c) promptly upon receipt thereof, copies of all final reports
submitted to the Company or to any of its Subsidiaries by independent
certified public accountants in connection with each annual, interim or
special audit of the books of the Company or any of its Subsidiaries made
by such accountants, and, upon the request of any Lender (through the
Administrative Agent), any final comment letter submitted by such
accountants to management in connection with their annual audit;
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available to
the public generally by the Company or any of its Subsidiaries, if any, and
all regular and periodic reports and all final registration statements and
final prospectuses, if any, filed by the Company or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission
or any Governmental Authority succeeding to any of its functions;
(e) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a management summary describing
and analyzing the performance of the Company and its Subsidiaries during
the periods covered by such financial statements;
(f) within 45 days after the end of each fiscal quarter, a summary of
all Asset Sales during such fiscal quarter including the amount of all Net
Proceeds from such Asset Sales not previously applied to prepayments of the
Loans and reductions of the Commitments pursuant to the proviso to
subsection 3.4(b)(iii);
(g) contemporaneously with the delivery to Meditrust 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 Meditrust; and
(h) promptly, such additional financial and other information as any
Lender may from time to time reasonably request (through the Administrative
Agent).
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
taxes and other obligations and liabilities of whatever nature, except (a) when
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Company or any of its
Subsidiaries, as the case may be, (b) for delinquent obligations which do not
have a material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole, and (c) for trade and other accounts payable in the ordinary course
of business which are not overdue for a period of more than 120 days or, if
overdue for more than 120 days, as to which a dispute exists and adequate
reserves in conformity with GAAP have been established on the books of the
Company or any of its Subsidiaries, as the case may be.
<PAGE>
71
6.4 Conduct of Business and Maintenance of Existence. Continue to
------------------------------------------------
engage in businesses of the same general type as now conducted by it (after
giving effect to the Merger), and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
material rights, material privileges, franchises, copyrights, patents,
trademarks and trade names necessary or desirable in the normal conduct of its
business except for rights, privileges, franchises, copyrights, patents,
trademarks and tradenames the loss of which would not in the aggregate have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole, and except as otherwise permitted by subsections 7.4 and 7.5; and
comply with all applicable Requirements of Law except to the extent that the
failure to comply therewith would not, in the aggregate, have a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.
6.5 Maintenance of Property; Insurance. (a) Keep all property
----------------------------------
useful and necessary in its business in good working order and condition
(ordinary wear and tear excepted); and
(b) Maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and with only such
deductibles as are usually maintained by, and against at least such risks (but
including, in any event, public liability insurance) as are usually insured
against in the same general area by, companies engaged in the same or a similar
business, and furnish to each Lender, (i) annually, a schedule disclosing (in a
manner substantially similar to that used in the schedule provided pursuant to
subsection 5.1(m)) all insurance against products liability risk maintained by
the Company and its Subsidiaries pursuant to this subsection 6.5(b) or otherwise
and (ii) upon written request of any Lender, full information as to the
insurance carried; provided that the Company may implement programs of self
--------
insurance in the ordinary course of business and in accordance with industry
standards for a company of similar size so long as reserves are maintained in
accordance with GAAP for the liabilities associated therewith.
6.6 Inspection of Property; Books and Records; Discussions. 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
which permit financial statements to be prepared in conformity with GAAP and all
Requirements of Law; and permit representatives of any Lender upon reasonable
notice (made through the Administrative Agent and no more frequently than
quarterly unless a Default or Event of Default shall have occurred and be
continuing) to visit and inspect any of its properties and examine and make
abstracts from any of its books and records, and to discuss the business,
operations, assets and financial and other condition of the Company and its
Subsidiaries with officers and employees thereof and with their independent
certified public accountants with prior reasonable notice to, and coordination
with, the chief financial officer or the treasurer of the Company.
<PAGE>
72
6.7 Notices. Promptly give notice to the Administrative Agent (to be
-------
distributed by the Administrative Agent to the Lenders):
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any instrument or
other agreement, guarantee or collateral document of the Company or any of
its Subsidiaries which default or event of default has not been waived and
would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, or any other default or event of default
under any such instrument, agreement, guarantee or other collateral
document which, if the amount referred to in the proviso to clause (e) of
Section 8 were $2,000,000, would have constituted a Default or Event of
Default under this Agreement, or (ii) litigation, investigation or
proceeding which may exist at any time between the Company or any of its
Subsidiaries and any Governmental Authority, or receipt of any notice of
any environmental claim or assessment against the Company or any of its
Subsidiaries by any Governmental Authority, which in any such case would
have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole;
(c) of any litigation or proceeding against the Company or any of its
Subsidiaries (i) in which more than $5,000,000 of the amount claimed is not
covered by insurance or (ii) in which injunctive or similar relief is
sought which if obtained would have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole;
(d) of the following events, as soon as practicable after, and in any
event within 30 days after, the Company knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any
Plan which Reportable Event could reasonably result in material liability
to the Company and its Subsidiaries, taken as a whole, or (ii) the
institution of proceedings or the taking of any other action by the PBGC,
the Company or any Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Plan and, with respect to a Multiemployer Plan,
the Reorganization or Insolvency of such Plan, in each of the foregoing
cases which could reasonably result in material liability to the Company
and its Subsidiaries, taken as a whole, and in addition to such notice,
deliver to the Administrative Agent and each Lender whichever of the
following may be applicable: (A) a certificate of a Responsible Officer of
the Company setting forth details as to such Reportable Event and the
action that the Company or such Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with the PBGC, or (B) any notice
delivered by the PBGC evidencing its intent to institute such proceedings
or any notice to the PBGC that such Plan is to be terminated, as the case
may be;
<PAGE>
73
(e) concurrently with the delivery of the information delivered
pursuant to subsection 6.2(f) and each prepayment required pursuant to
subsection 3.4(b)(iii), of any Asset Sale or substantially like-kind
exchange of real property by the Company or any of its Subsidiaries; and
(f) of the following events, as soon as practicable and in any event
within five Business Days (i) after obtaining knowledge thereof, the
occurrence of any event that would (with the giving of notice, the passage
of time, or both) be a violation of any Health Care Permit that is
necessary for the lawful conduct of the business or operations of the
Company or any of its Subsidiaries (other than violations which the Company
does not reasonably expect to be able to cure within a reasonable period of
time and which could not reasonably be expected to have a material adverse
effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a
whole), including, without limitation, the ownership and operation of its
Health Care Facilities and Ancillary Businesses, (ii) after receipt
thereof, any notice of any violation of any Requirements of Law which would
(with the giving of notice, the passage of time, or both) cause any of the
Health Care Permits referred to in clause (i) to be modified, rescinded or
revoked and which the Company does not reasonably expect to be able to cure
within a reasonable period of time, (iii) after receipt thereof, any
notice, summons, citation or other proceeding imposing a revocation,
suspension or a materially adverse modification of any Medicare provider
agreement, Medicaid provider agreement, Medicare certification or Medicaid
certification applicable to any of the Health Care Businesses of the
Company or any of its Subsidiaries in any manner which would reasonably be
expected to have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries, taken as a whole, or (iv) after obtaining knowledge
thereof, any revocation or involuntary termination of any Medicare provider
agreement, Medicaid provider agreement, Medicare certification or Medicaid
certification applicable to any of the Health Care Businesses of the
Company or any of its Subsidiaries that could reasonably be expected to
have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer of the Company setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (d)) stating what
action the Company proposes to take with respect thereto.
6.8 Environmental Laws. (a) (i) Comply with all Environmental Laws
------------------
applicable to it, and obtain, comply with and maintain any and all Environmental
Permits necessary for its operations as conducted and as planned and (ii) take
reasonable efforts to ensure that all of its tenants, subtenants, contractors,
subcontractors, and invitees comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits, applicable to any of
them insofar as any failure of the Company, its Subsidiaries or any of the
foregoing so to comply, obtain or maintain could result in a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the
<PAGE>
74
Company and its Subsidiaries, taken as a whole. Noncompliance by the Company or
any of its Subsidiaries with any applicable Environmental Law or Environmental
Permit shall be deemed not to constitute a breach of this subsection 6.8(a),
provided that, upon learning of any such noncompliance, the Company and its
- --------
Subsidiaries shall promptly undertake reasonable efforts to achieve compliance
or to contest by appropriate proceedings any alleged noncompliance and,
provided, further, that, in any case, such noncompliance, and any other
- -------- -------
noncompliance with Environmental Law and any contesting of allegations of
noncompliance with Environmental Laws, individually or in the aggregate, could
not reasonably be expected to give rise to a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole.
(b) Comply in a timely manner with all orders and lawful directives
regarding Environmental Laws issued to the Company or any of its Subsidiaries by
any Governmental Authority, other than such orders and lawful directives as to
which an appeal or other challenge has been timely and properly taken in good
faith and the pendency of any and all such appeals and other challenges could
not reasonably be expected to give rise to a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole.
(c) Maintain, update as appropriate, and implement in all material
respects an environmental program reasonably designed to (i) ensure that the
Company, its Subsidiaries, any of their respective operations (including,
without limitation, disposal), and any properties owned, leased or operated by
any of them, attain and remain in substantial compliance with all applicable
Environmental Laws, (ii) reasonably and prudently manage any liabilities or
potential liabilities that the Company, any of the other Credit Parties, any of
their respective operations (including, without limitation, disposal), and any
properties owned or leased by any of them, may have under all applicable
Environmental Laws, and (iii) ensure that the Company and its Subsidiaries
undertake reasonable efforts to identify, and reasonably evaluate, issues of
compliance with and liability under Environmental Laws prior to acquiring,
directly or indirectly, any ownership or leasehold interest in real property, or
other interest in any real property that could give rise to Company or any of
its Subsidiaries being subjected to liability under any Environmental Law as a
result of such acquisition.
6.9 Additional Collateral. (a) Subject to the limitations set forth
---------------------
in subsection 6.9(b) and subsection 6.9(c) and except with respect to any joint
venture investments permitted by subsection 7.6(h), with respect to any assets
acquired after the Closing Date by the Company or any of its Subsidiaries (other
than (x) any assets described in paragraph (b), (c) or (d) of this subsection
and (y) immaterial assets) as to which the Administrative Agent, for the benefit
of the Lenders, does not have a perfected Lien, promptly (and in any event
within 30 days after the acquisition thereof): (i) execute and deliver to the
Administrative Agent such amendments or supplements to the relevant Security
Documents or such other documents as the Administrative Agent shall deem
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a Lien on such assets, and (ii) take all actions necessary or
advisable to cause such Lien to be duly perfected to the extent required by such
Security Document in accordance with all applicable
<PAGE>
75
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be reasonably requested by the
Administrative Agent.
(b) With respect to any Person that is or becomes a Domestic
Subsidiary, promptly upon the request of the Administrative Agent (i) execute
and deliver to the Administrative Agent, for the benefit of the Lenders, a new
pledge agreement or such amendments to the Collateral Agreement as the
Administrative Agent reasonably shall deem necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital
Stock of such Subsidiary which is owned by the Company or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Company or such Domestic
Subsidiary, as the case may be, and (iii) cause such new Domestic Subsidiaries
(A) to become a party to this Agreement as a Borrower (or to become a guarantor
of the obligations hereunder and under the Synthetic Lease Facility), to become
a party to the Collateral Agreement and to become a party to the Agency and
Intercreditor Agreement or, in each case, to become a party to such comparable
documentation which is in form and substance reasonably satisfactory to the
Administrative Agent and (B) to take all actions necessary or advisable to cause
the Lien created by the Collateral Agreement or such comparable documentation,
as the case may be, to be duly perfected to the extent required by such
agreement or document in accordance with all applicable Requirements of Law,
including, without limitation, the filing of financing statements in such
jurisdictions as may be reasonably requested by the Administrative Agent,
provided, that the Company and its Subsidiaries shall not be required to comply
- --------
with the requirements of this subsection 6.9(b) with respect to a Domestic
Subsidiary if (x) such compliance is prohibited by such Domestic Subsidiary's
Contractual Obligations with third parties in connection with lease arrangements
or Indebtedness for borrowed money and (y) the aggregate Acquisition
Consideration for all Domestic Subsidiaries acquired subsequent to the date
hereof which are not Borrowers hereunder or guarantors of the obligations
hereunder and under the Synthetic Lease Facility shall not exceed $30,000,000.
(c) Upon the request of the Administrative Agent, the Company will,
and will cause its Domestic Subsidiaries to, promptly grant to the
Administrative Agent, within 60 days of such request, security interests and
mortgages (an "Additional Mortgage") in such owned Real Property of the Company
-------------------
and its Domestic Subsidiaries as are acquired after the Closing Date by the
Company or such Domestic Subsidiary as additional security for the obligations
of the Credit Parties under any Credit Document, provided that an Additional
--------
Mortgage covering any such owned Real Property will not be required if (i) such
Real Property is already mortgaged to a third party to the extent permitted by
subsection 7.2, (ii) with respect to a Domestic Subsidiary, such Additional
Mortgage is not permitted by such Domestic Subsidiary's Contractual Obligations
with third parties in connection with lease arrangements or Indebtedness for
borrowed money or (iii) (A) the value of such Real Property, together with any
improvements thereon, is less than $2,500,000 and (B) the aggregate value of all
Real Properties (other than Real Properties for which the granting of an
Additional Mortgage would be prohibited under the circumstances set forth in
clause (i) or (ii) of this proviso) for which Additional Mortgages are not
granted hereunder shall not exceed $10,000,000. Each such Additional Mortgage
shall be granted pursuant to documentation
<PAGE>
76
substantially similar to the form of Mortgage attached hereto as Exhibit L and
shall constitute valid and enforceable perfected Liens subject only to Permitted
Liens and such other Liens reasonably acceptable to the Administrative Agent.
The Additional Mortgages or instruments related thereto shall be duly recorded
or filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Administrative Agent,
for the benefit of the Lenders, required to be granted pursuant to the
Additional Mortgages and all taxes, fees and other charges payable in connection
therewith shall be paid in full. If requested by the Administrative Agent or
the Required Lenders, the Company shall provide a lender's title policy with
respect to each such Additional Mortgage conforming to the requirements of
subsection 6.12.
(d) With respect to any new Foreign Subsidiary created or acquired
after the Closing Date by the Company or any of its Subsidiaries, promptly (i)
execute and deliver to the Administrative Agent such amendments to the
Collateral Agreement, or such other Security Document, as the Administrative
Agent deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary that is owned by the Company or any of its
Subsidiaries (provided that in no event shall more than 65% of the total
outstanding voting Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Company or such Subsidiary, as the
case may be, and take such other action as may be necessary or, in the opinion
of the Administrative Agent, desirable to perfect the Administrative Agent's
security interest therein, and (iii) if reasonably requested by the
Administrative Agent (taking into account the cost involved in relation to the
value of the collateral security to be afforded thereby), deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent, provided that the Company and its
--------
Subsidiaries shall not be required to comply with the requirements of this
subsection 6.9(c) with respect to a Foreign Subsidiary if such compliance is
prohibited by such Foreign Subsidiary's Contractual Obligations with third
parties in connection with lease arrangements or Indebtedness for borrowed
money.
6.10 Health Care Permits and Approvals. Take all action reasonably
---------------------------------
necessary (a) to maintain in full force and effect all Health Care Permits
reasonably necessary for the lawful conduct of its business or operations where
now conducted and as planned to be conducted, including the ownership and
operation of its Health Care Facilities and Ancillary Businesses pursuant to all
Requirements of Law and (b) to ensure that each Health Care Facility and
Ancillary Business owned, leased, managed or operated by the Company or any of
its Subsidiaries are entitled to participate in, and receive payment under, the
appropriate Medicare, Medicaid and related reimbursement programs, and any
similar state or local government-sponsored program, to the extent the Company
or any of its Subsidiaries has decided to participate in any such program with
respect to such Health Care Facility or Ancillary Business, as the case may be,
and to receive reimbursement from private and commercial payers and health
maintenance organizations to the extent applicable thereto, except, in each
case, where a failure to do so could not reasonably be expected to have a
<PAGE>
77
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole.
6.11 Operating Leases. Furnish to the Administrative Agent, at the
----------------
time of the acquisition of any Encumbered Subsidiary the principal asset of
which is the subject of an operating lease under which such Encumbered
Subsidiary is the lessee, or of the acquisition by any Encumbered Subsidiary of
any assets the principal one of which is the subject of an operating lease under
which such Encumbered Subsidiary is the lessee, an appraisal prepared by an
appraiser of recognized standing in the area in which such leased property is
located of the fair market value of such property.
6.12 Mortgages. Furnish to the Administrative Agent, within 60 days
---------
after the Closing Date, (a) fully executed counterparts of deeds of trust,
mortgages and similar documents in each case in form and substance reasonably
satisfactory to the Administrative Agent and substantially in the form of
Exhibit L (each a "Mortgage" and collectively, the "Mortgages") covering all the
-------- ---------
Mortgaged Properties, and arrangements reasonably satisfactory to the
Administrative Agent shall be in place by the 60th day after the Closing Date to
provide that counterparts of such Mortgages shall be promptly recorded upon
execution in all places to the extent necessary or desirable, in the reasonable
judgment of the Administrative Agent, effectively to create a valid and
enforceable first (or, in the case of the Mortgages granted by the Meditrust
Entities, second) priority Lien, subject only to Permitted Liens, on each
Mortgaged Property in favor of the Administrative Agent (or such other trustee
as may be required or desired under local law) for the benefit of the Lenders,
(b) a lender's title insurance policy, paid for by the Company, issued by a
nationally recognized title insurance company, together with such endorsements,
coinsurance and reinsurance as may be reasonably requested by the Administrative
Agent, in form and substance reasonably acceptable to the Administrative Agent,
insuring each Mortgage as a first (or, in the case of the Mortgages granted by
the Meditrust Entities, second) lien on the relevant Mortgaged Property and
subject only to Permitted Liens and Liens expressly agreed to by the
Administrative Agent and (c) such other documents (including without limitation,
ALTA/ASCM surveys of each Mortgaged Property made in accordance with ALTA/ASCM
standards, including Table A, Items Nos. 1-4 and 6-13 as updated by inspection)
as are reasonably required by the Administrative Agent.
