<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
----- -----
COMMISSION FILE NUMBER 1-9550
BEVERLY ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1691861
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 BEVERLY WAY
FORT SMITH, ARKANSAS 72919
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 201-2000
INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
--- ---
SHARES OF REGISTRANT'S COMMON STOCK, $.10 PAR VALUE, OUTSTANDING,
EXCLUSIVE OF TREASURY SHARES, AT OCTOBER 29, 1999 -- 102,495,556
================================================================================
<PAGE> 2
BEVERLY ENTERPRISES, INC.
FORM 10-Q
SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets...................... 2
Condensed Consolidated Statements of Operations............ 3
Condensed Consolidated Statements of Cash Flows............ 4
Notes to Condensed Consolidated Financial Statements....... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 11
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................................. 19
Item 6. Exhibits and Reports on Form 8-K.................................. 20
</TABLE>
1
<PAGE> 3
PART I
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ -----------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 17,462 $ 17,278
Accounts receivable - patient, less allowance for doubtful accounts:
1999 - $60,073; 1998 - $21,764 ........................................... 341,658 463,822
Accounts receivable - nonpatient, less allowance for doubtful accounts:
1999 - $631; 1998 - $441 ................................................. 18,519 85,585
Notes receivable ............................................................ 21,560 21,075
Operating supplies .......................................................... 32,577 32,133
Deferred income taxes ....................................................... 44,028 56,512
Prepaid expenses and other .................................................. 16,415 19,565
----------- -----------
Total current assets .................................................. 492,219 695,970
Property and equipment, net of accumulated depreciation and amortization:
1999 - $750,494; 1998 - $694,322 ............................................ 1,108,188 1,120,315
Other assets:
Notes receivable, less allowance for doubtful notes:
1999 - $2,462; 1998 - $2,921 ............................................. 4,003 21,263
Designated funds ............................................................ 3,092 4,029
Goodwill, net ............................................................... 229,479 217,066
Other, net .................................................................. 133,091 101,868
----------- -----------
Total other assets .................................................... 369,665 344,226
----------- -----------
$ 1,970,072 $ 2,160,511
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 71,660 $ 85,533
Accrued wages and related liabilities ....................................... 88,368 96,092
Accrued interest ............................................................ 12,236 12,783
Other accrued liabilities ................................................... 149,120 134,975
Current portion of long-term debt ........................................... 23,810 27,773
----------- -----------
Total current liabilities ............................................. 345,194 357,156
Long-term debt ................................................................. 776,276 878,270
Deferred income taxes payable .................................................. 39,566 114,962
Other liabilities and deferred items ........................................... 135,130 33,917
Commitments and contingencies
Stockholders' equity:
Preferred stock, shares authorized: 25,000,000 ............................. -- --
Common stock, shares issued: 1999 - 110,382,356; 1998 - 110,275,714 ........ 11,038 11,028
Additional paid-in capital .................................................. 875,850 876,383
Accumulated deficit ......................................................... (106,835) (4,782)
Accumulated other comprehensive income ...................................... 1,036 760
Treasury stock, at cost: 7,886,800 shares .................................. (107,183) (107,183)
----------- -----------
Total stockholders' equity ............................................ 673,906 776,206
----------- -----------
$ 1,970,072 $ 2,160,511
=========== ===========
</TABLE>
NOTE: The balance sheet at December 31, 1998 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying notes.
2
<PAGE> 4
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net operating revenues ..................................... $ 637,396 $ 697,937 $ 1,903,748 $ 2,107,752
Interest income............................................. 935 2,698 3,290 7,958
------------ ------------ ------------ ------------
Total revenues.................................... 638,331 700,635 1,907,038 2,115,710
Costs and expenses:
Operating and administrative:
Wages and related.................................... 389,710 428,284 1,177,676 1,284,506
Other................................................ 186,993 196,493 549,692 614,293
Interest................................................ 20,001 16,788 54,029 48,869
Depreciation and amortization........................... 25,669 23,711 74,511 69,947
Special charges related to tentative settlements of
federal government investigations.................... -- -- 199,043 --
Year 2000 remediation................................... 3,423 2,041 10,672 3,875
Investigation costs..................................... -- 496 3,404 496
------------ ------------ ------------ ------------
Total costs and expenses.......................... 625,796 667,813 2,069,027 2,021,986
------------ ------------ ------------ ------------
Income (loss) before provision for (benefit from) income
taxes and cumulative effect of change in accounting
for start-up costs...................................... 12,535 32,822 (161,989) 93,724
Provision for (benefit from) income taxes................... 4,638 11,487 (59,936) 32,803
------------ ------------ ------------ ------------
Income (loss) before cumulative effect of change in
accounting for start-up costs........................... 7,897 21,335 (102,053) 60,921
Cumulative effect of change in accounting for start-up costs,
net of income tax benefit of $2,811..................... -- -- -- (4,415)
------------ ------------ ------------ ------------
Net income (loss)........................................... $ 7,897 $ 21,335 $ (102,053) $ 56,506
============ ============ ============ ============
Income (loss) per share of common stock:
Basic:
Before cumulative effect of change in accounting
for start-up costs................................ $ 0.08 $ 0.21 $ (1.00) $ 0.58
Cumulative effect of change in accounting for
start-up costs.................................... -- -- -- (0.04)
------------ ------------ ------------ ------------
Net income (loss).................................... $ 0.08 $ 0.21 $ (1.00) $ 0.54
============ ============ ============ ============
Shares used to compute per share amounts............. 102,495 103,019 102,490 104,225
============ ============ ============ ============
Diluted:
Before cumulative effect of change in accounting
for start-up costs................................ $ 0.08 $ 0.21 $ (1.00) $ 0.58
Cumulative effect of change in accounting for
start-up costs.................................... -- -- -- (0.04)
------------ ------------ ------------ ------------
Net income (loss).................................... $ 0.08 $ 0.21 $ (1.00) $ 0.54
============ ============ ============ ============
Shares used to compute per share amounts............. 102,715 103,610 102,490 105,391
============ ============ ============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 5
BEVERLY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................................. $ (102,053) $ 56,506
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization............................................................... 74,511 69,947
Provision for reserves on patient, notes and other receivables, net......................... 20,345 13,626
Amortization of deferred financing costs.................................................... 2,562 1,784
Special charges related to tentative settlements of federal government investigations....... 199,043 --
Cumulative effect of change in accounting for start-up costs................................ -- 7,226
Losses (gains) on dispositions of facilities and other assets, net.......................... 4,002 (20,496)
Deferred taxes.............................................................................. (62,122) 12,877
Net increase (decrease) in insurance related accounts....................................... 4,008 (26,906)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable - patient............................................................. (8,927) (89,693)
Operating supplies........................................................................ (495) (437)
Prepaid expenses and other receivables.................................................... 523 2,170
Accounts payable and other accrued expenses............................................... (31,706) 14,584
Income taxes payable...................................................................... 21,545 (4,919)
Other, net................................................................................ (2,549) (3,997)
---------- ---------
Total adjustments....................................................................... 220,740 (24,234)
---------- ---------
Net cash provided by operating activities............................................... 118,687 32,272
Cash flows from investing activities:
Proceeds from dispositions of facilities and other assets................................... 41,044 67,740
Payments for acquisitions, net of cash acquired............................................. (5,927) (146,672)
Capital expenditures........................................................................ (69,007) (103,234)
Collections on notes receivable............................................................. 16,589 3,800
Other, net.................................................................................. (27,886) (11,422)
---------- --------
Net cash used for investing activities................................................. (45,187) (189,788)
Cash flows from financing activities:
Revolver borrowings......................................................................... 854,000 944,000
Repayments of Revolver borrowings........................................................... (975,000) (763,000)
Proceeds from issuance of long-term debt.................................................... 125,820 --
Repayments of long-term debt................................................................ (75,602) (52,040)
Purchase of common stock for treasury....................................................... -- (56,332)
Proceeds from exercise of stock options..................................................... 129 3,090
Deferred financing costs.................................................................... (2,963) (624)
Proceeds from designated funds, net......................................................... 300 730
---------- ---------
Net cash provided by (used for) financing activities.................................... (73,316) 75,824
---------- ---------
Net increase (decrease) in cash and cash equivalents............................................. 184 (81,692)
Cash and cash equivalents at beginning of period................................................. 17,278 105,230
---------- ---------
Cash and cash equivalents at end of period....................................................... $ 17,462 $ 23,538
========== =========
Supplemental schedule of cash flow information: Cash paid (received) during the
period for:
Interest, net of amounts capitalized........................................................ $ 52,014 $ 52,078
Income tax payments (refunds), net.......................................................... (19,359) 22,034
</TABLE>
See accompanying notes.
4
<PAGE> 6
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments of a
normal recurring nature which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the three-month and
nine-month periods ended September 30, 1999 and 1998 pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures in these condensed consolidated financial statements are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and the notes thereto included in
the Company's 1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The results of operations for the three-month and
nine-month periods ended September 30, 1999 are not necessarily indicative of
the results for a full year. Unless the context indicates otherwise, the Company
means Beverly Enterprises, Inc. and its consolidated subsidiaries.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The following table sets forth the computation of basic and diluted
earnings per share from continuing operations for the three-month and nine-month
periods ended September 30 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
NUMERATOR:
Numerator for basic and diluted income (loss) per share
from continuing operations................................... $ 7,897 $ 21,335 $ (102,053) $ 60,921
========== ========= ========== =========
DENOMINATOR:
Denominator for basic income (loss) per share - weighted
average shares............................................... 102,495 103,019 102,490 104,225
Effect of dilutive securities:
Employee stock options....................................... 220 591 -- 1,166
---------- --------- ---------- ---------
Denominator for diluted income (loss) per share - adjusted
weighted average shares and assumed conversions.............. 102,715 103,610 102,490 105,391
========== ========= ========== =========
Basic income (loss) per share.................................. $ 0.08 $ 0.21 $ (1.00) $ 0.58
========== ========= ========== =========
Diluted income (loss) per share................................ $ 0.08 $ 0.21 $ (1.00) $ 0.58
========== ========= ========== =========
</TABLE>
5
<PAGE> 7
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
Comprehensive income (loss) includes net income (loss), as well as charges
and credits directly to stockholders' equity which are excluded from net income
(loss). The components of comprehensive income (loss), net of income taxes,
consist of the following for the three-month and nine-month periods ended
September 30 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss)........................................ $ 7,897 $ 21,335 $(102,053) $ 56,506
Unrealized gains on securities, net of income taxes...... 324 505 276 682
---------- -------- --------- ---------
Comprehensive income (loss).............................. $ 8,221 $ 21,840 $(101,777) $ 57,188
========== ======== ========= =========
</TABLE>
Accumulated other comprehensive income, net of income taxes, consists of
unrealized gains on securities of $1,036,000 and $760,000 at September 30, 1999
and December 31, 1998, respectively.
Results of operations for the nine months ended September 30, 1998 have
been restated for a cumulative effect adjustment of $4,415,000, net of income
taxes, or $0.04 per share, resulting from the adoption, effective January 1,
1998, of Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," which requires costs of start-up activities and organization costs
to be expensed as incurred.