SECTION 7. NEGATIVE COVENANTS
------------------
The Company hereby agrees that it shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly so long as the
Commitments remain in effect or any Loan, Note or L/C Obligation remains
outstanding and unpaid, any amount (unless cash in an amount equal to such
amount has been deposited to a cash collateral account established by the
Administrative Agent) remains available to be drawn under any Letter of Credit
or any other amount is owing to any Lender or the Administrative Agent hereunder
or under any other Credit Document (it being understood that each of the
permitted exceptions to each of the covenants in this Section 7 is in addition
to, and not overlapping with, any other of such permitted exceptions except to
the extent expressly provided):
<PAGE>
78
7.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness, except:
(a) the Indebtedness outstanding on the Closing Date and reflected on
Schedule 7.1(a), including the refinancing of any such Indebtedness on terms and
conditions that, in the good faith judgment of the Company, taken as a whole are
no less favorable to the Company and its Subsidiaries or the Lenders;
(b) Indebtedness of any Credit Party pursuant to (i) any Credit
Document and (ii) the Synthetic Lease Facility;
(c) Indebtedness (i) of the Company to any Domestic Subsidiary, (ii)
of any Domestic Subsidiary to the Company or any other Domestic Subsidiary and
(iii) of any Foreign Subsidiary to the Company or any other Subsidiary in an
aggregate principal amount at any one time outstanding for all Foreign
Subsidiaries not to exceed the sum of $15,000,000 plus the sum of any amounts
----
dividended or distributed to the Company or any Domestic Subsidiary (other than
an Encumbered Subsidiary) subsequent to the date hereof by any Foreign
Subsidiary, less the sum of (A) the aggregate amount of any Contingent
----
Obligations of the Borrowers in respect of then outstanding obligations of
Foreign Subsidiaries pursuant to subsection 7.3(c)(ii) and (B) the aggregate
amount of any investments made in Foreign Subsidiaries subsequent to the date
hereof pursuant to subsection 7.6(b)(iii), provided that such Indebtedness
--------
referred to in this clause (c) is evidenced, if requested by the Administrative
Agent, by a promissory note or promissory notes which has or have been pledged
to the Administrative Agent on terms and conditions satisfactory to the
Administrative Agent and provided, further, that at no time shall (x) the sum,
-------- -------
calculated for each Encumbered Subsidiary and then aggregated for all Encumbered
Subsidiaries, of the excess, if any, of (1) the aggregate amount of all loans,
advances and investments (other than any investments in connection with
acquisitions of Encumbered Subsidiaries permitted by subsection 7.6(g)(iv)) by
the Company or any Subsidiary (other than an Encumbered Subsidiary) to or in
such Encumbered Subsidiary subsequent to the date hereof as permitted by this
subsection and subsection 7.6(b)(ii)(B) over (2) the aggregate amount of loan
repayments and dividends and distributions from such Encumbered Subsidiary to
the Company or any Subsidiary (other than an Encumbered Subsidiary) subsequent
to the date hereof exceed (y) the sum of $25,000,000 plus the then Added Amount;
----
(d) Indebtedness of the Company in respect of:
(i)(A) up to $105,000,000 principal amount of Bridge Senior
Subordinated Debt issued on the Closing Date, and additional principal
amount of Bridge Senior Subordinated Debt issued in lieu of cash
interest on the outstanding Bridge Senior Subordinated Debt and
otherwise as contemplated by the Bridge Loan Agreement upon exchange
of Bridge Senior Subordinated Debt into exchange notes or (B) Senior
Subordinated Discount Notes issued on the Closing Date for gross cash
proceeds to the Company of up to $105,000,000;
<PAGE>
79
(ii) Permanent Senior Subordinated Debt in an aggregate
principal amount not to exceed the accreted value of such Senior
Subordinated Discount Notes (or any refinancing thereof permitted
hereunder) at the time of such refinancing and 10% of such value, the
proceeds (net of any fees and expenses in connection therewith) of
which shall be applied to prepay, redeem, retire or repurchase either
(A) the outstanding principal amount of the Bridge Senior Subordinated
Debt, (B) the accreted value of the Senior Subordinated Discount Notes
at the time of such refinancing or (C) other Permanent Senior
Subordinated Debt;
(iii) up to $40,000,000 principal amount of Bridge Junior
Subordinated Debt issued on the Closing Date, and additional principal
amount of Bridge Junior Subordinated Debt issued in lieu of cash
interest on the outstanding Bridge Junior Subordinated Debt and
otherwise as contemplated by the Bridge Loan Agreement upon exchange
of Bridge Junior Subordinated Debt into exchange notes; provided,
--------
however, that in the event that the aggregate principal amount of
-------
Bridge Senior Subordinated Debt or Senior Subordinated Discount Notes,
as the case may be, issued as permitted by subsection 7.1(d)(i) is
more than $100,000,000 but less than or equal to $105,000,000, the
principal amount of Indebtedness permitted by this subsection
7.1(d)(iii) shall be reduced by an amount equal to the amount by which
such Bridge Senior Subordinated Debt or Senior Subordinated Discount
Notes, as the case may be, exceeds $100,000,000; and
(iv) Permanent Junior Subordinated Debt in an aggregate
principal amount not to exceed the principal amount of the Bridge
Junior Subordinated Debt or, if the issuance thereof to refinance
Preferred Stock shall be consented to by the Required Lenders, the
Exchange Debentures (or, in either case, any refinancing thereof
permitted hereunder) at the time of such refinancing and 10% of such
value, the proceeds (net of any fees and expenses in connection
therewith) of which shall be applied to prepay, redeem, retire or
repurchase either (A) the outstanding principal amount of Bridge
Junior Subordinated Debt, (B) the outstanding amount of Preferred
Stock, (C) the outstanding principal amount of Exchange Debentures, if
any, or (D) other Permanent Junior Subordinated Debt.
(e) (i) Indebtedness of the Company and its Subsidiaries for (A)
industrial revenue bonds or other similar governmental and municipal bonds and
(B) the deferred purchase price of newly acquired equipment of the Company and
its Subsidiaries (pursuant to purchase money mortgages or otherwise and whether
owed to the seller or a third party) used in the ordinary course of business
(provided such financing is entered into within 180 days of the acquisition of
- ---------
such property) of the Company and its Subsidiaries in an amount (based on the
remaining balance of the obligations therefor on the books of the Company and
its Subsidiaries) which shall not exceed $10,000,000 in the aggregate at any one
time outstanding for Indebtedness described in this clause (i), and (ii)
Indebtedness of the Company and its
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Subsidiaries in respect of Financing Leases to the extent subsections 7.7 and
7.10 would not be contravened;
(f) (i) Indebtedness assumed in connection with acquisitions
permitted by subsection 7.6(g) (so long as such Indebtedness was not incurred in
anticipation of such acquisitions), (ii) Indebtedness of newly acquired
Subsidiaries acquired in such acquisitions (so long as such Indebtedness was not
incurred in anticipation of such acquisition), (iii) Indebtedness owed to the
seller in any acquisition permitted by subsection 7.6(g) constituting part of
the purchase price thereof and (iv) Indebtedness of the Company or any
Subsidiary incurred to finance any acquisition permitted by subsection 7.6(g),
all of which Indebtedness permitted by this subsection 7.1(f) (including
refinancings thereof as permitted by subsection 7.1(m)), when added to the
aggregate principal amount of Indebtedness permitted by subsection 7.1(h) or
7.1(n) the Net Proceeds of which shall have been applied to refinance preferred
stock the proceeds of which were originally used to finance the acquisition of
an Encumbered Subsidiary permitted by subsection 7.6(g), shall not exceed in the
aggregate at any one time outstanding an amount equal to the excess, if any, of
(x) $175,000,000 over (y) the excess, if any, of (1) the aggregate Acquisition
Consideration given subsequent to the date hereof in connection with
acquisitions permitted by subsection 7.6(g)(iv) (excluding (A) Capital Stock of
the Company issued in connection with such acquisitions, (B) the Net Proceeds of
issuances of Capital Stock to the extent such Net Proceeds are contemporaneously
applied toward such acquisitions, (C) any Indebtedness constituting a portion of
such Acquisition Consideration and (D) the Net Proceeds of any bond issuance as
permitted by subsection 7.1(e) to the extent such Net Proceeds are
contemporaneously applied toward such acquisition) over (2) an amount equal to
the aggregate Acquisition Consideration (or in the event of one or more partial
sales of assets or Capital Stock as set forth in clause (aa) below, the proceeds
thereof not to exceed, individually or in the aggregate, the total Acquisition
Consideration therefor) given subsequent to the date hereof in connection with
acquisitions permitted by subsection 7.6(g)(iv) (excluding Capital Stock, Net
Proceeds of issuances thereof, any Indebtedness constituting a portion of such
Acquisition Consideration and Net Proceeds of certain bond issuances as
aforesaid) with respect to which either (aa) all or a portion of the assets or
Capital Stock so acquired shall have been subsequently sold or (bb) in any case
where the Subsidiary that is the subject of such acquisition or that is the
holder of the assets so acquired is, immediately after giving effect to such
acquisition, an Encumbered Subsidiary, such Encumbered Subsidiary shall have
ceased to be an Encumbered Subsidiary; provided that the aggregate principal
--------
amount of outstanding Indebtedness permitted by this clause (iv) at any time
outstanding shall be increased by an amount equal to the aggregate amount which
the Company would then be permitted to borrow under subsection 7.1(e)(i) and
invest under subsection 7.6(h);
(g) Indebtedness in connection with workmen's compensation
obligations and general liability exposure of the Company and its Subsidiaries;
(h) unsecured subordinated indebtedness of the Company and its
Subsidiaries, provided that (i) such Indebtedness shall not exceed $10,000,000
--------
in aggregate principal amount at any one time outstanding plus any additional
principal amount of such Indebtedness issued in lieu of cash interest on such
outstanding Indebtedness or any
<PAGE>
81
refinancing thereof, (ii) no part of the principal amount of such Indebtedness
shall have a maturity date earlier than the one-year anniversary of the
Termination Date and (iii) the non-default interest rate thereon shall not
exceed 12% per annum;
(i) additional Indebtedness of the Company and its Subsidiaries in an
aggregate principal amount at any one time outstanding not in excess of
$15,000,000.
(j) Indebtedness in respect of letters of credit (other than Letters
of Credit issued hereunder) in an aggregate principal amount equal to $5,000,000
at any one time outstanding;
(k) Indebtedness of Foreign Subsidiaries owing to Persons other than
the Company or any other Subsidiary in an aggregate principal amount at any one
time outstanding not in excess of $15,000,000;
(l) Indebtedness of a Domestic Subsidiary in an aggregate principal
amount at any one time outstanding not in excess of $18,000,000 assumed in
connection with the exercise of purchase options with respect to the properties,
or the equity interests in the Persons that are the owners of such properties,
that are the subject of the currently existing Financing Leases to which
Harborside of Cleveland, L.P. is a party;
(m) refinancings on market terms and conditions of Indebtedness
permitted pursuant to subsection 7.1(f), provided that either (i) the Available
--------
Revolving Credit Commitment at the time of any such refinancing is less than the
amount being refinanced or (ii) such refinancing is of Indebtedness of an
Encumbered Subsidiary that occurs at the final maturity of such Indebtedness and
the payment of such Indebtedness in full at such final maturity would not (as a
result of Contractual Obligations with third parties in connection with lease
arrangements or other Indebtedness for borrowed money) result in such Encumbered
Subsidiary ceasing to be an Encumbered Subsidiary;
(n) Indebtedness the aggregate gross proceeds received by the Company
in connection with the issuance of which do not exceed $25,000,000 on terms and
conditions (other than those relating to the rate of interest payable thereon,
provided that such rate may not exceed the then prevailing market rate for
similar issues by comparable issuers) substantially similar to those described
in the Offering Memorandum as being applicable to the Senior Subordinated
Discount Notes; and
(o) additional secured Indebtedness of the Company and its
Subsidiaries in an aggregate principal amount of any one time outstanding not in
excess of $10,000,000.
For the purposes of this subsection 7.1, Indebtedness incurred in
connection with the payment by the Company or any Subsidiary of expenses,
operating costs and maintenance capital expenditures of any Domestic Subsidiary
in the ordinary course of the business of such Domestic Subsidiary shall not be
considered to be a loan of, or advance by, the Company or any Subsidiary to such
Domestic Subsidiary and shall be permitted under this Agreement.
<PAGE>
82
7.2 Limitation on Liens. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of its property, assets, income or profits, whether now owned
or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or such Subsidiary, as the case may be, in accordance with
GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations which are not yet due or which are bonded or which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases, licenses,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
(e) easements (including, without limitation, reciprocal easement
agreements), rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments, changes, and
other similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which do not in the
aggregate materially detract from the aggregate value of the properties of the
Company and its Subsidiaries, taken as a whole, or in the aggregate materially
interfere with or adversely affect in any material respect the ordinary conduct
of the business of the Company and its Subsidiaries on the properties subject
thereto, taken as a whole;
(f) Liens in favor of the Administrative Agent and the Lenders
pursuant to the Credit Documents, including Liens pursuant to the Credit
Documents in respect of Interest Rate Agreements, and bankers' liens arising by
operation of law;
(g) Liens on property of the Company or any Subsidiary created solely
for the purpose of securing Indebtedness permitted by subsection 7.1(e)
representing or incurred to finance, refinance or refund the purchase price of
property or the cost of making improvements thereto, provided that (i) no such
--------
Lien shall extend to or cover property of the Company or such Subsidiary other
than the respective property so acquired or improved and (ii) the principal
amount of Indebtedness secured by any such Lien shall not exceed the fair market
value of such property at the time of the creation of such Indebtedness;
<PAGE>
83
(h) Liens on property of the Company or any Subsidiary acquired with
the proceeds of any Indebtedness permitted by subsection 7.1(f), or on the
Capital Stock of any such acquired Subsidiary, to secure such Indebtedness,
provided that (i) no such Lien shall extend to or cover other property of the
- --------
Company or such Subsidiary and (ii) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such property;
(i) Liens existing on the Closing Date after giving effect to the
consummation of the Merger and described in subsection 4.13 or Schedule 7.2(i)
(including the extension of any Liens listed on such Schedule relating to any
Indebtedness permitted under subsection 7.1(a) in connection with any
refinancing of such Indebtedness permitted by such subsection and any Liens
securing Indebtedness to be repaid on the Closing Date to the extent the Company
has made arrangements to terminate such Liens in a manner satisfactory to the
Administrative Agent), provided that no such Lien shall extend to or cover other
--------
property of the Company or the respective Subsidiary other than the respective
property so encumbered and the principal amount of Indebtedness secured by any
such Lien shall at no time exceed the original principal amount of the
Indebtedness so secured;
(j) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Commercial L/Cs;
(k) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matter of record that have been placed by any
developer, landlord or other third party on property over which the Company or
any Subsidiary has easement rights or on any Leased Property and subordination
or similar agreements relating thereto and (ii) any condemnation or eminent
domain proceedings affecting any real property;
(l) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Subsidiaries;
(m) Liens on goods (and proceeds thereof) securing reimbursement
obligations in respect of commercial letters of credit issued in accordance with
the terms of this Agreement;
(n) Liens on the Capital Stock or assets of any Foreign Subsidiary
securing Indebtedness of such Foreign Subsidiary permitted by subsection 7.1(k);
(o) Liens on the Capital Stock or personal property of any Subsidiary
securing operating leases of such Subsidiary; and
(p) Liens on property of the Company or any Subsidiary created solely
for the purpose of securing Indebtedness permitted by subsection 7.1(o).