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
(ii) The provision for (benefit from) taxes on income (loss) before the
cumulative effect of a change in accounting for start-up costs for the
three-month and nine-month periods ended September 30, 1999 and 1998 were based
on estimated annual effective tax rates of 37% and 35%, respectively. The
Company's estimated annual effective tax rates for 1999 and 1998 were different
than the federal statutory rate primarily due to the impact of state income
taxes, amortization of nondeductible goodwill and the benefit of certain tax
credits. The Company's 1998 estimated annual effective tax rate was further
impacted by the sale of American Transitional Hospitals, Inc., which operated as
Beverly Specialty Hospitals, in 1998. The Company's net deferred tax assets at
September 30, 1999 will be realized primarily through the reversal of temporary
taxable differences and future taxable income. Accordingly, the Company does not
believe that a deferred tax valuation allowance is necessary at September 30,
1999. The provision for (benefit from) taxes on income (loss) before the
cumulative effect of a change in accounting for start-up costs consists of the
following for the three-month and nine-month periods ended September 30 (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Federal:
Current................................................ $ -- $ 6,348 $ -- $ 15,685
Deferred............................................... 3,168 3,036 (56,044) 10,861
State:
Current................................................ (169) 1,771 2,186 4,241
Deferred............................................... 1,639 332 (6,078) 2,016
--------- -------- --------- ---------
$ 4,638 $ 11,487 $ (59,936) $ 32,803
========= ======== ========= =========
</TABLE>
6
<PAGE> 8
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(iii) During the nine months ended September 30, 1999, the Company
purchased three outpatient clinics, two home care centers, two nursing
facilities (284 beds), one previously leased nursing facility (190 beds) and
certain other assets for cash of approximately $5,000,000, acquired debt of
approximately $15,100,000 and closing and other costs of approximately
$1,700,000. The acquisitions of such facilities and other assets were accounted
for as purchases. Also during such period, the Company sold or terminated the
leases on 10 nursing facilities (1,075 beds), one assisted living center (10
units), 17 home care centers and certain other assets for cash proceeds of
approximately $6,200,000 and notes receivable of approximately $1,000,000. The
Company did not operate two of these nursing facilities (166 beds) which were
leased to other nursing home operators in prior year transactions. The Company
recognized net pre-tax losses, which were included in net operating revenues
during the nine months ended September 30, 1999, of approximately $4,000,000 as
a result of these dispositions. The operations of these facilities and certain
other assets were immaterial to the Company's consolidated financial position
and results of operations.
(iv) In January 1999, the Company entered into a $65,000,000 promissory
note at an annual interest rate of 6.50%. In October 1999, the note was
renegotiated to allow the Company to make an interest-only payment in January
2000 at an annual interest rate of 6.50%, with the principal balance payable in
two equal installments in January 2001 and in January 2002 at an annual interest
rate of 7.00%. The proceeds from this promissory note were used to pay down
Revolver borrowings and is secured by a surety bond. During the nine months
ended September 30, 1999, the Company entered into promissory notes totaling
approximately $10,820,000 in conjunction with the construction of certain
nursing facilities. Such debt instruments bear interest at rates ranging from
7.75% to 8.00%, require monthly installments of principal and interest and are
secured by mortgage interests in the real property and security interests in the
personal property of the nursing facilities. Also during such period, the
Company entered into promissory notes totaling approximately $15,100,000 in
conjunction with the acquisitions of certain facilities (see Note iii). Such
debt instruments bear interest at rates ranging from 7.00% to 8.00%, require
monthly installments of principal and interest and are secured by mortgage
interests in the real property and security interests in the personal property
of the acquired facilities.
In June 1999, the Company refinanced its Medium Term Notes, increasing its
borrowings from $40,000,000 to $50,000,000. The Medium Term Notes are
collateralized by patient accounts receivable, which are sold by Beverly Health
and Rehabilitation Services, Inc. ("BHRS") (currently operating as Beverly
Healthcare), a wholly-owned subsidiary of the Company, to Beverly Funding
Corporation ("BFC"), a wholly-owned bankruptcy remote subsidiary of the Company.
As a result of this refinancing, the Company was required by Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," ("SFAS No. 125") to
deconsolidate BFC. SFAS No. 125 provides accounting and reporting standards for
sales, securitizations, and servicing of receivables and other financial assets,
secured borrowing and collateral transactions, and the extinguishments of
liabilities. It requires companies to recognize the financial and servicing
assets it controls and the liabilities it has incurred and to deconsolidate
financial assets when control has been surrendered in accordance with the
criteria provided in SFAS No. 125. Deconsolidation of BFC, which had total
assets of approximately $74,200,000, total liabilities of approximately
$55,800,000 and total stockholder's equity of approximately $18,400,000 at June
30, 1999, caused a reduction in the Company's accounts receivable-patient and
long-term debt. In addition, the Company recorded its ongoing investment in BFC
as an increase in other, net assets.
During July 1999, BFC increased its borrowings under the Medium Term Notes
to $70,000,000. In conjunction therewith, the Company, through BHRS, sold an
additional $25,000,000 of patient accounts receivable and made an additional
capital contribution of $5,000,000 to BFC. At September 30, 1999, BFC had total
assets of approximately $108,000,000, total liabilities of approximately
$74,100,000, and total stockholder's equity of approximately $33,900,000. The
Company's Statement of Cash Flows reflects the change from June 30, 1999 to
September 30, 1999 in receivables sold to BFC in the caption Accounts receivable
- - patient and the change from June 30, 1999 to September 30, 1999 in the
Company's investment in BFC in the caption Other, net - investing.
Effective September 30, 1999, the Company executed an amendment to the
Credit Agreement covering the Company's $375,000,000 Revolver/Letter of Credit
Facility, as well as amendments with certain of its other lenders covering debt
of approximately $199,000,000 (collectively, the "Amendments"). Such Amendments
were required since recording of the special charges related to the tentative
settlements, as discussed in Note vii, would have resulted in the Company's
noncompliance with certain financial covenants contained in those debt
agreements. The Amendments modify certain financial covenant levels and increase
the annual interest rates for such debt.
(v) Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" provides disclosure
guidelines for segments of a company based on a management approach to defining
operating segments.
7
<PAGE> 9
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
The following table summarizes certain information for each of the
Company's operating segments (in thousands):
<TABLE>
<CAPTION>
BEVERLY BEVERLY
BEVERLY CARE SPECIALTY
HEALTHCARE ALLIANCE HOSPITALS (1) ALL OTHER (2) TOTALS
----------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1999
Revenues from external customers ............. $ 580,961 $ 55,128 $ -- $ 1,307 $ 637,396
Intercompany revenues ........................ -- 34,263 -- 2,937 37,200
Interest income .............................. 61 20 -- 854 935
Interest expense ............................. 7,933 107 -- 11,961 20,001
Depreciation and amortization ................ 20,537 3,401 -- 1,731 25,669
Pre-tax income (loss) ........................ 26,643 4,279 -- (18,387) 12,535
Total assets ................................. 1,543,726 327,219 -- 99,127 1,970,072
Capital expenditures ......................... 16,401 2,491 -- (1,324) 17,568
Three months ended September 30, 1998
Revenues from external customers ............. $ 642,209 $ 53,740 $ -- $ 1,988 $ 697,937
Intercompany revenues ........................ -- 3,416 -- 2,741 6,157
Interest income .............................. 100 34 -- 2,564 2,698
Interest expense ............................. 7,277 46 -- 9,465 16,788
Depreciation and amortization ................ 19,499 2,426 -- 1,786 23,711
Pre-tax income (loss) ........................ 42,535 2,595 -- (12,308) 32,822
Total assets ................................. 1,550,126 296,208 -- 352,619 2,198,953
Capital expenditures ......................... 16,065 4,372 -- 19,258 39,695
Nine months ended September 30, 1999
Revenues from external customers ............. $ 1,716,246 $ 184,337 $ -- $ 3,165 $ 1,903,748
Intercompany revenues ........................ -- 105,191 -- 8,553 113,744
Interest income .............................. 169 50 -- 3,071 3,290
Interest expense ............................. 21,246 334 -- 32,449 54,029
Depreciation and amortization ................ 60,020 9,806 -- 4,685 74,511
Pre-tax income (loss) ........................ 84,710 16,248 -- (262,947) (161,989)
Total assets ................................. 1,543,726 327,219 -- 99,127 1,970,072
Capital expenditures ......................... 55,902 8,773 -- 4,332 69,007
Nine months ended September 30, 1998
Revenues from external customers ............. $ 1,904,420 $ 131,914 $ 61,775 $ 9,643 $ 2,107,752
Intercompany revenues ........................ -- 10,491 539 7,965 18,995
Interest income .............................. 257 34 3 7,664 7,958
Interest expense ............................. 22,326 61 93 26,389 48,869
Depreciation and amortization ................ 58,124 5,958 1,578 4,287 69,947
Pre-tax income (loss) ........................ 129,341 7,231 (670) (42,178) 93,724
Total assets ................................. 1,550,126 296,208 -- 352,619 2,198,953
Capital expenditures ......................... 56,846 9,585 4,937 31,866 103,234
</TABLE>
- --------------
(1) The Company completed the sale of Beverly Specialty Hospitals in June 1998.
(2) All Other consists of the operations of the Company's corporate headquarters
and related overhead, as well as certain other non-operating revenues and
expenses.
8
<PAGE> 10
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(vi) The Company has been the subject of a federal government investigation
relating to the allocation to the Medicare program of certain nursing labor
costs in its skilled nursing facilities from 1990 to 1998. The investigation has
been conducted by the Office of Inspector General of the Department of Health
and Human Services and by the U.S. Department of Justice. In addition, a federal
grand jury in San Francisco has investigated business practices which are the
subject of the above civil investigation, and the Company's current Medicare
fiscal intermediary, Blue Cross of California, is examining cost reports of the
Company's facilities with respect to the areas that are the focus of the
government investigation.
In late July 1999, the Company announced it had reached a tentative
understanding with the U.S. Department of Justice to settle the civil and
criminal aspects of all investigations by the federal government and its fiscal
intermediary into the allocation of nursing labor hours to the Medicare program
from 1990 to 1998 (the "Allocation Investigations"). Since that time, the
Company has continued to negotiate with the federal government to complete and
execute definitive settlement documents, certain of which are subject to court
approval.
As previously reported, if the tentative civil settlement is consummated,
the Company would be obligated to reimburse the federal government $170,000,000
as follows: (i) $25,000,000 within 30 days of signing the definitive civil
settlement agreement; and (ii) $145,000,000 to be withheld from the Company's
biweekly Medicare periodic interim payments in equal installments over eight
years. In addition, the Company would agree to resubmit certain Medicare filings
to reflect reduced direct labor costs.
If the tentative criminal settlement is consummated, a subsidiary of the
Company would pay a fine of $5,000,000. The effect of this settlement would be
to exclude such subsidiary's nursing facilities from the Medicare and Medicaid
programs and would require the subsidiary to dispose of such facilities. It is
expected that this will affect no more than 10 nursing facilities.
On July 6, 1999, an amended complaint was filed by the plaintiffs in the
previously disclosed purported class action lawsuit pending against the Company
and certain of its officers in the United States District Court for the Eastern
District of Arkansas (the "Class Action"). Plaintiffs filed a second amended
complaint on September 9, 1999 which asserted claims under Section 10(b)
(including Rule 10b-5 promulgated thereunder) and under Section 20 of the
Securities Exchange Act of 1934 arising from practices that are the subject of
the Allocation Investigations. The defendants filed a motion to dismiss that
complaint on October 8, 1999. Due to the preliminary state of the Class Action
and the fact the second amended complaint does not allege damages with any
specificity, the Company is unable at this time to assess the probable outcome
of the Class Action or the materiality of the risk of loss. However, the Company
believes that it acted lawfully with respect to plaintiff investors and will
vigorously defend the Class Action.
In addition, since July 29, 1999, seven derivative lawsuits have been filed
in the state courts of Arkansas, California and Delaware (collectively, the
"Derivative Actions"). Norman M. Lyons v. David R. Banks, et al., Case No.