7.3 Limitation on Contingent Obligations. Create, incur, assume or
------------------------------------
suffer to exist any Contingent Obligation except:
<PAGE>
84
(a) pursuant to this Agreement, the Collateral Agreement or the
Synthetic Lease Facility;
(b) guarantees by the Company incurred in the ordinary course of
business for an aggregate amount not to exceed $5,000,000 at any one time
outstanding;
(c) guarantees by the Company or any Domestic Subsidiary of (i)
obligations of the Company or of Domestic Subsidiaries (other than Encumbered
Subsidiaries) and (ii) obligations of Foreign Subsidiaries in an aggregate
principal amount at any one time outstanding not to exceed $15,000,000 plus the
----
sum of any amounts dividended or distributed to the Company or any Domestic
Subsidiary (other than an Encumbered Subsidiary) subsequent to the date hereof
by Foreign Subsidiaries, less the sum of (A) the aggregate amount of any
----
Indebtedness of Foreign Subsidiaries pursuant to subsection 7.1(c)(iii) and (B)
the aggregate amount of any investments made in Foreign Subsidiaries subsequent
to the date hereof pursuant to subsection 7.6(b)(iii);
(d) guarantees by the Company or any Subsidiary of Indebtedness of
Encumbered Subsidiaries in an aggregate principal amount not to exceed at any
one time outstanding $35,000,000;
(e) Contingent Obligations existing on the Closing Date and described
in Schedule 7.3(e) and Contingent Obligations relating to any Indebtedness
permitted under subsection 7.1(a);
(f) guarantees of obligations to third parties in connection with
travel and entertainment advances and relocation and other loans to employees of
the Company or any of its Subsidiaries, in an amount which, together with all
loans and advances made pursuant to subsection 7.6(f), shall not exceed
$5,000,000 at any one time outstanding;
(g) Contingent Obligations in connection with workmen's compensation
obligations and general liability exposure of the Company and its Subsidiaries;
(h) subordinated guarantees in respect of the Subordinated Debt
issued by Subsidiaries, provided that such subordinated guarantees are
--------
subordinated to the Borrowers' obligations under this Agreement on substantially
the same basis as the Subordinated Debt is subordinated to the Loans; and
(i) guarantees by the Company or any Domestic Subsidiary of
Indebtedness of joint ventures in or to which the Company or any of its
Subsidiaries has made investments or loans or advances as permitted by
subsection 7.6(h) in an aggregate principal amount (when added to the aggregate
then outstanding amount of such investments, loans and advances) not to exceed
at any one time outstanding $10,000,000 plus the sum of (i) any amounts
----
dividended or distributed to the Company or any Domestic Subsidiary (other than
an Encumbered Subsidiary) subsequent to the date hereof by such joint ventures
and (ii) the proceeds of any sale permitted by subsection 7.5(j) to the extent
that such proceeds are not otherwise reinvested.
<PAGE>
85
7.4 Prohibition of Fundamental Changes. Enter into any merger or
----------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or engage in any type of business other
than of the same general type now conducted by it, except (a) for the Merger,
(b) for the transactions otherwise permitted pursuant to subsection 7.5(b), (c)
Subsidiaries with a net book value not greater than $100,000 may be dissolved
and (d) any Subsidiary may otherwise be dissolved, provided that upon
--------
dissolution, the assets of such Subsidiary are transferred to the Company or a
wholly owned Domestic Subsidiary of the Company on the terms and subject to the
conditions set forth in subsection 7.5(b).
7.5 Prohibition on Disposition of Assets. Convey, sell, lease,
------------------------------------
assign, transfer or otherwise dispose of (including through a transaction of
merger or consolidation of any Subsidiary of the Company) any of its property,
business or assets (including, without limitation, receivables and other
payments and Health Care Businesses), whether now owned or hereafter acquired,
except:
(a) the sale or other disposition of inventory in the ordinary course
of business;
(b) the Company or any Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to, and any Subsidiary of the Company may merge with
and into, the Company or a wholly owned Domestic Subsidiary of the Company, and
the Company or any Subsidiary of the Company may sell or otherwise dispose of,
or part with control of any or all of, the Capital Stock of any Subsidiary to a
wholly owned Domestic Subsidiary of the Company or the Company, provided that no
--------
such transaction may be effected if it would result in the transfer of any
assets of, or any Capital Stock of, the Company or a Subsidiary (other than an
Encumbered Subsidiary) to, or the merger with and into, an Encumbered Subsidiary
unless such Encumbered Subsidiary (directly or through a series of mergers and
transfers) promptly transfers the assets transferred to it by such Subsidiary,
or, as the case may be, any Capital Stock thereof, to the Company or a Domestic
Subsidiary (other than an Encumbered Subsidiary);
(c) the lease in the ordinary course of business of Fee Properties
and other real property owned in fee;
(d) any condemnation or eminent domain proceeding affecting any real
property, provided that the parties hereto agree that the net proceeds received
--------
in connection with such proceeding shall be deemed not to constitute "Net
Proceeds" if such net proceeds are reinvested in new or existing properties or
used for capital expenditures within 18 months;
(e) any substantially like-kind exchange of real property, provided
--------
that only any cash received by the Company or any Subsidiary of the Company in
connection with such an exchange (net of all costs and expenses incurred in
connection with such transaction or with the commencement of operation of real
property received in such exchange) and not reinvested in real property or used
for capital expenditures within 360 days (or, in the event
<PAGE>
86
there is a definitive agreement in existence committing such net proceeds to
such reinvestment or capital expenditure within 360 days of receipt of the same,
such 360-day period will be extended for a period not to exceed 180 days with
respect to the amount of net proceeds so committed until required to be paid in
accordance with such agreement (or, if earlier, until termination of such
agreement)) of receipt of the same shall be deemed to be Net Proceeds and shall
be applied as provided for in subsection 3.4(b)(iii) and provided, further, that
-------- -------
the aggregate outstanding amount of net proceeds held by the Company at any time
for reinvestment in respect of any real property exchanged pursuant to this
paragraph (e) and real property sold pursuant to subsection 7.5(h) shall not
exceed $40,000,000;
(f) the sale or other disposition of any property that, in the
reasonable judgment of the Company has become uneconomic, obsolete or worn out,
and which is sold or disposed of in the ordinary course of business;
(g) the sale or other disposition of any property, the aggregate
amount of the net proceeds received in respect of which shall not exceed
$10,000,000 during the term of this Agreement;
(h) the sale or other disposition of any interest in real property,
provided that (i) the net proceeds of any such sale shall constitute Net
- --------
Proceeds only to the extent such net proceeds are not reinvested in real
property or used for capital expenditures within 360 days (or, in the event
there is a definitive agreement in existence committing such net proceeds to
such reinvestment or capital expenditure within 360 days from the date of such
sale, such 360-day period will be extended for a period not to exceed 180 days
with respect to the amount of net proceeds so committed until required to be
paid in accordance with such agreement (or, if earlier, until termination of
such agreement)) from the date of such sale, (ii) if the real property so sold
constituted Collateral under the Security Documents then any real property
purchased with the net proceeds thereof shall be mortgaged for the benefit of
the Lenders if required by subsection 6.9(c) and in accordance therewith and
(iii) the aggregate outstanding amount of net proceeds held by the Company at
any time for reinvestment in respect of any real property sold pursuant to this
paragraph (h) and real property exchanged pursuant to subsection 7.5(e) shall
not exceed $40,000,000;
(i) the sale of all or any part of the Company's or any Subsidiary's
ownership of Bowie Center L.P. and the pharmacy joint venture with Neighborcare;
(j) the sale of all or any part of any joint venture interest
permitted by subsection 7.6(h), provided that the net proceeds of any such sale
--------
shall constitute Net Proceeds only to the extent such net proceeds are not
reinvested in joint ventures (as permitted by subsection 7.6(h)) or used for
capital expenditures or for acquisitions permitted by subsection 7.6(g) within
360 days (or, in the event there is a definitive agreement in existence
committing such net proceeds to such reinvestment, capital expenditure or
acquisition within 360 days from the date of such sale, such 360-day period will
be extended for a period not to exceed 180 days with respect to the amount of
net proceeds so committed until required to be paid in accordance with such
agreement (or, if earlier, until termination of such agreement)) from the date
of such sale; and
<PAGE>
87
(k) the sublease in the ordinary course of business of any assets or
properties, provided that the Company and its Subsidiaries may not sublease all
--------
or substantially all of the assets of more than seven Health Care Facilities to
Persons that are not Affiliates of the Company.
7.6 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment in
(including, without limitation, any acquisition of all or any substantial
portion of the assets, and any acquisition of a business or a product line, of
other companies, other than the acquisition of inventory in the ordinary course
of business and it being understood that this covenant is not intended to limit
the ability of the Company or any Subsidiary to enter into any lease of real or
personal property but that this covenant is intended to cover the acquisition of
a business, the principal asset or assets of which is or are the subject of an
operating lease under which the Company or any Subsidiary is the lessee and it
being further understood that this covenant is intended to cover the acquisition
by the Company or any Subsidiary of any real property and related personal
property that is the subject of such an operating lease pursuant to the exercise
by the Company or such Subsidiary of a purchase option provided for in such
lease (a "Purchase Option Acquisition")), any Person (except to the extent
---------------------------
permitted by subsection 7.7), except:
(a) the Company may make loans or advances to any Domestic Subsidiary
(other than an Encumbered Subsidiary), and any Subsidiary may make loans or
advances to the Company or any Domestic Subsidiary (other than an Encumbered
Subsidiary), to the extent in each case the Indebtedness created thereby is
permitted by subsection 7.1(c);
(b) (i) any Subsidiary may make investments in the Company (by way of
capital contribution or otherwise), (ii) the Company and any Subsidiary may make
investments in, or create, any wholly owned Domestic Subsidiary (by way of
capital contribution or otherwise) or make investments permitted by subsection
7.5(b), provided that, in any such case, (A) the requirements of subsection 6.9
--------
are satisfied and (B) at no time shall (x) the sum, calculated for each
Encumbered Subsidiary and then aggregated for all Encumbered Subsidiaries, of
the excess, if any, of (1) the aggregate amount of all loans, advances and
investments (other than any investments in connection with acquisitions of
Encumbered Subsidiaries permitted by subsection 7.6(g)(iv)) by the Company or
any Subsidiary (other than an Encumbered Subsidiary) to or in such Encumbered
Subsidiary subsequent to the date hereof as permitted by this subsection and
subsection 7.1(c) over (2) the aggregate amount of loan repayments and dividends
and distributions from such Encumbered Subsidiary to the Company or any
Subsidiary (other than an Encumbered Subsidiary) subsequent to the date hereof
exceed (y) the sum of $25,000,000 plus the then Added Amount, and (iii) the
----
Company and any Subsidiary may make investments in, or create, any Foreign
Subsidiary (by way of capital contribution or otherwise), provided that (A) the
--------
requirements of subsection 6.9 are satisfied and (B) the aggregate amount of all
investments in such Foreign Subsidiaries shall not exceed at any one time
outstanding the sum of $15,000,000 plus any amounts dividended or distributed by
----
such Foreign Subsidiaries subsequent to the date hereof to the Company or any
Domestic Subsidiary (other than an Encumbered Subsidiary), less the sum of (x)
----
the aggregate amount of any Indebtedness of
<PAGE>
88
Foreign Subsidiaries pursuant to subsection 7.1(c)(iii) and (y) the aggregate
amount of any Contingent Obligations of the Borrowers in respect of then
outstanding obligations of Foreign Subsidiaries pursuant to subsection
7.3(c)(ii);
(c) the Company and its Subsidiaries may invest in, acquire and hold
Cash Equivalents and Investment Grade Securities;
(d) the Company or any of its Subsidiaries may make payroll advances
in the ordinary course of business;
(e) the Company or any of its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms,
provided that nothing in this clause (e) shall prevent the Company or any
- --------
Subsidiary from offering such concessionary trade terms, or from receiving such
investments, in connection with the bankruptcy or reorganization of their
respective suppliers or customers or the settlement of disputes with such
customers or suppliers arising in the ordinary course of business, as management
deems reasonable in the circumstances;
(f) the Company or any of its Subsidiaries may make travel and
entertainment advances and relocation and other loans to officers and employees
of the Company or any such Subsidiary, provided that the aggregate principal
--------
amount of all such loans and advances outstanding at any one time, together with
the guarantees of such loans and advances made pursuant to subsection 7.3(f),
shall not exceed $5,000,000 at any one time outstanding; and
(g) the Company and its Subsidiaries may make Purchase Option
Acquisitions and may make expenditures to acquire all or a portion of the
Capital Stock or assets of any Person engaged primarily in one or more
businesses in which the Company and its Subsidiaries are engaged or directly
related thereto or in the ownership or operation of Health Care Facilities or
Ancillary Businesses generally (it being understood that this paragraph (g)
shall be applicable to any like-kind exchange of property effected pursuant to
subsection 7.5(e) to the extent that the fair market value of the property
received by the Company or any Subsidiary in such exchange exceeds the fair
market value of the property transferred by the Company or any Subsidiary in
connection therewith), provided that, after giving pro forma effect to any such
-------- --- -----
acquisition permitted by this paragraph (g) and the financing thereof and any
Indebtedness incurred or assumed in connection therewith:
(i) the provisions of subsection 6.9 are satisfied,
(ii) either (A) the ratio of Consolidated Senior Indebtedness as of
the day of such acquisition to Consolidated EBITDA for the period of four
fiscal quarters ending as at the last day of the most recently ended fiscal
quarter is less than or equal to 4.25 to 1.00, provided that for purposes
--------
of calculating such ratio, the unencumbered (other than Liens permitted
pursuant to subsection 7.2(f)) cash and Cash Equivalent balances of the
Company and its Subsidiaries as of the day of such acquisition shall be
deducted from the amount of Consolidated Senior Indebtedness on such date
and
<PAGE>
89
provided, further, that for purposes of calculating Consolidated EBITDA for
-------- -------
any period, the Consolidated EBITDA of any Acquired Business acquired
during such period (as the Consolidated EBITDA of such Acquired Business
may be adjusted (w) for those items that occur by reason of such
acquisition that would be substantially in conformity with the calculation
of Consolidated EBITDA in accordance with Regulation S-X, (x) in accordance
with the adjustment to EBITDA for the fiscal year ending December 31, 1997
described in the Confidential Information Memorandum in an aggregate
approximate amount of $1,300,000, (y) to reflect a full year of occupancy
for newly constructed beds and (z) for any cost reduction resulting from
the termination of any contracts of the Acquired Business which are in
existence at the time of the acquisition of such Acquired Business and any
additional costs incurred in connection with the services that were
terminated) shall be included on a pro forma basis for such period
--- -----
(assuming the consummation of such acquisition and the incurrence,
assumption or guarantee of any Indebtedness in connection therewith
occurred on the first day of such period), (B) the amount of expenditures
in connection with each such acquisition does not exceed $2,500,000 and the
Company elects (by prior written notice to the Administrative Agent) to
treat such expenditures as Capital Expenditures for purposes of this
Agreement, including but not limited to subsection 7.7, or (C) such
acquisition constitutes an acquisition of a business, the principal asset
or assets of which is or are the subject of an operating lease under which
the Company or any Subsidiary is the lessee and the Trust is not the
lessor, and with respect to which no amounts are expended by the Company or
any Subsidiary in connection therewith other than (w) regularly scheduled
lease payments, (x) customary closing costs and expenses, (y) customary
security deposits and (z) payments to acquire temporary working capital of
such business so long as the Company or such Subsidiary reasonably expects
to receive at least an equivalent amount of cash from such business within
90 days of such expenditure,
(iii) no Default or Event of Default has occurred and is continuing
or would result therefrom,
(iv) the excess, if any, of (1) the aggregate Acquisition
Consideration given subsequent to the date hereof in connection with all
acquisitions of or by Encumbered Subsidiaries as permitted by this
subsection 7.6(g) (excluding (A) Capital Stock of the Company issued in
connection with such acquisitions, (B) the Net Proceeds of issuances of
Capital Stock to the extent such Net Proceeds are contemporaneously applied
toward such acquisitions, (C) any Indebtedness constituting a portion of
such Acquisition Consideration and (D) the Net Proceeds of any bond
issuance as permitted by subsection 7.1(e) to the extent such Net Proceeds
are contemporaneously applied toward such acquisition) over (2) an amount
equal to the aggregate Acquisition Consideration (or in the event of one or
more partial sales of assets or Capital Stock as set forth in clause (aa)
below, the proceeds thereof not to exceed, individually or in the
aggregate, the total Acquisition Consideration therefor) given subsequent
to the date hereof in connection with acquisitions permitted by this
subsection 7.6(g)(iv) (excluding Capital Stock, Net Proceeds of issuances
thereof, any Indebtedness constituting a portion of such Acquisition
Consideration and Net Proceeds of certain
<PAGE>
90
bond issuances as aforesaid) with respect to which either (aa) all or a
portion of the assets or Capital Stock so acquired shall have been
subsequently sold or (bb) in any case where the Subsidiary that is the
subject of such acquisition or that is the holder of the assets so acquired
is, immediately after giving effect to such acquisition, an Encumbered
Subsidiary, such Encumbered Subsidiary shall have ceased to be an
Encumbered Subsidiary, shall not exceed an amount equal to the excess, if
any, of (x) $175,000,000 over (y) the sum of (I) the aggregate then
outstanding principal amount of Indebtedness permitted by subsection 7.1(f)
(including refinancings thereof permitted by subsection 7.1(m)) plus (II)
----
the aggregate principal amount of Indebtedness permitted by subsection
7.1(h) or 7.1(n) the Net Proceeds of which shall have been applied to
refinance preferred stock the proceeds of which were originally used to
finance the acquisition of an Encumbered Subsidiary permitted by this
subsection 7.6(g)); provided that the aggregate amount that the Company or
--------
any Subsidiary may at any time expend to acquire Encumbered Subsidiaries
shall be increased by an amount equal to the aggregate amount which the
Company would then be permitted to borrow under subsection 7.1(e)(i) and
invest under subsection 7.6(h) and
(v) in any case where such acquisition (other than an acquisition of
the Capital Stock of a Person and other than a Purchase Option Acquisition)
is made by a Subsidiary (other than an Encumbered Subsidiary) that conducts
a Health Care Business, such Subsidiary shall not, as a result of or in
connection with such acquisition, have become a party to any Contractual
Obligations with third parties in connection with lease arrangements or
Indebtedness for borrowed money that prohibit the transfer, assignment or
grant of a security interest in any asset that, but for such prohibition,
would constitute Collateral;
(h) the Company or any of its Subsidiaries may make investments in,
or loans or advances to, joint ventures or other Persons (other than
Subsidiaries) engaged primarily in one or more businesses in which the Company
and its Subsidiaries are engaged or directly related thereto or in the ownership
or operation of Health Care Facilities or Ancillary Businesses generally, in an
aggregate principal amount (when added to the aggregate then outstanding
principal amount of Indebtedness supported by Contingent Obligations as
permitted by subsection 7.3(i)) at any one time outstanding not to exceed
$10,000,000 plus the sum of (i) any amounts dividended or distributed to the
----
Company or any Domestic Subsidiary (other than an Encumbered Subsidiary)
subsequent to the date hereof by such joint venture or other Person and (ii) the
proceeds of any sales permitted by subsection 7.5(j) to the extent that such
proceeds are not otherwise reinvested; provided that at the time of and after
--------
giving effect thereto no Default or Event of Default shall have occurred and be
continuing or would result therefrom;
(i) the Company or any of its Subsidiaries may make investments in
connection with the exercise of purchase options with respect to the properties,
or the equity interests in the Persons that are the owners of such properties,
that are the subject of the currently existing Financing Leases to which
Harborside of Cleveland, L.P. is a party in an
<PAGE>
91
aggregate amount not to exceed $57,125,000 less the aggregate principal amount
----
of Indebtedness assumed in connection therewith as permitted by subsection
7.1(l);
(j) the Company or any of its Subsidiaries (other than an Encumbered
Subsidiary) may make Purchase Option Acquisitions of the properties that are the
subject of the Synthetic Lease Facility, provided that the Company or such
--------
Subsidiary promptly, and in any event within 60 days after such Purchase Option
Acquisition by the Company or such Subsidiary, grants to the Administrative
Agent for the benefit of the Lenders an Additional Mortgage covering the real
property that is the subject thereof and otherwise complies with the
requirements of subsection 6.9 with respect to such Purchase Option Acquisition;
and
(k) the Company or any of its Subsidiaries may make loans to, and
hold investments in promissory notes issued by, purchasers, sellers or lessors
of assets in transactions permitted by subsection 7.5 or 7.6 in an aggregate
principal amount not to exceed $10,000,000 at any one time outstanding and may
hold the Promissory Note.
For the purposes of this subsection 7.6, the payment by the Company or
any Subsidiary of expenses, operating costs or maintenance capital expenditures
of any Domestic Subsidiary incurred in the ordinary course of its business shall
not be considered to be a loan to, advance by or other investment of the Company
or any Subsidiary in, such Domestic Subsidiary and shall be permitted under this
Agreement.
7.7 Capital Expenditures. Make or commit to make any Capital
--------------------
Expenditures, except that the Company and its Subsidiaries may make or commit to
make Capital Expenditures not exceeding the amount set forth below (the "Base
----
Amount") for each of the fiscal years or periods of the Company (or other
- ------
period) set forth below:
<TABLE>
<CAPTION>
Fiscal Year
or Period Base Amount
----------- -----------
<S> <C>
Closing Date to December 31, 1999 $ 23,000,000
2000 $ 16,000,000
2001 $ 17,000,000
2002 $ 18,000,000
2003 $ 19,000,000
January 1, 2004 to $10,000,000;
Scheduled Termination Date
</TABLE>
provided that (a) for any period set forth above, the Base Amount set forth
- --------
above may be increased by a maximum of 50% of the Base Amount for any such
period by carrying over to any such period any portion of the Base Amount (as
increased) not spent in the immediately preceding period, (b) for each period
set forth above after the fiscal year in which any Person or assets of such
Person (an "Acquired Person") is acquired as permitted herein, the Base Amount
---------------
set forth above shall be increased by an amount equal to the product of $1,000
times
<PAGE>
92
the number of beds of each such Acquired Person at the time of acquisition
thereof ("Acquired Capital Expenditures"), (c) with respect to the fiscal year
-----------------------------
in which such Person becomes an Acquired Person, the Base Amount shall be
increased by the product of (i) the Acquired Capital Expenditures of such
Acquired Person times (ii) a fraction, the numerator of which is the number of
days remaining in the fiscal year of the Company in which such Acquired Person
was acquired and the denominator of which is 365, (d) for each period set forth
above after the fiscal year in which the Company or any Subsidiary adds new beds
("Acquired Beds") to any then existing Health Care Facility, the Base Amount set
-------------
forth above shall be increased by an amount equal to the product of $1,000 times
the number of such Acquired Beds ("Acquired Bed Expenditures") and (e) with
-------------------------
respect to the fiscal year in which the Company or any Subsidiary adds Acquired
Beds to any then existing Health Care Facility, the Base Amount shall be
increased by the product of (i) the Acquired Bed Expenditures for such Acquired
Beds times (ii) a fraction, the numerator of which is the number of days
remaining in the fiscal year of the Company in which the Acquired Beds were
acquired and the denominator of which is 365; and provided, further, that,
-------- -------
notwithstanding anything to the contrary herein, additional Capital Expenditures
may be made with net proceeds received in property sales or dispositions
permitted under subsection 7.5(g). Notwithstanding anything to the contrary in
this subsection 7.7, no expenditure to acquire real or personal property
pursuant to a Purchase Option Acquisition shall be deemed to constitute a
Capital Expenditure for purposes of this subsection.
7.8 Interest Rate Agreements. Enter into, create, incur, assume or
------------------------
suffer to exist any Interest Rate Agreements or obligations in respect thereof
except in the ordinary course of business for non-speculative purposes.
7.9 Debt to EBITDA. At the last day of any fiscal quarter set forth
--------------
below, permit the ratio (the "Leverage Ratio") of Consolidated Indebtedness as
--------------
of such day to Consolidated EBITDA for the period of four fiscal quarters ending
on such day to be greater than the ratio set forth below for such fiscal
quarter:
Fiscal Year Fiscal Quarter Ratio
------------- -------------- ------------
1998 Fourth 6.85 to 1.00
1999 First 6.85 to 1.00
Second 6.85 to 1.00
Third 6.85 to 1.00
Fourth 6.85 to 1.00
<PAGE>
93
2000 First 6.85 to 1.00
Second 6.85 to 1.00
Third 6.85 to 1.00
Fourth 6.50 to 1.00
2001 First 6.50 to 1.00
Second 6.50 to 1.00
Third 6.50 to 1.00
Fourth 6.25 to 1.00
2002 First 6.25 to 1.00
Second 6.25 to 1.00
Third 6.25 to 1.00
Fourth 6.00 to 1.00
Thereafter 6.00 to 1.00;
provided that for purposes of calculating Consolidated EBITDA for any period,
- --------
the Consolidated EBITDA of any Acquired Business acquired during such period (as
the Consolidated EBITDA of such Acquired Business may be adjusted (w) for those
items that occur by reason of such acquisition that would be substantially in
conformity with the calculation of Consolidated EBITDA in accordance with
Regulation S-X, (x) in accordance with the adjustment to EBITDA for the fiscal
year ending December 31, 1997 described in the Confidential Information
Memorandum in an aggregate approximate amount of $1,300,000, (y) to reflect a
full year of occupancy of newly constructed beds and (z) for any cost reduction
resulting from the termination of any contracts of the Acquired Business which
are in existence at the time of the acquisition of such Acquired Business and
any additional costs incurred in connection with the services that were
terminated) shall be included on a pro forma basis for such period (assuming the
--- -----
consummation of such acquisition and the incurrence, assumption or guarantee of
any Indebtedness in connection therewith occurred on the first day of such
period).
7.10 Coverage Ratio. At the last day of any fiscal quarter set forth
--------------
below, permit the Coverage Ratio to be less than the ratio set forth below for
such fiscal quarter:
Fiscal Year Fiscal Quarter Coverage Ratio
------------- -------------- --------------
1998 Fourth 1.50 to 1.00
1999 First 1.50 to 1.00
Second 1.50 to 1.00
Third 1.50 to 1.00
Fourth 1.50 to 1.00
2000 First 1.50 to 1.00
Second 1.50 to 1.00
<PAGE>
94
Interest
Coverage
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
Third 1.50 to 1.00
Fourth 1.50 to 1.00
2001 First 1.50 to 1.00
Second 1.50 to 1.00
Third 1.50 to 1.00
Fourth 1.50 to 1.00
2002 First 1.50 to 1.00
Second 1.50 to 1.00
Third 1.50 to 1.00
Fourth 1.50 to 1.00
2003 First 1.50 to 1.00
Second 1.50 to 1.00
Third 1.50 to 1.00
Fourth 1.40 to 1.00
2004 First 1.35 to 1.00
Second 1.30 to 1.00
Thereafter 1.30 to 1.00;
provided that for purposes of calculating Consolidated EBITDA for any period,
- --------
the Consolidated EBITDA of any Acquired Business acquired during such period in
an acquisition permitted by subsection 7.6(g) (as the Consolidated EBITDA of
such Acquired Business may be adjusted (w) for those items that occur by reason
of such acquisition that would be substantially in conformity with the
calculation of Consolidated EBITDA in accordance with Regulation S-X, (x) in
accordance with the adjustment to EBITDA for the fiscal year ending December 31,
1997 described in the Confidential Information Memorandum in an aggregate
approximate amount of $1,300,000, (y) to reflect a full year of occupancy for
newly constructed beds and (z) for any cost reduction resulting from the
termination of any contracts of the Acquired Business which are in existence at
the time of the acquisition of such Acquired Business and any additional costs
incurred in connection with the services that were terminated) shall be included
on a pro forma basis for such period (assuming the consummation of such
--- -----
acquisition and the incurrence, assumption or guarantee of any Indebtedness in
connection therewith occurred on the first day of such period); provided
--------
further, that for purposes of calculating interest expense for any period, pro
- ------- ---
forma effect shall be given to any incurrence, assumption or guarantee of
- -----
Indebtedness of any Person acquired by the Company or its Subsidiaries during
such period (assuming the consummation of such acquisition and the incurrence,
assumption or guarantee of any Indebtedness in connection therewith occurred on
the first day of such period and assuming that, with respect to any Indebtedness
that bears a floating rate of interest, the rate in effect on the last day of
such period had been the applicable rate for the entire period).
<PAGE>
95
7.11 Limitation on Dividends. Declare any dividends on any shares of
-----------------------
any class of Capital Stock, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of any shares of any class of
Capital Stock, or any warrants or options to purchase such Capital Stock,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company or any of its Subsidiaries; except that:
(a) (i) Subsidiaries may pay dividends or distributions to the
Company or to Domestic Subsidiaries (other than Encumbered Subsidiaries) which
are directly or indirectly wholly owned by the Company, (ii) Subsidiaries may
pay dividends or distributions to Encumbered Subsidiaries that (directly or
through a series of dividends or distributions) promptly pay such dividends or
distributions to the Company or a Domestic Subsidiary (other than an Encumbered
Subsidiary) and (iii) Encumbered Subsidiaries may pay dividends or distributions
to other Encumbered Subsidiaries;
(b) the Company may pay or make dividends or distributions to any
holder of its Capital Stock in the form of additional shares of Capital Stock of
the same class and type;
(c) the Company may repurchase Capital Stock of the Company owned by
former, present or future employees of the Company or its Subsidiaries or their
assigns, estates and heirs, provided that the aggregate amount expended by the
--------
Company pursuant to this clause (c) shall not in the aggregate exceed (i)
$5,000,000 in any fiscal year or (ii) $10,000,000 during the term of this
Agreement, plus any amounts contributed to the Company as a result of resales of
such repurchased shares of Capital Stock;
(d) the Company may after the fifth anniversary of the date of the
issuance thereof make scheduled payments or dividends on the Preferred Stock
when due at a rate per annum no greater than the rate per annum applicable to
such Preferred Stock on the original date of issuance thereof, to the extent
required to be paid in cash, provided that no Default or Event of Default shall
--------
have occurred and be continuing or would result therefrom;
(e) the Company may redeem Preferred Stock with the proceeds of
issuances of common stock and preferred stock as referred to in subsection
3.4(b)(i); and
(f) the Company may redeem preferred stock with the proceeds of
issuances of other preferred stock as referred to in subsection 3.4(b)(i) and/or
with the proceeds of Indebtedness issued as permitted by subsection 7.1(h) or
7.1(n).
7.12 Transactions with Affiliates. Enter into any transaction,
----------------------------
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate except for transactions
which are otherwise permitted under this Agreement and which are in the ordinary
course of the Company's or a Subsidiary's business and which are upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than it
would obtain in a hypothetical comparable arm's length transaction with a Person
not an Affiliate, provided that nothing in this subsection 7.12 shall prohibit
--------
the
<PAGE>
96
Company or its Subsidiaries from engaging in the following transactions: (a)
the performance of the Company's or any Subsidiary's obligations under any
employment contract, collective bargaining agreement, employee benefit plan,
related trust agreement or any other similar arrangement heretofore or hereafter
entered into in the ordinary course of business, (b) the payment of compensation
to employees, officers, directors or consultants in the ordinary course of
business or (c) the maintenance of benefit programs or arrangements for
employees, officers or directors, including, without limitation, vacation plans,
health and life insurance plans, deferred compensation plans, and retirement or
savings plans and similar plans, in each case, in the ordinary course of
business.
7.13 Prepayments and Amendments of Subordinated Debt. (a) Optionally
-----------------------------------------------
prepay, retire, redeem, purchase, defease or exchange any Subordinated Debt
(other than (i) any redemption of the Bridge Senior Subordinated Debt or the
Senior Subordinated Discount Notes with proceeds of Permanent Senior
Subordinated Debt as permitted by subsection 7.1(d), (ii) any refinancing of the
Permanent Junior Subordinated Debt or Permanent Senior Subordinated Debt
contemplated in the definition thereof, (iii) any redemption of the Bridge
Junior Subordinated Debt with the proceeds of the issuance of Preferred Stock to
the extent permitted by subsection 3.4(b)(i), or (iv) any other redemption of
Subordinated Debt with the proceeds of the issuance of Capital Stock to the
extent permitted by subsection 3.4(b)(i)), (b) pay any interest on Subordinated
Debt in cash if such interest may be paid by the issuance of additional
Subordinated Debt or (c) waive, amend, supplement, modify, terminate or release
the provisions of any Subordinated Debt, to the extent that any such waiver,
amendment, supplement, modification, termination or release would be materially
adverse to the Lenders.
7.14 Limitation on Changes in Fiscal Year. Permit the fiscal year of
------------------------------------
the Company to end on a day other than December 31 in any calendar year.
7.15 Limitation on Lines of Business. Enter into any business, either
-------------------------------
directly or through any Subsidiary, except for those businesses in which the
Company or any Subsidiary is engaged on the date of this Agreement (or which are
directly related thereto or those related generally to the ownership or
operation of Health Care Facilities or Ancillary Businesses).
7.16 Health Care Permits and Approvals. Engage in any activity that
---------------------------------
(a) constitutes or, with the giving of notice, the passage of time, or both,
would result in a material violation of, any Health Care Permit necessary for
the lawful conduct of its business or operations or (b) constitutes or, with the
giving of notice, the passage of time, or both, would result in the loss by any
Health Care Facility or Ancillary Business owned, leased, managed or operated by
the Company or any of its Subsidiaries of the right to participate in, and
receive payment under, the appropriate Medicare, Medicaid and related
reimbursement programs, and any similar state or local government-sponsored
program, to the extent that such Credit Party has decided to participate in any
such program with respect to such Health Care Facility or Ancillary Business, as
the case may be, and to receive reimbursement from private and commercial payers
and health maintenance organizations to the extent applicable thereto, in each
case described in clauses (a) or (b) above, except where such violation or the
loss of such Health Care Permit or rights to participate in or receive payments
under such
<PAGE>
97
programs could not reasonably be expected to have a material adverse effect on
the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole.
7.17 Preferred Stock. Convert any shares of Preferred Stock into, or
---------------
exchange any shares of Preferred Stock for, any Indebtedness.