OT99-4041, was filed in the Chancery Court of Pulaski County, Arkansas (4th
Division) on or about July 29, 1999; Alfred Badger, Jr. v. David R. Banks, et
al., Case No. OT99-4353, was filed in the Chancery Court of Pulaski County,
Arkansas (1st Division) on or about August 17, 1999 and voluntarily dismissed on
November 3, 1999. On November 1, 1999, the defendants filed a motion to dismiss
the Lyons and Badger actions. James L. Laurita v. David R. Banks, et al., Case
No. 17348NC, was filed in the Delaware Chancery Court on or about August 2,
1999; Kenneth Abbey v. David R. Banks, et al., Case No. 17352NC, was filed in
the Delaware Chancery Court on or about August 4, 1999; Alan Friedman v. David
R. Banks, et al., Case No. 17355NC, was filed in the Delaware Chancery Court on
or about August 9, 1999. The Laurita, Abbey and Friedman actions were
subsequently consolidated by order of the Delaware Chancery Court. On or about
October 1, 1999, the defendants moved to dismiss the Laurita, Abbey and Friedman
actions. Elles Trading Company v. David R. Banks, et al., was filed in the
Superior Court for San Francisco County, California on or about August 4, 1999.
That action was removed to United States District Court for the Northern
District, and plaintiff filed a motion to remand the action to state court on or
about October 14, 1999. The defendants have not yet responded to the complaint
in the Elles Trading Company action. Richardson v. David R. Banks, et al., Case
No. LR-C-99-826, was filed in United States District Court for the Eastern
District of Arkansas (Western Division) on November 4, 1999. The Derivative
Actions each name the Company's directors as defendants, as well as the Company
as a nominal defendant. The Badger and Lyons actions also name as defendants
certain of the Company's officers. The Derivative Actions each allege breach of
fiduciary duties to the Company and its stockholders arising
9
<PAGE> 11
BEVERLY ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
primarily out of the Company's alleged exposure to loss due to the Class Action
and the Allocation Investigations. The Lyons, Badger and Richardson actions also
assert claims for abuse of control and constructive fraud arising from the same
allegations, and the Richardson action also claims unjust enrichment. Due to the
preliminary state of the Derivative Actions and the fact the complaints do not
allege damages with any specificity, the Company is unable at this time to
assess the probable outcome of the Derivative Actions or the materiality of the
risk of loss. However, the Company believes that it acted lawfully with respect
to the allegations of the Derivative Actions and will vigorously defend the
Derivative Actions.
On March 4, 1998, a jury in California returned a verdict of $95,100,000
against a nursing facility operated by a subsidiary of the Company. The verdict,
which was based on findings of fraud as well as negligence and abuse, consisted
of $365,580 in compensatory damages and $94,700,000 in punitive damages. At a
post-trial hearing on June 3, 1998, the trial judge reduced the compensatory
damages to $125,000 and reduced the punitive damages to $3,000,000. The Company
believes that these reduced damages are excessive and has appealed on this
basis. The plaintiff has cross-appealed. The Company intends to aggressively
pursue all appellate remedies available.
There are various other lawsuits and regulatory actions pending against the
Company arising in the normal course of business, some of which seek punitive
damages that are generally not covered by insurance. The Company does not
believe that the ultimate resolution of such other matters will have a material
adverse effect on the Company's consolidated financial position or results of
operations.
(vii) In late July 1999, the Company reached a tentative understanding with
the U.S. Department of Justice to settle the Allocation Investigations (See Note
vi). As a result, during the second quarter ended June 30, 1999, the Company
recorded a special pre-tax charge of approximately $199,000,000 ($125,400,000,
net of income taxes, or $1.22 per share diluted) which includes: (i) provisions
totaling approximately $128,800,000 representing the net present value of the
tentative civil and criminal settlements; (ii) impairment losses of
approximately $17,000,000 on certain nursing facilities which would be excluded
from the Medicare and Medicaid programs in conjunction with the tentative
criminal settlement; (iii) approximately $39,000,000 for certain prior year cost
report related items affected by the tentative settlements; (iv) approximately
$3,100,000 of debt issuance and refinancing costs related to various bank debt
modifications as a result of the tentative settlements; and (v) approximately
$11,100,000 for other investigation and settlement related costs.
10
<PAGE> 12
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1999
(UNAUDITED)
GENERAL
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and other information provided by
the Company from time to time, contains certain "forward-looking"
statements as that term is defined by the Private Securities Litigation
Reform Act of 1995. All statements regarding the Company's expected future
financial position, results of operations, cash flows, continued
performance improvements, ability to settle the civil and criminal aspects
of the federal government investigations, ability to service and refinance
its debt obligations, ability to finance growth opportunities, ability to
respond to changes in government regulations, and similar statements
including, without limitation, those containing words such as "believes,"
"anticipates," "expects," "intends," "estimates," "plans," and other
similar expressions are forward-looking statements. Forward-looking
statements involve known and unknown risks and uncertainties that may cause
the Company's actual results in future periods to differ materially from
those projected or contemplated in the forward-looking statements as a
result of, but not limited to, the following factors: national and local
economic conditions, including their effect on the availability and cost of
labor and materials; the effect of government regulations and changes in
regulations governing the healthcare industry, including the Company's
compliance with such regulations; changes in Medicare and Medicaid payment
levels; liabilities and other claims asserted against the Company,
including the final settlements of the criminal and civil aspects of the
federal government investigations and the outcome of the Class Action and
Derivative Lawsuits (see "Part II, Item 1. Legal Proceedings"); the ability
to attract and retain qualified personnel; the availability and terms of
capital to fund acquisitions and capital improvements; the competitive
environment in which the Company operates; demographic changes; and the
ability of the Company and its significant vendors, suppliers and payors to
timely locate and correct all relevant computer codes and identify and
remediate date-sensitive embedded chips prior to the year 2000. Given these
risks and uncertainties, the Company can give no assurances that these
forward-looking statements will, in fact, transpire and, therefore,
cautions investors not to place undue reliance on them.
Investors also should refer to Item 1. Business - Governmental
Regulation and Reimbursement in the Company's Form 10-K for the year ended
December 31, 1998 for a discussion of various governmental regulations
relating to the healthcare industry and various risk factors inherent in
them.
YEAR 2000 REMEDIATION
GENERAL
Computer programs and embedded chips that utilize a two digit year in
their processing logic may interpret the year "00" as the year 1900 rather
than the year 2000. This could result in system failure or miscalculations
causing disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices, or engage in
similar normal business activities. Through the year 2000 project (the "Y2K
Project"), the Company is addressing its own processing logic issues, as
well as those of third parties, which may impact the Company.
In 1996, the Company began a major systems initiative to upgrade or
replace all of its integrated financial application software to facilitate
the adoption of a new standard chart of accounts. As part of that major
initiative, the Company took the necessary steps to upgrade or replace the
applications with year 2000 compliant releases of the software whenever
possible. For those purchased software applications where the year 2000
release was not available at that time, the upgrades to the compliant
releases are being addressed as part of the Y2K Project. The Company has
not postponed any of its other significant information technology projects
as a result of the Y2K Project.
11
<PAGE> 13
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
Y2K PROJECT
The Company's Y2K Project is divided into four major components: technology
infrastructure; applications software; third party vendors, suppliers and major
customers; and business unit operating equipment. The phases of the Y2K Project
that are common to all components include: inventory of date-dependent hardware,
software, and operating equipment; assessment of identified items to determine
current year 2000 compliance status; repair or replacement of material
non-compliant items; testing of material items for compliance; and development
of contingency plans for each operating unit.
The technology infrastructure component and the applications software
component, together, comprise all of the Company's hardware and systems
software, as well as all electronic interfaces with external parties. The
testing phase for these components is divided into two distinct types of
testing, each with its own timetable. The initial phase of year 2000 testing
consists of remediating, upgrading, or replacing hardware and software. Upon
successful completion of this phase of testing, the application is moved back
into the production environment. At that time, the second phase of year 2000
testing is done in a parallel operating environment in which the applications
are tested using year 2000 dates. The remediation, upgrade, replacement, and
initial testing of all mission critical mainframe hardware and software was
complete as of September 30, 1999. Trans-century compliance testing began during
the first quarter of 1999 and was substantially complete as of September 30,
1999.
The third party vendors, suppliers and major customers component of the Y2K
Project includes the process of identifying and prioritizing critical vendors,
suppliers and customers, and communicating with them about their plans and
progress in addressing the year 2000 problem. The Company has completed the
inventory phase of this component of the Y2K Project and has initiated formal
communications with all of the vendors, suppliers, and customers identified as
critical to the Company's operations. During the fourth quarter of 1998,
follow-up inquiries were initiated with any critical third parties that did not
respond to the first communication, and detailed evaluations of the responses
for the most critical third parties were initiated. Based on the data obtained
and the detailed evaluations performed, contingency planning began in the fourth
quarter of 1998 and was substantially complete as of September 30, 1999. The
Company has no means of ensuring that third parties will be year 2000 ready. The
inability of third parties to complete their year 2000 resolution process in a
timely manner could materially impact the Company. The Company cannot determine
the effect of non-compliance by third parties. Due to these and other
uncertainties, as part of the Company's contingency planning process, the
Company is taking appropriate measures to ensure that an uninterrupted supply of
critical products is available into the new century, including additional
monitoring of the Company's critical third party vendors and suppliers,
replacing vendors and suppliers where necessary and increasing inventories when
possible.
For the business unit operating equipment component of the Y2K Project, the
inventories of each individual operating unit were completed during the third
quarter of 1998, and the data has been compiled and summarized by major
operating category, including: medical devices and equipment; environmental
systems; security systems; telecommunication and office equipment. The Company
is utilizing external resources to test critical equipment impacted by the year
2000 problem, retrofit or replace equipment where necessary, and certify year
2000 compliance of all material date-sensitive equipment. All such remediation
and testing will be completed during the fourth quarter of 1999.
COSTS
The Company has, and will continue to, utilize both internal and external
resources to reprogram or replace, test, and implement the software and
operating equipment for year 2000 modifications. The total cost of the Company's
Y2K Project is estimated at approximately $29,000,000 and is being funded
through operating cash flows. The total amount expended on the Y2K Project
through September 30, 1999 was approximately $23,000,000 ($20,400,000 expensed
and $2,600,000 capitalized for new systems and equipment), related to the
activities completed to date for all components and phases of the Y2K Project.
Of the total remaining Y2K Project costs, $2,000,000 is attributable to the
purchase of new hardware, software and operating equipment, which will be
capitalized. The remaining $4,000,000 relates to remediation of hardware,
software, and operating equipment, as well as expenses related to certain
contingency planning preparations, and will be expensed as incurred.
12
<PAGE> 14
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
RISKS
The failure to correct a material year 2000 problem could result in
significant disruptions in, or failures of, normal business activities. Due to
the general uncertainty inherent in the year 2000 problem, due in part to the
uncertainty of the year 2000 readiness of third party vendors, suppliers and
customers, the Company is unable to determine at this time if it will be
impacted by year 2000 disruptions or failures, or whether the consequences of
such year 2000 disruptions or failures will have a material impact on the
Company's consolidated financial position, results of operations or cash flows.