SECTION 8. EVENTS OF DEFAULT
-----------------
Upon the occurrence and during the continuance of any of the following
events:
(a) Any Borrower shall fail to (i) pay any principal of any Loan or
Note when due in accordance with the terms hereof or thereof or to reimburse the
Issuing Lender in accordance with subsection 2.8 or (ii) pay any interest on any
Loan or Note or any other amount payable hereunder within five days after any
such interest or other amount becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or deemed made by any Credit
Party in any Credit Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Company or any other Borrower shall default in the observance
or performance of any agreement contained in subsection 6.7(a) or 6.9 or Section
7 of this Agreement or the Company or any Subsidiary shall default in the
observance or performance of any agreement contained in Section 5(a), 5(i),
5(j), 5(k), 5(l), 5(p), 5(s)(i) or 5(s)(ii) of the Collateral Agreement or
Section 5, 6 or 7 of any Mortgage; or
(d) Any Credit Party shall default in the observance or performance
of any other agreement contained in any Credit Document and such default shall
continue unremedied for a period of 30 days; or
(e) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on or other amounts in respect of any
Indebtedness (other than the Loans, the L/C Obligations and any inter-company
debt) or Interest Rate Agreement or in the payment of any Contingent Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness, Interest Rate Agreement or Contingent Obligation
was created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness, Interest Rate
Agreement or Contingent Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity, any
<PAGE>
98
applicable grace period having expired, or such Contingent Obligation to become
payable, any applicable grace period having expired; in each case, provided that
--------
the aggregate principal amount of all such Indebtedness, Interest Rate
Agreements and Contingent Obligations under which a default exists or which
would then become due or payable equals or exceeds $7,500,000; or
(f) (i) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Company or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against the
Company or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
the Company or any of its Subsidiaries shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Company or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company
or any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan,
and such event or condition, together with all other such events or conditions,
relating to a Plan, if any, would be reasonably likely to subject the Company or
any of its Subsidiaries to any tax, penalty or other liabilities in the
aggregate resulting in a material adverse effect on the
<PAGE>
99
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole; or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) of $7,500,000 or more and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within the time required by the terms of such judgment; or
(i) Any Credit Document shall cease, for any reason, to be in full
force and effect or any Credit Party or any of its Subsidiaries shall so assert
in writing, or any Security Document shall cease to be effective to grant a
perfected Lien on the collateral described therein with the priority purported
to be created thereby (other than as a result of any action or inaction on the
part of the Administrative Agent or the Lenders), subject to such exceptions as
may be permitted therein or herein, and such condition shall continue unremedied
for 30 days after notice thereof to the Company by the Administrative Agent or
any Lender; or
(j) There shall have occurred a Change of Control; or
(k) The subordination provisions of any document governing any
Subordinated Debt shall cease, for any reason, to be valid or any Credit Party
or any of its Subsidiaries shall so assert in writing; or
(l) There shall have occurred and be continuing an Event of Default
under and as defined in the documentation for the Synthetic Lease Facility;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to any Borrower,
automatically (i) the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (ii) all
obligations of the Company in respect of the Letters of Credit, although
contingent and unmatured, shall become immediately due and payable and the
Issuing Lender's obligations to issue the Letters of Credit shall immediately
terminate and (b) if such event is any other Event of Default, so long as any
such Event of Default shall be continuing, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Company, declare the Commitments
and the Issuing Lender's obligations to issue the Letters of Credit to be
terminated forthwith, whereupon the Commitments and such obligations shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice of default to the Company, (A) declare all
or a portion of the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable, and (B)
declare all or a portion of the obligations of the Company in respect of the
Letters of Credit, although
<PAGE>
100
contingent and unmatured, to be due and payable forthwith, whereupon the same
shall immediately become due and payable and/or demand that the Company
discharge any or all of the obligations supported by the Letters of Credit by
paying or prepaying any amount due or to become due in respect of such
obligations. All payments under this Section 8 on account of undrawn Letters of
Credit shall be made by the Company directly to a cash collateral account
established by the Administrative Agent for such purpose for application to the
Company's reimbursement obligations under subsection 2.8 as drafts are presented
under the Letters of Credit, with the balance, if any, to be applied to the
Borrowers' obligations under this Agreement and the Notes as the Administrative
Agent shall determine with the approval of the Required Lenders. Except as
expressly provided above in this Section 8, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
SECTION 9. MISCELLANEOUS
-------------
9.1 Amendments and Waivers. Except as otherwise expressly set forth
----------------------
in this Agreement, no Credit Document nor any terms thereof may be amended,
supplemented, waived or modified except in accordance with the provisions of
this subsection 9.1. With the written consent of the Required Lenders, the
Administrative Agent and the respective Credit Parties or their Subsidiaries
may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to any Credit
Document to which they are parties or changing in any manner the rights of the
Lenders or of any such Credit Party or its Subsidiaries thereunder or waiving,
on such terms and conditions as the Administrative Agent may specify in such
instrument, any of the requirements of any such Credit Document or any Default
or Event of Default and its consequences; provided that:
--------
(a) no such waiver and no such amendment, supplement or modification
shall release collateral not required or permitted by any Credit Document
to be released and which, in the aggregate with all other collateral
released pursuant to this clause (a) (other than collateral released
pursuant to the proviso to this clause (a)) during the calendar year in
which such proposed release would be effected and the immediately preceding
calendar year, has fair market value on the proposed date of release in
excess of 20% of the fair market value of all collateral (including any
guarantee of the obligations hereunder) on such date without the written
consent of the Supermajority Lenders; provided that, notwithstanding the
--------
foregoing, this clause (a) shall not be applicable to and no consent shall
be required for (i) releases of collateral in connection with any Asset
Sales permitted by subsection 7.5, (ii) releases of collateral in
accordance with subsection 9.11 or (iii) upon the reincorporation of the
Company or any Subsidiary in a new jurisdiction or the creation of a new
Subsidiary of the Company, any release of collateral in connection with the
transfer of such released collateral to such reincorporated entity or new
Subsidiary in compliance with subsection 7.4, provided that the
--------
Administrative Agent, in its sole discretion, determines that such release
and transfer, together with any grant and perfection of a new Lien therein
in favor of the Administrative Agent, will cause no material
<PAGE>
101
impairment of the value of the collateral taken as a whole, after giving
effect to such release and transfer;
(b) no such waiver and no such amendment, supplement or modification
shall extend the final maturity date of any Note or reduce the rate or
extend the time of payment of interest thereon, or change the method of
calculating interest thereon, or reduce or extend the time of payment of
any fee payable to the Lenders hereunder, or reduce the principal amount
thereof, or change the amount of any Lender's Commitment or Revolving
Credit Percentage, or amend, modify or waive any provision of subsection
3.9(b) or this subsection 9.1 or reduce the percentage specified in the
definition of Required Lenders or reduce the percentage specified in the
definition of Supermajority Lenders or consent to the assignment or
transfer by any Credit Party of any of its rights and obligations under any
Credit Document, in each case, without the prior written consent of each
Lender, and each holder of Term Synthetic Lease Obligations, directly
affected thereby;
(c) no such waiver and no such amendment, supplement or modification
affecting the then Administrative Agent or Issuing Lender shall amend,
modify or waive any provision of Section 5 of the Agency and Intercreditor
Agreement without the written consent of such Administrative Agent and
Issuing Lender; and
(d) no such waiver, and no such amendment, supplement or modification
shall amend, modify or waive the order of application of prepayments
specified in subsection 3.4(b)(v) without the written consent of the
holders of at least 51% of each of (i) the aggregate unpaid principal
amount of the Term Loans, if any, (ii) the Term Synthetic Lease
Obligations, if any, and (iii) the Revolving Credit Commitments or, if the
Revolving Credit Commitments are terminated, the aggregate unpaid principal
amount of the Revolving Credit Loans (the Term Loans, the Term Synthetic
Lease Obligations and the Revolving Credit Commitments (or, if the
Revolving Credit Commitments are terminated, the aggregate unpaid principal
amount of the Revolving Credit Loans, and participations in Swing Line
Loans and the aggregate amount available to be drawn at such time under all
outstanding Letters of Credit and L/C Obligations) of any Non-Funding
Lender to be disregarded in determining such percentage at any time);
any such waiver and any such amendment, supplement or modification described in
this subsection 9.1 shall apply equally to each of the Lenders and shall be
binding upon each Credit Party and its Subsidiaries, the Lenders, the
Administrative Agent, the Documentation Agent, the Syndication Agent and the
Issuing Lender and all future holders of the Notes and the Loans. Any extension
of a Letter of Credit by the Issuing Lender shall be treated hereunder as a new
Letter of Credit. In the case of any waiver, the Credit Parties, the Lenders,
the Administrative Agent and Issuing Lender shall be restored to their former
position and rights hereunder and under the outstanding Notes, and any Default
or Event of Default waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.
<PAGE>
102
9.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy) and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three Business Days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when sent, confirmation of receipt received, addressed as follows in the
case of the Company, the other Borrowers and the Administrative Agent, and as
set forth in Schedule II in the case of any Lender, or to such other address as
may be hereafter notified by the respective parties hereto and any future
holders of the Notes:
The Company
and the other
Borrowers: Harborside Healthcare Corporation
470 Atlantic Avenue
Boston, Massachusetts 02210
Attention: William H. Stephan
Telecopy: (617) 556-1565
With a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
The Administrative Agent
and Swing Line Lender: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza, 8th floor
New York, New York 10081
Attention: Janet M. Belden
Telecopy: (212) 552-5658
With a copy to: Chase New England Corporation
85 Wells Avenue, Suite 200
Newton, Massachusetts 02159
Attention: Roger A. Stone
Telecopy: (617) 928-3057
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to subsections 2.4, 2.5, 3.1, 3.2, 3.3 and 3.4 shall not
be effective until received and, provided, further, that the failure to provide
-------- -------
the copies of notices to the Company and the other Borrowers provided for in
this subsection 9.2 shall not result in any liability to the Administrative
Agent.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial
<PAGE>
103
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement, the Letters of Credit and the Notes.
9.5 Payment of Expenses and Taxes. Each Borrower agrees (a) to pay
-----------------------------
or reimburse the Administrative Agent, the Arranger, the Co-Arrangers, the
Syndication Agent and the Documentation Agent for all their reasonable out-of-
pocket costs and expenses incurred in connection with the development,
negotiation, preparation and execution of the Credit Documents and any other
documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of one counsel to the Administrative Agent,
the Arranger, the Co-Arrangers, the Syndication Agent and the Documentation
Agent, (b) to pay or reimburse all of the reasonable expenses, including without
limitation, reasonable fees and expenses of counsel, incurred by the
Administrative Agent in connection with the administration of the facilities
provided for herein or in connection with any amendments, waivers, work-outs or
restructurings in respect thereof, (c) to pay or reimburse the Administrative
Agent, the Arranger, each Co-Arranger, the Syndication Agent, the Documentation
Agent, the Issuing Lender and each Lender for all their costs and expenses
incurred in connection with, and to pay, indemnify, and hold the Administrative
Agent, the Arranger, each Co-Arranger, the Syndication Agent, the Documentation
Agent, the Issuing Bank and each Lender harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever arising
out of or in connection with, the enforcement or preservation of any rights
under any Credit Document and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Administrative
Agent, the Arranger, each Co-Arranger, the Syndication Agent, the Documentation
Agent and each Lender incurred in connection with the foregoing and in
connection with advising the Administrative Agent with respect to its rights and
responsibilities under this Agreement and the documentation relating thereto,
(d) to pay, indemnify, and to hold the Administrative Agent, the Arranger, each
Co-Arranger, the Syndication Agent, the Documentation Agent and each Lender
harmless from any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes (other than withholding taxes), if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
any Credit Document and any such other documents, and (e) to pay, indemnify, and
hold the Administrative Agent, the Arranger, each Co-Arranger, the Syndication
Agent, the Documentation Agent, the Issuing Bank and each Lender and their
respective affiliates, officers, directors and trustees harmless from and
against any and all other liabilities,
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104
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including, without
limitation, reasonable fees and disbursements of counsel) which may be incurred
by or asserted against the Administrative Agent, the Arranger, each Co-Arranger,
the Syndication Agent, the Documentation Agent, the Issuing Bank or the Lenders
or such affiliates, officers, directors or trustees (x) arising out of or in
connection with any investigation, litigation or proceeding related to this
Agreement, the other Credit Documents, the proceeds of the Loans, the Preferred
Stock or the Subordinated Debt and the transactions contemplated by or in
respect of such use of proceeds, or any of the other transactions contemplated
hereby, whether or not the Administrative Agent, the Arranger, each Co-Arranger,
the Syndication Agent, the Documentation Agent, the Issuing Bank or any of the
Lenders or such affiliates, officers, directors or trustees is a party thereto,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the Company, any of its Subsidiaries or any of the facilities and properties
owned, leased or operated by the Company or any of its Subsidiaries, or (y)
without limiting the generality of the foregoing, by reason of or in connection
with the execution and delivery or transfer of, or payment or failure to make
payments under, Letters of Credit (it being agreed that nothing in this
subsection 9.5(d)(y) is intended to limit the Company's obligations pursuant to
subsection 2.8) (all the foregoing, collectively, the "indemnified
-----------
liabilities"), provided that no Borrower shall have any obligation hereunder
--------
with respect to indemnified liabilities of the Administrative Agent, the
Arranger, any Co-Arranger, the Syndication Agent, the Documentation Agent, the
Issuing Bank or any Lender or any of their respective affiliates, officers,
directors and trustees arising from (i) the gross negligence or willful
misconduct of the person seeking indemnification or (ii) legal proceedings
commenced against the Administrative Agent, the Arranger, any such Co-Arranger,
the Syndication Agent, the Documentation Agent, the Issuing Bank or any such
Lender by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (iii) legal proceedings commenced against the Administrative Agent, the
Arranger, any such Co-Arranger, the Syndication Agent, the Documentation Agent,
the Issuing Bank or any such Lender by any Transferee. Without limiting the
foregoing, and to the extent permitted by applicable law, the Company agrees not
to assert, and hereby waives (and shall cause the Subsidiaries not to assert and
to waive) all rights for contribution or any other rights of recovery with
respect to all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever, under or related to Environmental Laws, that any of them might have
by statute or otherwise against the Administrative Agent, the Arranger, any Co-
Arranger, the Syndication Agent, the Documentation Agent, the Issuing Lender or
any Lender. The agreements in this subsection 9.5 shall survive repayment of
the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments. (a)
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This Agreement shall be binding upon and inure to the benefit of the Borrowers,
the Lenders, the Administrative Agent, the Arranger, the Co-Arrangers, the
Syndication Agent, the Documentation Agent, all future holders of the Notes and
the Loans, and their respective successors and assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
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105
(b) Any Lender may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, at any time sell to
one or more banks or other entities ("Participants") participating interests in
------------
any Loan owing to such Lender, any participating interest in the Letters of
Credit of such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and the Company and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Credit
Documents. Each Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note; provided that such right of
--------
setoff shall be subject to the obligation of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
the Agency and Intercreditor Agreement. Each Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 2.10, 3.11 and 3.12
with respect to its participation in the Letters of Credit and in the
Commitments and the Loans outstanding from time to time as if it were a Lender;
and provided, further, that no Participant shall be entitled to receive any
-------- -------
greater amount pursuant to any such subsection than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred. Each Lender agrees that the participation agreement pursuant to which
any Participant acquires its participating interest (or any other document) may
afford voting rights to such Participant, or any right to instruct such Lender
with respect to voting hereunder, only with respect to matters requiring the
consent of (i) all of the Lenders hereunder, (ii) such Lender (with respect to
matters specified in subsection 9.1(b) only), if it is affected thereby or (iii)
all of the Lenders holding the relevant Loans or Revolving Credit Commitments
subject to such participation.
(c) Subject to paragraph (g) of this subsection 9.6, any Lender may,
in the ordinary course of its commercial banking, lending or investment business
and in accordance with applicable law, (i) at any time and from time to time
assign all or any part of its rights and obligations under this Agreement and
the Notes to any Lender or any Affiliate thereof, provided that, in the event of
--------
a sale of less than all of such rights and obligations, such assigning Lender
after any such sale to any other Lender or any Affiliate of such Lender shall
retain Commitments and/or Loans and/or L/C Participating Interests aggregating
at least $5,000,000 (or such lesser amount as the Administrative Agent may
determine) and (ii) with the consent of the Company, as agent for the Borrowers,
and the Administrative Agent (which in each case shall not be unreasonably
withheld or delayed) at any time and from time to time assign to one or more
additional banks, mutual funds or financial institutions or entities (each, an
"Assignee"), all or any part of its rights and obligations under this Agreement
- ---------
and the Notes, pursuant to an Assignment and Acceptance, executed by such
Assignee, such transferor
<PAGE>
106
Lender (and, in the case of an Assignee that is not then a Lender or an
Affiliate thereof, by the Company, as agent for the Borrowers, and the
Administrative Agent), and delivered to the Administrative Agent for its
acceptance and recording in the Register (as defined below); provided that (A)
--------
each such sale pursuant to clause (ii) of this subsection 9.6(c) shall be in a
principal amount of $5,000,000 or more unless the Assigning Lender is
transferring all of its rights and obligations and (B) in the event of a sale of
less than all of such rights and obligations, such Lender after any such sale
shall retain Commitments and/or Loans and/or L/C Participating Interests
aggregating at least $5,000,000 (or such lesser amount as the Administrative
Agent and the Company may determine). Each assignment of Commitments, Revolving
Credit Loans and L/C Participating Interests to an Assignee pursuant to this
subsection 9.6(c) shall automatically include an assignment to such Assignee of
an equal percentage of all the assigning Lender's rights and obligations in
respect of the Revolving Synthetic Lease Obligations and commitments to make
revolving credit loans under the Synthetic Lease Facility. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and to the Agency and Intercreditor Agreement and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder with a Commitment as set forth therein, and (y) the assigning
Lender thereunder shall, to the extent of the interest transferred, as reflected
in such Assignment and Acceptance, be released from its obligations under this
Agreement and the Agency and Intercreditor Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor Lender
shall cease to be a party hereto and to the Agency and Intercreditor Agreement
but shall continue to be entitled to the benefits of the indemnification
provisions set forth in subsection 9.5).
(d) The Administrative Agent, which for purposes of this subsection
9.6(d) only shall be deemed to be the agent of the Borrowers, shall maintain at
the address of the Administrative Agent referred to in subsection 9.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
--------
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence
of manifest error, and the Borrowers, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the Register as the owner of a
Loan or other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Credit Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Company or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Company, as agent for the
Borrowers, and the Administrative Agent), together with payment to the
Administrative Agent of a registration and processing fee of $4,000 if the
Assignee is not a Lender prior to the execution of such supplement and $1,000
otherwise (which fee need not be paid in the case of any assignment by a Lender
to
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107
an affiliate of such Lender), the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Company.
On or prior to such effective date, the applicable Borrower at its own expense,
shall execute and deliver to the Administrative Agent (in exchange for any or
all of the Term Loan Notes or Revolving Credit Notes of the assigning Lender, if
any) new Term Loan Notes or Revolving Credit Notes, as the case may be, to the
order of such Assignee (if requested) in an amount equal to the Revolving Credit
Commitment or the Term Loans, as the case may be, assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
or any Term Loans hereunder, new Term Loan Notes or Revolving Credit Notes, as
the case may be, to the order of the assigning Lender in an amount equal to the
Commitment or such Term Loans, as the case may be, retained by it hereunder (if
requested). Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Notes replaced thereby.
(f) The Administrative Agent, the Arranger, the Co-Arrangers, the
Syndication Agent, the Documentation Agent and the Lenders agree that they will
use reasonable efforts to protect the confidentiality of any confidential
information concerning the Company and its Subsidiaries and Affiliates.
Notwithstanding the foregoing, each Borrower authorizes each Lender to disclose
to any Participant or Assignee (each, a "Transferee") and any prospective
----------
Transferee any and all information in such Lender's possession concerning the
Company and its Subsidiaries and Affiliates which has been delivered to such
Lender by or on behalf of the Company pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of any Borrower in connection with
such Lender's credit evaluation of the Company and its Subsidiaries prior to
becoming a party to this Agreement; provided that each Lender shall cause its
--------
respective prospective Transferees to agree in writing to protect the
confidentiality of any confidential information concerning the Company and its
Subsidiaries and Affiliates.
(g) If, pursuant to this subsection 9.6, any interest in this
Agreement or any Note is transferred to any Transferee which is organized under
the laws of any jurisdiction other than the United States or any State thereof,
the transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer either (1) in the case of a Transferee that is a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) to represent
to the transferor Lender (for the benefit of the transferor Lender, the
Administrative Agent and the Company) that under applicable law and treaties no
taxes will be required to be withheld by the Administrative Agent, any Borrower
or the transferor Lender with respect to any payments to be made to such
Transferee in respect of the Loans or L/C Participating Interests, (ii) to
furnish to the transferor Lender (and, in the case of any Transferee registered
in the Register, the Administrative Agent and the Company) either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
such Transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Borrowers) to
the extent permitted by then-current law to provide the transferor Lender (and,
in the case of any Transferee registered in the Register, the Administrative
Agent and the Company) a new Form 4224 or Form 1001 upon the
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108
expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and regulations and
amendments duly executed and completed by such Transferee, and to comply from
time to time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption or (2) in the case of any Transferee that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) to represent
to the transferor Lender (for the benefit of the transferor Lender, the
Administrative Agent and the Borrowers) that it is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code, (ii) to furnish to the transferor
Lender (and, in the case of any Transferee registered in the Register, to the
Company), with a copy to the Administrative Agent, (A) a Subsection 3.11(d)(2)
Certificate and (B) two accurate and complete original signed copies of Internal
Revenue Service Form W-8, certifying to such Transferee's legal entitlement on
the date of the effectiveness of such transfer to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with respect
to all payments to be made under this Agreement, and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Borrowers),
to the extent legally entitled to do so, upon reasonable request by the
transferor Lender (or, in the case of any Transferee registered in the Register,
the Administrative Agent or the Company), to provide to the transferor Lender,
the Administrative Agent and the Company such other forms as may be required to
establish the legal entitlement of such Transferee to an exemption from
withholding tax with respect to payments under this Agreement.
(h) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
9.7 Set-off. In addition to any rights and remedies of the Lenders
-------
provided by law, each Lender shall have the right, without prior notice to any
Borrower, any such notice being expressly waived by each Borrower to the extent
permitted by applicable law, upon the filing of a petition under any of the
provisions of the federal bankruptcy code or amendments thereto, by or against;
the making of an assignment for the benefit of creditors by; the application for
the appointment, or the appointment, of any receiver of, or of any substantial
portion of the property of; the issuance of any execution against any
substantial portion of the property of; the issuance of a subpoena or order, in
supplementary proceedings, against or with respect to any substantial portion of
the property of; or the issuance of a warrant of attachment against any
substantial portion of the property of; any Borrower to set off and apply
against any indebtedness, whether matured or unmatured, of any Borrower to such
Lender, any amount owing from such Lender to any Borrower, at or at any time
after, the happening of any of the above mentioned events, and as security for
such indebtedness, each Borrower hereby grants to each Lender a continuing
security interest in any and all deposits, accounts or moneys of such Borrower
then or thereafter maintained with such Lender, subject in each case to the
Agency and Intercreditor Agreement. The aforesaid right of set-off may be
exercised by such Lender against any Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of any Borrower, or
against anyone else claiming through or
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109
against any Borrower or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set-off shall
not have been exercised by such Lender prior to the making, filing or issuance,
or service upon such Lender of, or of notice of, any such petition; assignment
for the benefit of creditors; appointment or application for the appointment of
a receiver; or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Company and the Administrative Agent after any
such set-off and application made by such Lender, provided that the failure to
--------
give such notice shall not affect the validity of such set-off and application.
9.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Administrative Agent. This Agreement
shall become effective when the Administrative Agent shall have received copies
of this Agreement executed by the Borrowers, the Administrative Agent, the
Arranger, the Co-Arrangers, the Syndication Agent, the Documentation Agent and
the Lenders, or, in the case of any Lender, shall have received telephonic
confirmation from such Lender stating that such Lender has executed counterparts
of this Agreement or the signature pages hereto and sent the same to the
Administrative Agent.
9.9 Governing Law; No Third Party Rights. THIS AGREEMENT AND THE
------------------------------------
NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK. This Agreement is solely for the benefit of
the parties hereto and their respective successors and assigns, and, except as
set forth in subsection 9.6, no other Persons shall have any right, benefit,
priority or interest under, or because of the existence of, this Agreement.
9.10 Submission to Jurisdiction; Waivers. (a) Each party to this
-----------------------------------
Agreement hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit Documents,
or for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of New
York, the courts of the United States for the Southern District of New
York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in
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110
subsection 9.2 or at such other address of which the Administrative Agent
shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(B) EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (A) ABOVE AND ANY
COUNTERCLAIM THEREIN.
9.11 Releases. The Administrative Agent and Lenders agree to
--------
cooperate with the Company and its Subsidiaries with respect to any sale or
other disposition permitted by subsection 7.5 and promptly take such action and
execute and deliver such instruments and documents necessary to release the
liens and security interests created by the Security Documents relating to any
of the assets or property affected by any such sale permitted by subsection 7.5,
including, without limitation, any Uniform Commercial Code amendment, release or
termination or partial release or termination statements. The Administrative
Agent is hereby irrevocably authorized by each of the Lenders to release any
Lien covering any property or assets of the Company or any of its Subsidiaries
that is the subject of a disposition which is permitted by this Agreement or
which has been consented to in accordance with subsection 9.1.
9.12 Interest. Each provision in this Agreement and each other Credit
--------
Document is expressly limited so that in no event whatsoever shall the amount
paid, or otherwise agreed to be paid, by any Borrower for the use, forbearance
or detention of the money to be loaned under this Agreement or any other Credit
Document or otherwise (including any sums paid as required by any covenant or
obligation contained herein or in any other Credit Document which is for the
use, forbearance or detention of such money), exceed that amount of money which
would cause the effective rate of interest to exceed the highest lawful rate
permitted by applicable law (the "Highest Lawful Rate"), and all amounts owed
-------------------
under this Agreement and each other Credit Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
other Credit Document shall in no event exceed that amount of money which would
cause the effective rate of interest to exceed the Highest Lawful Rate.
Notwithstanding any provision in this Agreement or any other Credit Document to
the contrary, if the maturity of the Loans or the obligations in respect of the
other Credit Documents are accelerated for any reason, or in the event of any
prepayment of all or any portion of the Loans or the obligations in respect of
the other Credit Documents by any Borrower or in any other event, earned
interest on the Loans and such other obligations of any Borrower may never
exceed the Highest Lawful Rate, and any unearned interest otherwise payable on
the Loans or the obligations in respect of the other Credit Documents that is in
excess of the Highest Lawful Rate shall be cancelled automatically as of the
date of such acceleration or prepayment or other such event and (if theretofore
paid) shall, at the option of the holder of the Loans or such other obligations,
be either refunded to such Borrower or credited on the principal of the Loans.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the
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111
Highest Lawful Rate, the Borrowers and the Lenders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with this
Agreement.
9.13 Special Indemnification. Notwithstanding any provision in this
-----------------------
Agreement to the contrary, (a) each Lender, or Transferee of any Lender pursuant
to subsection 9.6(g) of this Agreement, shall indemnify each Borrower and the
Administrative Agent, and hold each of them harmless against any and all
payments, expenses or taxes which such Borrower or the Administrative Agent may
become subject to or obligated to pay if and to the extent that, (i) on the
Closing Date or the effective date of transfer, as the case may be, such Lender,
or such Transferee of a Lender pursuant to subsection 9.6(g) of this Agreement,
(A) makes the representation and covenants set forth in subsection 3.11(d)(2) of
this Agreement, or, in the case of a Transferee, pursuant to subsection
9.6(g)(2) of this Agreement and the Assignment and Acceptance, and (B) is not in
fact also qualified to make the representation and covenants set forth in
subsection 3.11(d)(1) of this Agreement or, in the case of a Transferee,
pursuant to subsection 9.6(g)(2) of this Agreement and the Assignment and
Acceptance, and (ii) as a result of any Change in Law or compliance by such
Lender, or Transferee, with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority the Company
or the Administrative Agent is required to make any additional payments on
account of U.S. withholding taxes and amounts related thereto with respect to
any payments under this Agreement, any Note, or a Eurodollar Loan, made prior to
such Change in Law or request or directive, none of which payments would have
been required if such Lender, or Transferee, was qualified on the Closing Date
or the date of the transfer, as the case may be, to make the representation and
covenants set forth in subsection 3.11(d)(1) of this Agreement or pursuant to
subsection 9.6(g)(1) of this Agreement and the Assignment and Acceptance, as the
case may be, and (b) each Lender, or Transferee, agrees that to the extent any
amount payable by such Lender or Transferee pursuant to this subsection 9.13
remains unpaid on any Interest Payment Date or the date on which any prepayment
is made, each Borrower shall have the right to set-off against any payment due
to such Lender or Transferee on such date any amounts owing to such Borrower
pursuant to this subsection 9.13.
9.14 Permitted Payments and Transactions. Notwithstanding any
-----------------------------------
provision to the contrary contained in this Agreement, the Company and its
Subsidiaries shall be permitted to pay fees and expenses pursuant to or in
respect of, the following agreements, and, in the case of clauses (a) and (d)
below, to engage in the following transactions: (a)(i) the Agreement for
Management and Advisory Services, between Investcorp International, Inc. ("III")
---
and AcquisitionCo dated as of August 11, 1998, (ii) the Loan Financing Advisory
Agreement between III and AcquisitionCo dated as of August 11, 1998, (iii) the
Equity Placement Fee Letter between Investcorp and AcquisitionCo dated August
11, 1998, (iv) the Standby Commitment Agreement between AcquisitionCo and
Invifin S.A. dated as of August 11, 1998 and (v) the Merger Agreement; (b)
agreements with any Person or Persons providing for the payment of customary
fees in connection with serving as a director of the Company or any Subsidiary
of the Company; (c) agreements providing for the payment of commercially
reasonable fees in connection with any permitted financing, refinancing, sale,
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112
transfer, sale and leaseback or other permitted disposition of any assets of the
Company or its Subsidiaries; (d) the borrowing of any Indebtedness to the
extent, and upon the terms and conditions, the same is expressly permitted under
subsection 7.1; and (e) agreements providing for commercially reasonable fees in
connection with any permitted purchase or acquisition of stock or assets by the
Company or any of its Subsidiaries.
9.15 Harborside of Rhode Island. Notwithstanding any provision to the
--------------------------
contrary contained in this Agreement or any other Credit Document, to the extent
required by Department of Health of the State of Rhode Island or any successor
thereto, the obligations under the Credit Documents of Harborside Rhode Island
Limited Partnership, a Massachusetts limited partnership ("HRI"), and any other
---
Subsidiary substantially all the assets of which are located in the State of
Rhode Island shall not exceed, for each such Subsidiary, at any time an amount
equal to the product of 80% times the aggregate Acquisition Consideration paid
by the Company, HRI or any other Subsidiary for Health Care Facilities owned or
operated by such Subsidiary and located in the State of Rhode Island.
<PAGE>
113
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
HARBORSIDE HEALTHCARE CORPORATION
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
114
BAY TREE NURSING CENTER CORP.
BELMONT NURSING CENTER CORP.
COUNTRYSIDE CARE CENTER CORP.
HARBORSIDE HEALTH I CORPORATION
HARBORSIDE TOLEDO CORP.
KHI CORP.
MARYLAND HARBORSIDE CORP.
NEW JERSEY HARBORSIDE CORP.
OAKHURST MANOR NURSING CENTER
CORP.
ORCHARD RIDGE NURSING CENTER CORP.
SAILORS, INC.
SUNSET POINT NURSING CENTER CORP.
WEST BAY NURSING CENTER CORP.
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
115
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP IV
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP V
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP VI
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP VII
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP VIII
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP IX
HARBORSIDE ACQUISITION LIMITED
PARTNERSHIP X
HARBORSIDE ATLANTRIX LIMITED
PARTNERSHIP
HARBORSIDE CONNECTICUT LIMITED
PARTNERSHIP
HARBORSIDE HEALTHCARE BALTIMORE
LIMITED PARTNERSHIP
HARBORSIDE HEALTHCARE NETWORK
LIMITED PARTNERSHIP
HARBORSIDE MASSACHUSETTS LIMITED
PARTNERSHIP
HARBORSIDE NORTH TOLEDO LIMITED
PARTNERSHIP
HARBORSIDE OF CLEVELAND LIMITED
PARTNERSHIP
HARBORSIDE OF DAYTON LIMITED
PARTNERSHIP
HARBORSIDE OF FLORIDA LIMITED
PARTNERSHIP
HARBORSIDE OF OHIO LIMITED
PARTNERSHIP
HARBORSIDE REHABILITATION LIMITED
PARTNERSHIP
HARBORSIDE RHODE ISLAND LIMITED
PARTNERSHIP
RIVERSIDE RETIREMENT LIMITED
PARTNERSHIP
By: HARBORSIDE HEALTH I CORPORATION,
as General Partner
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
116
HARBORSIDE FUNDING LIMITED
PARTNERSHIP
By: HARBORSIDE HEALTHCARE LIMITED
PARTNERSHIP, as General Partner
By: KHI CORP., as General Partner
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
117
BRIDGEWATER ASSISTED LIVING LIMITED
PARTNERSHIP
By: NEW JERSEY HARBORSIDE CORP., as
General Partner
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
118
HARBORSIDE NEW HAMPSHIRE LIMITED
PARTNERSHIP
HARBORSIDE TOLEDO LIMITED
PARTNERSHIP
HHCI LIMITED PARTNERSHIP
By: HARBORSIDE TOLEDO CORP., as General
Partner
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
119
HARBORSIDE HEALTHCARE ADVISORS
LIMITED PARTNERSHIP
HARBORSIDE HEALTHCARE LIMITED
PARTNERSHIP
HARBORSIDE HOMECARE LIMITED
PARTNERSHIP
By: KHI CORP., as General Partner
By: /s/ Stephen L. Guillard
-----------------------------------
Title:
Stephen L. Guillard
President and
Chief Executive Officer
<PAGE>
120
HARBORSIDE PROPERTIES TRUST I, a
Massachusetts business trust
By: /s/ William H. Stephan
-----------------------------------
Name: William H. Stephan, in his capacity as
trustee and not individually
<PAGE>
THE CHASE MANHATTAN BANK, as
Administrative Agent, a Corporate Lender, the
Issuing Lender and a Synthetic Lender
By: /s/ Robert Anastasio
------------------------------------------
Title:
<PAGE>
CHASE SECURITIES INC., as the Arranger
By: /s/ Robert Anastasio
------------------------------------------
Title:
<PAGE>
MORGAN STANLEY SENIOR FUNDING, INC.,
as a Co-Arranger, the Syndication Agent,
and a Lender
By: /s/ Michael Hart
----------------------------------
Title:
Michael Hart
PRINCIPAL
<PAGE>
BT ALEX. BROWN INCORPORATED, as
a Co-Arranger
By: /s/ Lorenz E. Zimmerman, Jr.
-------------------------------
Title:
<PAGE>
BANKERS TRUST COMPANY, as
the Documentation Agent and a Lender
By: /s/ Mary Kay Coyle
--------------------------------------
Title:
MANAGING DIRECTOR
<PAGE>
ARAB BANKING CORPORATION (B.S.C.)
By: /s/ Louise Bilbro
------------------------------------------
Title: LOUISE BILBRO
VICE PRESIDENT
<PAGE>
BANKBOSTON, N.A.
By: /s/ Gregory R.D. Clark
------------------------------------------
Title: Gregory R.D. Clark
Managing Director
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Douglas J. Weir
------------------------------------------
Title: DOUGLAS J. WEIR
Vice President
<PAGE>
CITICORP U.S.A., INC.