The Company believes that, with the completion of all phases of each component
of the Y2K Project as scheduled, the possibility of significant disruptions of
normal operations should be significantly reduced. However, in the event of any
unforeseen Y2K issues not discovered during the remediation and testing phases,
a possible worst case scenario might be that the Company would be unable to
provide uninterrupted service to its patients, invoice customers, or collect
payments. In addition, due to the Company's dependence on Medicare and Medicaid
revenue sources, disruptions in the processing and payment of Medicare or
Medicaid claims could also materially adversely affect the Company. The General
Accounting Office has reported that the Health Care Financing Administration,
which runs Medicare, is behind schedule in taking steps to deal with the year
2000 issue, and that it is highly unlikely that all of the Medicare systems will
be compliant in time to ensure the delivery of uninterrupted benefits and
services into the year 2000. The Company does not know at this time whether
there will in fact be a disruption of Medicare or Medicaid reimbursements and
is, therefore, unable to determine the impact on the Company, its operations or
cash flows. In addition, the Company could be subject to litigation for
equipment shutdown or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
The Company is in the process of developing contingency plans for certain
critical applications and will continue development and enhancement of such
plans for all critical business functions throughout 1999. These contingency
plans involve, among other actions, manual workarounds, increasing inventories
and staffing adjustments.
OPERATING RESULTS
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998
RESULTS OF OPERATIONS
Net income was $7,897,000 for the third quarter of 1999, as compared to net
income of $21,335,000 for the same period in 1998. The Company had an estimated
annual effective tax rate of 37% and 35% in 1999 and 1998, respectively. The
Company's estimated annual effective tax rates for 1999 and 1998 were different
than the federal statutory rate primarily due to the impact of state income
taxes, amortization of nondeductible goodwill and the benefit of certain tax
credits. The Company's 1998 estimated annual effective tax rate was further
impacted by the sale of American Transitional Hospitals, Inc. ("ATH"), which
operated as Beverly Specialty Hospitals, in 1998. The Company's net deferred tax
assets at September 30, 1999 will be realized primarily through the reversal of
temporary taxable differences and future taxable income. Accordingly, the
Company does not believe that a deferred tax valuation allowance is necessary at
September 30, 1999.
NET OPERATING REVENUES
The Company reported net operating revenues of $637,396,000 during the
third quarter of 1999 compared to $697,937,000 for the same period in 1998.
Approximately 91% and 92% of the Company's total net operating revenues for the
quarters ended September 30, 1999 and 1998, respectively, were derived from
services provided by the Company's Beverly Healthcare segment. The decrease in
net operating revenues of approximately $60,500,000 for the third quarter of
1999, as compared to the same period in 1998, consists of the following: a
decrease of approximately $54,100,000 due to facilities which the Company
operated during each of the quarters ended September 30, 1999 and 1998 ("same
facility operations"); a decrease of approximately $31,800,000 due to the
disposition of, or lease terminations on, 10 nursing facilities, one assisted
living center and 17 home care centers in 1999 and 26 nursing facilities in
1998; partially offset by an increase of approximately $25,400,000 due to the
acquisitions of nursing facilities and outpatient and home care businesses
during 1999 and 1998.
13
<PAGE> 15
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
The decrease in net operating revenues of approximately $54,100,000 for
same facility operations for the third quarter of 1999, as compared to the same
period in 1998, was due to the following: approximately $31,300,000 decrease in
ancillary revenues and approximately $13,500,000 decrease in Medicare rates both
primarily due to the impact of the Medicare prospective payment system ("PPS")
and other provisions of the Balanced Budget Act of 1997; approximately
$13,400,000 decrease due to a decline in same facility occupancy; approximately
$9,000,000 decrease due to a shift in the Company's patient mix; and
approximately $7,700,000 due to various other items; partially offset by an
increase of approximately $20,800,000 due primarily to increases in Medicaid and
private rates. The Company's same facility occupancy was 87.7% for the third
quarter of 1999, as compared to 89.3% for the same period in 1998. The Company
has implemented a series of initiatives to improve its occupancy levels and has
experienced some initial success; however, it is still too early to determine
the long-term effectiveness of these initiatives. No assurance can be given that
these initiatives will in fact improve the Company's occupancy levels. The
Company's Medicare, private and Medicaid census for same facility operations was
9%, 19% and 71%, respectively, for the third quarter of 1999, as compared to
10%, 20% and 69%, respectively, for the same period in 1998.
The decrease in net operating revenues of approximately $31,800,000 for the
third quarter of 1999, as compared to the same period in 1998, resulting from
dispositions and lease terminations that occurred during the nine months ended
September 30, 1999 and the year ended December 31, 1998 are described below.
During the nine months ended September 30, 1999, the Company sold or terminated
the leases on 10 nursing facilities (1,075 beds), one assisted living center (10
units), 17 home care centers and certain other assets. The Company did not
operate two of these nursing facilities (166 beds) which were leased to other
nursing home operators in prior year transactions. The Company recognized net
pre-tax losses, which were included in net operating revenues during the nine
months ended September 30, 1999, of approximately $4,000,000 as a result of
these dispositions. During the year ended December 31, 1998, the Company sold or
terminated the leases on 26 nursing facilities (3,203 beds) and certain other
assets. The Company did not operate seven of these nursing facilities (893 beds)
which were leased to other nursing home operators in prior year transactions.
The increase in net operating revenues of approximately $25,400,000 for the
third quarter of 1999, as compared to the same period in 1998, resulting from
acquisitions which occurred during the nine months ended September 30, 1999 and
the year ended December 31, 1998 are described below. During the nine months
ended September 30, 1999, the Company purchased three outpatient clinics, two
home care centers, two nursing facilities (284 beds), one previously leased
nursing facility (190 beds) and certain other assets. During the year ended
December 31, 1998, the Company purchased 111 outpatient clinics, 50 home care
centers, eight nursing facilities (823 beds), one assisted living center (48
units), two previously leased nursing facilities (228 beds) and certain other
assets.
OPERATING AND ADMINISTRATIVE EXPENSES
The Company reported operating and administrative expenses of $576,703,000
during the third quarter of 1999 compared to $624,777,000 for the same period in
1998. The decrease of approximately $48,100,000 consists of the following: a
decrease of approximately $43,800,000 due to same facility operations; a
decrease of approximately $29,900,000 due to dispositions; partially offset by
an increase of approximately $25,600,000 due to acquisitions. (See above for a
discussion of dispositions and acquisitions).