By: /s/ R. Bruce Hall
------------------------------------------
Title: Vice President
<PAGE>
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ David E. Yewer
------------------------------------------
Title: DAVID E. YEWER
Vice President
By: /s/ Catherine K. MacDonald
------------------------------------------
Title: Catherine K. MacDonald
Vice President
<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By: /s/ Andrew P. Nesi
------------------------------------------
Title: ANDREW P. NESI
VICE PRESIDENT
By: /s/ Felix K. Camacho
------------------------------------------
Title: FELIX K. CAMACHO
ASSISTANT TREASURER
<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Michael B. Stueck
------------------------------------------
Title: Vice President
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Joseph H. Towell
------------------------------------------
Title: Joseph H. Towell
Senior Vice President
<PAGE>
FLEET NATIONAL BANK
By: /s/ Maryann S. Smith
------------------------------------------
Title: MARYANN S. SMITH
VICE PRESIDENT
<PAGE>
IMPERIAL BANK
By: /s/ Ray Vadalma
------------------------------------------
Title: RAY VADALMA
SENIOR VICE PRESIDENT
<PAGE>
NATIONSBANK, N.A.
By: /s/ Kevin Wagley
------------------------------------------
Title: KEVIN WAGLEY
VICE PRESIDENT
<PAGE>
PROVIDENT BANK OF MARYLAND
By: /s/ Jennifer D. Patton
------------------------------------------
Title: Assistant Vice President
<PAGE>
STAR BANK, NATIONAL ASSOCIATION
By: /s/ William J. Goodwin
------------------------------------------
Title: William J. Goodwin
Senior Vice President
<PAGE>
SCHEDULE I
BORROWERS
Bay Tree Nursing Center Corp., a Massachusetts corporation
Belmont Nursing Center Corp., a Massachusetts corporation
Bridgewater Assisted Living Limited Partnership, a New Jersey limited
partnership
Countryside Care Center Corp., a Massachusetts corporation
Harborside Acquisition Limited Partnership IV, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership V, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VI, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VII, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VIII, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership IX, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership X, a Massachusetts limited
partnership
Harborside Atlantrix Limited Partnership, a Massachusetts limited partnership
Harborside Connecticut Limited Partnership, a Massachusetts limited partnership
Harborside Funding Limited Partnership, a Massachusetts limited partnership
Harborside Health I Corporation, a Delaware corporation
Harborside Healthcare Advisors Limited Partnership, a Massachusetts limited
partnership
Harborside Healthcare Baltimore Limited Partnership, a Massachusetts limited
partnership
Harborside Healthcare Limited Partnership, a Massachusetts limited partnership
Harborside Healthcare Network Limited Partnership, a Florida limited partnership
Harborside Homecare Limited Partnership, a Massachusetts limited partnership
Harborside Massachusetts Limited Partnership, a Massachusetts limited
partnership
Harborside New Hampshire Limited Partnership, a Massachusetts limited
partnership
Harborside North Toledo Limited Partnership, a Massachusetts limited partnership
Harborside of Cleveland Limited Partnership, a Massachusetts limited partnership
Harborside of Dayton Limited Partnership, a Massachusetts limited partnership
Harborside of Florida Limited Partnership, a Florida limited partnership
Harborside of Ohio Limited Partnership, a Massachusetts limited partnership
Harborside Properties Trust I, a Massachusetts business trust
Harborside Rehabilitation Limited Partnership, a Massachusetts limited
partnership
Harborside Rhode Island Limited Partnership, a Massachusetts limited partnership
Harborside Toledo Corp., a Massachusetts corporation
Harborside Toledo Limited Partnership, a Massachusetts limited partnership
HHCI Limited Partnership, a Massachusetts limited partnership
KHI Corp., a Delaware corporation
Maryland Harborside Corp., a Massachusetts corporation
New Jersey Harborside Corp., a Massachusetts corporation
Oakhurst Manor Nursing Center Corp., a Massachusetts corporation
Orchard Ridge Nursing Center Corp., a Massachusetts corporation
Riverside Retirement Limited Partnership, a Massachusetts limited partnership
Sailors, Inc., a Delaware corporation
Sunset Point Nursing Center Corp., a Massachusetts corporation
West Bay Nursing Center Corp., a Massachusetts corporation
<PAGE>
Schedule II to the
Credit Agreement
----------------
LENDERS, ADDRESSES AND COMMITMENTS
<TABLE>
<CAPTION>
Revolving Credit
Commitment
----------------
<S> <C>
THE CHASE MANHATTAN BANK $ 20,000,000.00
85 Wells Avenue, Suite 200
Newton, MA 02159
Attn: Roger Stone
Telecopy: 617-928-3057
MORGAN STANLEY SENIOR FUNDING, INC. $ 20,000,000.00
1585 Broadway
New York, NY 10036
Attn: Michael A. Hart
Telecopy: 212-761-0587
BANKERS TRUST COMPANY $ 20,000,000.00
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attn: Mary Kay Coyle
Telecopy: 212-250-1343
BANK OF TOKYO-MITSUBISHI TRUST COMPANY $ 15,750,000.00
1251 Avenue of the Americas, 12th Floor
New York, NY 10020
Attn: Doug Weir
Telecopy: 212-782-4935
CITICORP U.S.A., INC. $ 15,750,000.00
399 Park Avenue, 5th Floor
New York, NY 10043
Attn: Bruce Hall
Telecopy: 212-559-0292
FIRST UNION NATIONAL BANK $ 15,750,000.00
301 South College Street
Charlotte, NC 28288
Attn: J. Matt MacIver
Telecopy: 704-383-9144
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit
Commitment
----------------
<S> <C>
NATIONSBANK, N.A. $ 15,750,000.00
One Nationsbank Plaza - 7th Floor
Nashville, TN 37239-2697
Attn: Kevin Wagley
Telecopy: 615-749-4640
ARAB BANKING CORPORATION (B.S.C.) $ 13,000,000.00
277 Park Avenue, 32nd Floor
New York, NY 10172-3299
Attn: Sandy Tilney
Telecopy: 212-583-0921
THE CIT GROUP/BUSINESS CREDIT, INC. $ 13,000,000.00
1211 Avenue of the Americas
New York, NY 10036
Attn: Victor Russo
Telecopy: 212-536-1297
BANKBOSTON, N.A. $ 13,000,000.00
100 Federal Street, 8th Floor
Boston, MA 02110
Attn: Gregory Clark
Telecopy: 617-434-4929
CREDITANSTALT CORPORATE FINANCE, INC. $ 13,000,000.00
2 Greenwich Plaza
Greenwich, CT 06830
Attn: David Yewer
Telecopy: 203-861-1475
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND $ 13,000,000.00
CAYMAN BRANCH
75 Wall Street, 24th Floor
New York, NY 10005
Attn: Felix Camacho
Telecopy: 212-429-2129
THE FIRST NATIONAL BANK OF MARYLAND $ 13,000,000.00
25 South Charles Street
Baltimore, MD 21201
Attn: Bob Hauver
Telecopy: 410-244-4388
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit
Commitment
----------------
<S> <C>
FLEET NATIONAL BANK $ 13,000,000.00
1 Federal Street, MAOF 0324
Boston, MA 02110
Attn: Paul R. Trefry
Telecopy: 617-346-4885
PROVIDENT BANK OF MARYLAND $ 13,000,000.00
114 East Lexington Street, 5th Floor
Baltimore, MD 21202
Attn: Tom Myers
Telecopy: 410-277-2793
STAR BANK, NATIONAL ASSOCIATION $ 13,000,000.00
425 Walnut Street, 8th Floor, Corporate Banking
Cincinnati, OH 45201-1038
Attn: Mark Whitson
Telecopy: 513-632-2068
IMPERIAL BANK $ 10,000,000.00
9920 South La Clenega Blvd., 14th Floor
Inglewood, CA 90301
Attn: Jamie Harney
Telecopy: 310-417-5997
TOTAL $250,000,000.00
</TABLE>
<PAGE>
Schedule III to the
Credit Agreement
----------------
PRICING AND COMMITMENT FEE GRID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Applicable Margin
-----------------------
Eurodollar Commitment
Leverage Ratio ABR Loans Loans Fee
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal to 5.0 1.250% 2.250% 0.500%
- -----------------------------------------------------------------------------
Less than 5.0 to 1.0, but greater than 1.000% 2.000% 0.375%
or equal to 4.5 to 1.0
- -----------------------------------------------------------------------------
Less than 4.5 to 1.0, but greater than 0.750% 1.750% 0.375%
or equal to 4.0 to 1.0
- -----------------------------------------------------------------------------
Less than 4.0 to 1.0, but greater than 0.500% 1.500% 0.300%
or equal to 3.5 to 1.0
- -----------------------------------------------------------------------------
Less than 3.5 to 1.0, but greater than 0.250% 1.250% 0.250%
or equal to 3.0 to 1.0
- -----------------------------------------------------------------------------
Less than 3.0 to 1.0 0.000% 1.000% 0.250%
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2.5
EXISTING LETTERS OF CREDIT
1. Letter of Credit number P-390257 in the amount of $425,000 related to
Nationwide-financed properties in Massachusetts.
<PAGE>
SCHEDULE 4.11
TAXES
None.
<PAGE>
SCHEDULE 4.12
SUBSIDIARIES
Bay Tree Nursing Center Corp., a Massachusetts corporation
Belmont Nursing Center Corp., a Massachusetts corporation
Bridgewater Assisted Living Limited Partnership, a New Jersey limited
partnership
Countryside Care Center Corp., a Massachusetts corporation
Harborside Acquisition Limited Partnership IV, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership V, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VI, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VII, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership VIII, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership IX, a Massachusetts limited
partnership
Harborside Acquisition Limited Partnership X, a Massachusetts limited
partnership
Harborside Atlantrix Limited Partnership, a Massachusetts limited partnership
Harborside Connecticut Limited Partnership, a Massachusetts limited partnership
Harborside Funding Limited Partnership, a Massachusetts limited partnership
Harborside Health I Corporation, a Delaware corporation
Harborside Healthcare Advisors Limited Partnership, a Massachusetts limited
partnership
Harborside Healthcare Baltimore Limited Partnership, a Massachusetts limited
partnership
Harborside Healthcare Limited Partnership, a Massachusetts limited partnership
Harborside Healthcare Network Limited Partnership, a Florida limited partnership
Harborside Homecare Limited Partnership, a Massachusetts limited partnership
Harborside Massachusetts Limited Partnership, a Massachusetts limited
partnership
Harborside New Hampshire Limited Partnership, a Massachusetts limited
partnership
Harborside North Toledo Limited Partnership, a Massachusetts limited partnership
Harborside of Cleveland Limited Partnership, a Massachusetts limited partnership
Harborside of Dayton Limited Partnership, a Massachusetts limited partnership
Harborside of Florida Limited Partnership, a Florida limited partnership
Harborside of Ohio Limited Partnership, a Massachusetts limited partnership
Harborside Properties Trust I, a Massachusetts business trust
Harborside Rehabilitation Limited Partnership, a Massachusetts limited
partnership
Harborside Rhode Island Limited Partnership, a Massachusetts limited partnership
Harborside Toledo Corp., a Massachusetts corporation
Harborside Toledo Limited Partnership, a Massachusetts limited partnership
HHCI Limited Partnership, a Massachusetts limited partnership
KHI Corp., a Delaware corporation
Maryland Harborside Corp., a Massachusetts corporation
New Jersey Harborside Corp., a Massachusetts corporation
Oakhurst Manor Nursing Center Corp., a Massachusetts corporation
Orchard Ridge Nursing Center Corp., a Massachusetts corporation
Riverside Retirement Limited Partnership, a Massachusetts limited partnership
Sailors, Inc., a Delaware corporation
Sunset Point Nursing Center Corp., a Massachusetts corporation
West Bay Nursing Center Corp., a Massachusetts corporation
<PAGE>
SCHEDULE 4.13
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
Fee Properties Owner
- -------------- -----
<S> <C>
A. Mortgaged Properties
1. Pawtuxet Village Harborside Rhode Island Limited
270 Post Road Partnership
Warwick, Rhode Island 0288
2. Greenwood House Harborside Rhode Island Limited
1139 Main Street Partnership
Warwick, Rhode Island 02886
3. Sylvania Rehabilitation Harborside North Toledo Limited
5757 Whiteford Road Partnership
Sylvania, Ohio 43560
4. Point Place Rehabilitation Harborside North Toledo Limited
6101 North Summit Partnership
Toledo, Ohio 43611
5. Harborside Dayton Harborside of Dayton Limited
323 Forest Avenue Partnership
Dayton, Ohio 45405
6. Harborside New Lebanon Harborside of Dayton Limited
101 Mills Place Partnership
New Lebanon, Ohio 45345
7. Harborside Laurelwood Harborside of Dayton Limited
3797 Summitt Glen Drive Partnership
Dayton, Ohio 45449
8. Harborside Healthcare Toledo Belmont Nursing Center Corp.
28546 Starbright Boulevard
Perrysburg, Ohio 43551
9. Harborside Healthcare Gulf Coast Orchard Ridge Nursing Center Corp.
4927 Voorhees Road
Newport Richey, Florida 34653
</TABLE>
<PAGE>
SCHEDULE 4.13 (CONT'D)
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
Fee Properties Owner
- -------------- -----
<S> <C>
A. MORTGAGED PROPERTIES (CONT'D)
10. Harborside Healthcare Ocala Oakhurst Manor Nursing Center Corp.
1501 S.E. 24th Road
Ocala, Florida 34471
/*/11. Harborside Healthcare Terre Haute Countryside Care Center Corp.
1001 Springhill Drive
Terre Haute, Indiana
*12. Harborside Healthcare Palm Harbor Bay Tree Nursing Center Corp.
2600 Highlands Boulevard North
Palm Harbor, Florida 34684
*13. Harborside Healthcare Tampa Bay West Bay Nursing Center Corp.
3865 Tampa Road
Oldsmar, Florida 34677
*14. Harborside Healthcare Clearwater Sunset Point Nursing Center Corp.
1980 Sunset Point Road
Clearwater, Florida 34625
B. OTHER FEE PROPERTY
15. Harborside Healthcare Decatur Riverside Retirement Limited
4851 Tincher Road Partnership (Mortgaged in favor of
Indianapolis, Indiana 46221 City of Indianapolis, Indiana)
</TABLE>
_______________________
/*/ Mortgaged in favor of Meditrust Mortgage Investments, Inc.; therefore,
mortgage in favor of the Administrative Agent is a second lien.
<PAGE>
SCHEDULE 4.13 (CONT'D)
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
LEASED PROPERTIES Lessee
- ----------------- ------
<S> <C>
1. Harborside Beachwood Harborside of Cleveland Limited Partnership
3800 Park East
Beachwood, Ohio 44122
2. Harborside Royalview Harborside of Cleveland Limited Partnership
2801 East Roylton Road
Broadview Heights, Ohio 44147
3. Harborside Westlake Harborside of Cleveland Limited Partnership
27601 Westchester Parkway
Westlake, Ohio 44145
4. Harborside Westlake II Harborside of Cleveland Limited Partnership
27601 Westchester Parkway
Westlake, Ohio 44145
5. Harborside Healthcare Defiance Harborside of Ohio Limited Partnership
395 Harding Avenue
Defiance, Ohio 46512
6. Harborside Healthcare Northwestern Harborside of Ohio Limited Partnership
1104 Wesley Avenue
Bryan, Ohio 43506
7. Arden House Harborside Connecticut Limited Partnership
850 Mix Avenue
Hamden, Connecticut 06614
8. Governor's House Harborside Connecticut Limited Partnership
36 Firetown Road
Simsbury, Connecticut 06070
9. Madison House Harborside Connecticut Limited Partnership
34 Wildwood Avenue
Madison, Connecticut 06443
10. The Reservoir Harborside Connecticut Limited Partnership
1 Emily Way
West Hartford, Connecticut 06443
11. Willows Harborside Connecticut Limited Partnership
225 Amity Road
Woodbridge, Connecticut 06625
12. Harford Gardens Harborside Healthcare Baltimore Limited
4700 Harford Road Partnership
Baltimore, Maryland 21214
</TABLE>
<PAGE>
SCHEDULE 4.13 (CONT'D)
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
LEASED PROPERTIES LESSE
- ----------------- -----
<S> <C>
13. Harborside Brevard Harborside of Florida Limited Partnership
1775 Huntington Lane
Rockledge, Florida 32955
14. Harborside Applewood Harborside New Hampshire Limited Partnership
8 Snow Road
Winchester, New Hampshire 03455
15. Harborside Crestwood Harborside New Hampshire Limited Partnership
40 Crosby Street
Milford, New Hampshire 03055
16. Harborside Milford Harborside New Hampshire Limited Partnership
71 Elm Street
Milford, New Hampshire 03055
17. Harborside Pheasantwood Harborside New Hampshire Limited Partnership
Pheasant Road
Peterborough, New Hampshire 03458
18. Harborside Westwood Harborside New Hampshire Limited Partnership
298 Main Street
Keene, New Hampshire 03431
19. Harborside Northwood Harborside New Hampshire Limited Partnership
30 Colby Court
Bedford, New Hampshire 03100
20. Harborside Woods Edge HHCI Limited Partnership
875 Route 202/206 North
Bridgewater, New Jersey 08807
21. Harborside New Haven HHCI Limited Partnership
1201 Daly Drive
New Haven, Indiana 46774
22. Harborside Pinebrook HHCI Limited Partnership
1240 Pinebrook Road
Venice, Florida 34292
23. Harborside Sarasota HHCI Limited Partnership
4602 Northgate Court
Sarasota, Florida 34624
24. Harborside Indianapolis HHCI Limited Partnership
8201 West Washington Street
Indianapolis, Indiana 46231
</TABLE>
<PAGE>
SCHEDULE 4.13 (CONT'D)
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
LEASED PROPERTIES LESSE
- ----------------- -----
<S> <C>
25. Harborside Troy HHCI Limited Partnership
512 Crescent Drive
Troy, Ohio 45373
26. Harborside Naples HHCI Limited Partnership
2900 Twelfth Street North
Naples, Florida 33940
27. Harborside Swanton Harborside Toledo Limited Partnership
401 West Airport Highway
Swanton, Ohio 43558
28. Cedar Glen Harborside Massachusetts Limited Partnership
44 Summer Street
Danvers, Massachusetts 01923
29. Twin Oaks Harborside Massachusetts Limited Partnership
63 Locust Street
Danvers, Massachusetts 01923
30. Northshore Harborside Massachusetts Limited Partnership
266 Lincoln Avenue
Saugus, Massachusetts 01906
31. Amesbury Harborside Massachusetts Limited Partnership
6 Morris Place
Amesbury, Massachusetts 01913
32. Harborside Office Harborside Healthcare Corporation
470 Atlantic Avenue
Boston, Massachusetts 02210
33. Financial Services Group Harborside Healthcare Limited Partnership
1330 Medical Park Drive
Fort Wayne, Indiana 46828
34. Midwest Regional Office Harborside Healthcare Limited Partnership
Suite 107
5987 East 71st Street
Indianapolis, IN 46220
35. Southeast Regional Office Harborside Healthcare Limited Partnership
Suite 200
2536 Countryside Boulevard,
Clearwater, Florida 33763
</TABLE>
<PAGE>
SCHEDULE 4.13 (CONT'D)
FEE AND LEASED PROPERTIES
<TABLE>
<CAPTION>
LEASED PROPERTIES LESSE
- ----------------- -----
<S> <C>
36. Great Lakes Regional Office Harborside Healthcare Limited Partnership
3800 Park East, Suite 250
Beachwood, Ohio 44122
37. New England Regional Office Harborside Healthcare Limited Partnership
175 Spring Hill Road
Sharon, New Hampshire 03458
38. Massachusetts Office Harborside Healthcare Limited Partnership
27 Main Street
Topsfield, Massachusetts 01983
39. Northeast Regional Office Harborside Connecticut Limited Partnership
2 Emily Way
West Hartford, Connecticut 06107
40. Theracor Rehabilitation Center Harborside Rehabilitation Limited Partnership
Suite 100
34931 U.S.Route 19 North
Palm Harbor, Florida 34684
41. Theracor Rehabilitation-New England Harborside Rehabilitation Limited Partnership
501 Water Street
Framingham, Massachusetts 01701
</TABLE>
<PAGE>
SCHEDULE 4.15(A)
LIST OF UCC FILING OFFICES
Bay Tree Nursing Center
Massachusetts - Secretary of State, Town Clerk of Boston
Florida - Department of State
BELMONT NURSING CENTER CORP.
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Wood County Recorder
BRIDGEWATER ASSISTED LIVING LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
COUNTRYSIDE CARE CENTER CORP.
Massachusetts - Secretary of State, Town Clerk of Boston
Indiana - Secretary of State
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP IV
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP V
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VI
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VII
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP VIII
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP IX
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ACQUISITION LIMITED PARTNERSHIP X
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE ATLANTRIX LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
<PAGE>
SCHEDULE 4.15(A) (CONT'D)
LIST OF UCC FILING OFFICES
HARBORSIDE CONNECTICUT LIMITED PARTNERSHIP
Connecticut - Secretary of State
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE FUNDING LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE HEALTH I CORPORATION
Connecticut - Secretary of State
Delaware - Secretary of State
Florida - Department of State
Illinois - Secretary of State
Indiana - Secretary of State
Maryland - State Department of Assessments and Taxation
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of Danvers,
Town Clerk of Saugus, Town Clerk of Amesbury, Town Clerk of Framingham
New Jersey - Secretary of State
Ohio - Secretary of State, Montgomery County Recorder, Cuyahoga County Recorder,
Defiance County Recorder, Williams County Recorder, Lucas County Recorder
Rhode Island - Secretary of State
HARBORSIDE HEALTHCARE ADVISORS LIMITED PARTNERSHIP
Florida - Department of State
Illinois - Secretary of State
Indiana - Secretary of State
Maryland - State Department of Assessments and Taxation
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of
Topsfield
New Hampshire - Secretary of State, Town Clerk of Sharon
New Jersey - Secretary of State
Ohio - Secretary of State, Miami County Recorder, Cuyahoga County Recorder
HARBORSIDE HEALTHCARE BALTIMORE LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Maryland - State Department of Assessments and Taxation
HARBORSIDE HEALTHCARE CORPORATION
Connecticut - Secretary of State
Delaware - Secretary of State
Florida - Department of State
Illinois - Secretary of State
Indiana - Secretary of State
Maryland - State Department of Assessments and Taxation
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of Danvers,
Town Clerk of Saugus, Town Clerk of Amesbury, Town Clerk of Topsfield, Town
Clerk of Framingham
<PAGE>
SCHEDULE 4.15(A) (CONT'D)
LIST OF UCC FILING OFFICES
HARBORSIDE HEALTHCARE CORPORATION (cont'd)
New Hampshire - Secretary of State, Town Clerk of Sharon, Town Clerk of
Winchester, Town Clerk of Milford, Town Clerk of Peterborough, Town Clerk
of Bedford, Town Clerk of Keene
New Jersey - Secretary of State
Ohio - Secretary of State, Wood County Recorder, Fulton County Recorder, Miami
County Recorder, Montgomery County Recorder, Cuyahoga County Recorder,
Defiance County Recorder, Williams County Recorder, Lucas County Recorder
Rhode Island - Secretary of State
HARBORSIDE HEALTHCARE LIMITED PARTNERSHIP
Connecticut - Secretary of State
Florida - Department of State
Indiana - Secretary of State
Maryland - State Department of Assessments and Taxation
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of Danvers,
Town Clerk of Saugus, Town Clerk of Amesbury, Town Clerk of Framingham,
Town Clerk of Topsfield
New Hampshire - Secretary of State, Town Clerk of Sharon, Town Clerk of
Winchester, Town Clerk of Milford, Town Clerk of Peterborough, Town Clerk
of Bedford, Town Clerk of Keene
New Jersey - Secretary of State
Ohio - Secretary of State, Montgomery County Recorder, Cuyahoga County Recorder,
Defiance County Recorder, Williams County Recorder, Lucas County Recorder,
Fulton County Recorder
Rhode Island - Secretary of State
HARBORSIDE HEALTHCARE NETWORK LIMITED PARTNERSHIP
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE HOMECARE LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Harborside Massachusetts Limited Partnership
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of Danvers,
Town Clerk of Saugus, Town Clerk of Amesbury
HARBORSIDE NEW HAMPSHIRE LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
New Hampshire - Secretary of State, Town Clerk of Winchester, Town Clerk of
Milford, Town Clerk of Peterborough, Town Clerk of Bedford, Town Clerk of
Keene
<PAGE>
SCHEDULE 4.15(A) (CONT'D)
LIST OF UCC FILING OFFICES
HARBORSIDE NORTH TOLEDO LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Lucas County Recorder
HARBORSIDE OF CLEVELAND LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Cuyahoga County Recorder
HARBORSIDE OF DAYTON LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Montgomery County Recorder
HARBORSIDE OF OHIO LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Defiance County Recorder, Williams County Recorder
HARBORSIDE PROPERTIES TRUST I
Massachusetts - Secretary of State, Town Clerk of Boston
HARBORSIDE REHABILITATION LIMITED PARTNERSHIP
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of
Framingham
HARBORSIDE OF RHODE ISLAND LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Rhode Island - Secretary of State
Harborside Toledo Corp.
Indiana - Secretary of State
Massachusetts - Secretary of State
New Hampshire - Secretary of State, Town Clerk of Winchester, Town Clerk of
Milford, Town Clerk of Peterborough, Town Clerk of Bedford, Town Clerk of
Keene
New Jersey - Secretary of State
Ohio - Secretary of State, Fulton County Recorder, Miami County Recorder
HARBORSIDE TOLEDO LIMITED PARTNERSHIP
Massachusetts - Secretary of State, Town Clerk of Boston
Ohio - Secretary of State, Fulton County Recorder
HHCI LIMITED PARTNERSHIP
Florida - Department of State
Indiana - Secretary of State
Massachusetts - Secretary of State, Town Clerk of Boston
New Jersey - Secretary of State
Ohio - Secretary of State, Miami County Recorder
<PAGE>
SCHEDULE 4.15(A) (CONT'D)
LIST OF UCC FILING OFFICES
KHI CORP.
Delaware - Secretary of State
Florida - Department of State
Indiana - Secretary of State
Massachusetts - Secretary of State, Town Clerk of Boston, Town Clerk of
Topsfield
New Hampshire - Secretary of State, Town Clerk of Sharon
New Jersey - Secretary of State
Ohio - Secretary of State, Cuyahoga County Recorder
MARYLAND HARBORSIDE CORP.
Maryland - State Department of Assessments and Taxation
Massachusetts - Secretary of State, Town Clerk of Boston
NEW JERSEY HARBORSIDE CORP.
Massachusetts - Secretary of State, Town Clerk of Boston
OAKHURST MANOR NURSING CENTER CORP.
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston
ORCHARD RIDGE NURSING CENTER CORP.
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston
SAILORS, INC.
Delaware - Secretary of State
Massachusetts - Secretary of State, Town Clerk of Boston
SUNSET POINT NURSING CENTER CORP.
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston
WEST BAY NURSING CENTER CORP.
Florida - Department of State
Massachusetts - Secretary of State, Town Clerk of Boston
<PAGE>
SCHEDULE 4.16
TRADEMARKS AND COPYRIGHTS
<TABLE>
<CAPTION>
Trademark Application Number JURISDICTION OWNER
- -------- ------------------ ------------ -----
<S> <C> <C> <C>
Harborside Healthcare 75-402823 United States Harborside Healthcare
Limited Partnership
Theracor Rehabilitation 75-402819 United States Harborside Rehabilitation
Services/1/ Limited Partnership
Theracor Rehabilitation Pending United States Harborside Rehabilitation
Services/2/ Limited Partnership
Theratour 75-402820 United States Harborside Rehabilitation
Limited Partnership
</TABLE>
____________________
/1/ Nursing and rehabilitative services
/2/ Management consulting in connection with medical rehabilitation therapy
services
<PAGE>
SCHEDULE 7.1(A)
EXISTING INDEBTEDNESS
1. Indebtedness in the aggregate principal amount of approximately $16.4
million pursuant to the Loan Agreement, dated October 13, 1994 and related
documents as amended to date, by and among Bay Tree Nursing Center Corp.,
Countryside Care Center Corp., Sunset Point Nursing Center Corp., and West
Bay Nursing Center Corp., Harborside Healthcare Limited Partnership, and
Meditrust Mortgage Investments, Inc.
2. Indebtedness in the aggregate principal amount of approximately $1.6
million pursuant to the Indenture of Trust, dated as of April 1, 1984,
between the City of Indianapolis, Indiana (the "Issuer") and American
Fletcher National Bank and Trust Company, providing for the issuance of 14%
City of Indianapolis Economic Development Revenue Bonds-Series 1984 (C&C
Investments, Ltd. Project) Due 2010, subsequently assumed and modified
pursuant to a Loan Assumption and Modification Agreement, dated as of March
1, 1988, by and among C&C Investments, Ltd. ("C&C"), Riverside Retirement
Limited Partnership (the "Borrower"), and Roy L. Prock, Theodore E. Bruzas
and George A. Smith (the "Original Bondholders"), pursuant to which the
Borrower purchased the Decatur Facility from C&C and assumed C&C's
obligations under all documents delivered to the Original Bondholders in
connection with the issuance of the Bonds including a First Mortgage Note,
from C&C to the Issuer and a Collateral Assignment of Rents of C&C to the
Issuer.
3. Indebtedness in the aggregate principal amount of approximately $54.5
million pursuant to the Agreement to Lease among Westbay Manor Company,
Westbay Manor II Development Company, Royalview Manor Development Company,
Beachwood Care Center Limited Partnership and Royalview Manor Company,
Harborside Health I Corporation and Harborside Healthcare Limited
Partnership, together with the four capitalized leases entered into
pursuant to the Agreement to Lease with respect to four properties for
which Harborside of Cleveland Limited Partnership is the Tenant.
<PAGE>
SCHEDULE 7.2 (I)
EXISTING LIENS
Against HARBORSIDE HEALTHCARE LIMITED PARTNERSHIP, as debtor:
Secretary of State of Maryland
1. No. 200B2070068000 filed on April 14, 1993 by Maryland National Bank.
Assigned March 24, 1997 pursuant to filing No. 183B2110093301 to First
Union National Bank of Maryland. Covers all right, title and interest
in Bowie Center Limited Partnership.
Against HARBORSIDE OF FLORIDA LIMITED PARTNERSHIP, as debtor:
Secretary of State of Florida
2. No. 940000209518 filed on October 14, 1994 by SouthTrust Bank of
Alabama, National Associated. Covers all tangible and intangible
personal property relating to real property and nursing facility
located at 1775 Huntington Lane, Rockledge, Florida.
Against MARYLAND HARBORSIDE CORP., as debtor:
Secretary of State of Maryland
3. No. 35011733 filed on April 14, 1993 by Maryland National Bank.
Covers all right, title and interest in Bowie Center Limited
Partnership.
Liens in connection with obligations relating to Bowie Center Limited
Partnership, in an aggregate principal amount not to exceed $7,000,000 at any
time, in connection with Existing Indebtedness as described in Schedule 7.1(a)
and in connection with the fourteen Meditrust leased properties (listed as
leased properties 14 through 27 in Schedule 4.13 hereto), the four Nationwide
leased properties and the one Harborside of Florida Limited Partnership leased
property.
Liens in favor of The Chase Manhattan Bank, as Administrative Agent, in
connection with indebtedness to be repaid at closing. Terminations with respect
to these liens will be delivered to the Administrative Agent hereunder at
Closing.
<PAGE>
SCHEDULE 7.3(D)
EXISTING CONTINGENT OBLIGATIONS
Contingent Obligations in connection with obligations relating to Bowie Center
Limited Partnership, in an aggregate principal amount not to exceed $7,000,000
at any time, and in connection with Existing Indebtedness as described in
Schedule 7.1(a).
Contingent Obligations of Harborside of Florida Limited Partnership and
Harborside Healthcare Limited Partnership, pursuant to the Indemnity Agreement,
dated as of September 30, 1994 and as amended to date, by and among Rockledge T.
Limited Partnership, Harborside of Florida Limited Partnership, Harborside
Healthcare Limited Partnership and SouthTrust Bank of Alabama, N.A., to
indemnify SouthTrust Bank of Alabama, N.A. (the lender of an original principal
amount of $2,000,000 to Rockledge T. Limited Partnership, the owner of the
facility leased by Harborside of Florida Limited Partnership) for its
environmental liability relating to such facility.
<PAGE>
EXHIBIT 99.1
HARBORSIDE HEALTHCARE CORPORATION
Contact: Todd Fogarty/Jim Fingeroth
EKST and Company
212-521-4800
FOR IMMEDIATE RELEASE
---------------------
HARBORSIDE HEALTHCARE CORPORATION COMPLETES RECAPITALIZATION
WITH INVESTCORP MAKING A MAJORITY EQUITY INVESTMENT
Boston, MA, August 11, 1998 - Harborside Healthcare Corporation (NYSE-HBR), a
provider of high quality long-term care and specialty medical services, today
announced the completion of the previously announced recapitalization of
Harborside, including a majority equity investment by Investcorp, an
international investment firm, and certain of its investor clients.
Founded in 1987, Harborside has been publicly traded since 1996. Under the terms
of the agreement, Harborside's senior management team, led by Stephen L.
Guillard, Chairman, Chief Executive Officer, and President, will continue their
roles following the completion of the transaction. In addition, the Company will
retain its present operating structure and maintain its presence in its current
locations.
Headquartered in Boston, Harborside currently operates a regionally focused
network of 49 long-term care facilities with an aggregate capacity of
approximately 6,000 licensed beds located in nine states. The Company also
provides specialty medical services, including a variety of subacute care
programs, as well as distinct programs for the provision of care to Alzheimer's
and hospice patients. Over the past few years the Company has experienced
significant growth, primarily as a result of its aggressive acquisition program.
For the year ended December 31, 1997, the Company reported revenues of
approximately $221.8 million and earnings of $0.84 per diluted share.
Investcorp and its affiliates act as principals and intermediaries in
international investment transactions. To date, Investcorp and its affiliates
have completed over 70 transactions with an aggregate value of approximately $10
billion. Investcorp, its affiliates and their clients currently own interests in
16 other corporate investments in North America and Europe, including, among
others, Saks Fifth Avenue, Webinvest Ltd., Helly Hansen, CSK Auto, Star Markets,
Simmons Company, The William Carter Company, Falcon Building Products, Welcome
Break and Werner Holding Co. Previous investments have included Gucci, Tiffany,
Prime Equipment, Thorn-Lighting and Circle K.