The decrease in operating and administrative expenses of approximately
$43,800,000 for same facility operations for the third quarter of 1999, as
compared to the same period in 1998, was due primarily to a shift in the
Company's patient mix, as well as a decline in same facility occupancy, and
consists of the following: approximately $31,100,000 due to a decrease in wages
and related expenses; approximately $10,700,000 due to a decrease in contracted
therapy expenses; and approximately $2,000,000 due primarily to decreases in
purchased ancillary products, nursing supplies and other variable costs.
Although the Company's wages and related expenses decreased for the third
quarter of 1999, as compared to the same period in 1998, the Company's weighted
average wage rate and use of registry personnel continue to increase, both of
which underscore the increased difficulties many of the Company's nursing
facilities are having attracting nursing aides, assistants and other important
personnel. The Company is addressing this through several ongoing programs and
training initiatives. No assurance can be given that these programs and training
initiatives will in fact improve the Company's ability to attract these nursing
personnel.
14
<PAGE> 16
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
INTEREST EXPENSE, NET
Interest income decreased to $935,000 for the third quarter of 1999, as
compared to $2,698,000 for the same period in 1998 primarily due to the sale of
securities in conjunction with a loss portfolio transfer transaction during the
fourth quarter of 1998. Interest expense increased to $20,001,000 for the third
quarter of 1999, as compared to $16,788,000 for the same period in 1998
primarily due to imputed interest on the tentative civil settlement of
approximately $2,100,000, an increase in net borrowings under the
Revolver/Letter of Credit Facility during the third quarter of 1999 as compared
to the same period in 1998, and the write-off of deferred financing costs in
conjunction with certain bond refundings.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $25,669,000 for the
third quarter of 1999, as compared to $23,711,000 for the same period in 1998.
Such increase was affected by the following: approximately $2,700,000 increase
due to capital additions and improvements, as well as acquisitions; partially
offset by a decrease of approximately $700,000 due to dispositions of, or lease
terminations on, certain facilities.
NINE MONTHS 1999 COMPARED TO NINE MONTHS 1998
RESULTS OF OPERATIONS
Net loss was $102,053,000 for the nine months ended September 30, 1999, as
compared to net income of $56,506,000 for the same period in 1998. Net loss for
the nine months ended September 30, 1999 included a special pre-tax charge of
approximately $199,000,000 related to the tentative settlements of the
Allocation Investigations (as discussed herein). Results of operations for the
nine months ended September 30, 1998 have been restated for a cumulative effect
adjustment of $4,415,000, net of income taxes, resulting from the adoption,
effective January 1, 1998, of Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," which requires costs of start-up activities and
organization costs to be expensed as incurred.
In late July 1999, the Company reached a tentative understanding with the
U.S. Department of Justice to settle the civil and criminal aspects of all
investigations by the federal government and its fiscal intermediary into the
allocation of nursing labor hours to the Medicare program from 1990 to 1998 (the
"Allocation Investigations") (See "Part II, Item 1. Legal Proceedings"). As a
result, during the second quarter ended June 30, 1999, the Company recorded a
special pre-tax charge of approximately $199,000,000 ($125,400,000, net of
income taxes, or $1.22 per share diluted) which includes: (i) provisions
totaling approximately $128,800,000 representing the net present value of the
tentative civil and criminal settlements; (ii) impairment losses of
approximately $17,000,000 on certain nursing facilities which would be excluded
from the Medicare and Medicaid programs and would be required to be disposed of
in conjunction with the tentative criminal settlement; (iii) approximately
$39,000,000 for certain prior year cost report related items affected by the
tentative settlements; (iv) approximately $3,100,000 of debt issuance and
refinancing costs related to various bank debt modifications as a result of the
tentative settlements; and (v) approximately $11,100,000 for other investigation
and settlement related costs.
It is anticipated that the tentative civil settlement will include a
$170,000,000 non-interest bearing obligation due as follows: (i) $25,000,000 due
within 30 days of signing the final civil settlement documents; and (ii) the
$145,000,000 balance due over an eight-year period in the form of reductions in
the Company's future biweekly Medicare periodic interim payments. Because this
obligation will not bear interest, the Company is required to impute interest
over the eight-year period. This imputed
15
<PAGE> 17
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
interest expense, along with an increase in interest and rent expense resulting
from the Amendments, will adversely impact the Company's future operating
results. In addition, it is anticipated that a subsidiary of the Company will
pay a fine of approximately $5,000,000 in connection with the criminal
settlement. The effect of this settlement would be to exclude such subsidiary's
nursing facilities from the Medicare and Medicaid programs and would require the
subsidiary to dispose of such facilities. It is expected that this will affect
no more than 10 nursing facilities.
If, prior to January 1, 1999, the tentative settlement obligations and
related items had been finalized and recorded, the Company's bank debt had been
refinanced and the Company had closed or sold the facilities that are expected
to be impacted by the tentative criminal settlement, the Company's net income
would have been reduced by approximately $4,100,000, or $.04 per share diluted,
for the quarter ended September 30, 1999, and approximately $10,400,000, or $.10
per share diluted, for the nine months ended September 30, 1999.
NET OPERATING REVENUES
The Company reported net operating revenues of $1,903,748,000 during the
nine months ended September 30, 1999 compared to $2,107,752,000 for the same
period in 1998. Approximately 90% of the Company's total net operating revenues
for the nine months ended September 30, 1999 and 1998 were derived from services
provided by the Company's Beverly Healthcare segment. The decrease in net
operating revenues of approximately $204,000,000 for the nine months ended
September 30, 1999, as compared to the same period in 1998, consists of the
following: a decrease of approximately $161,400,000 due to dispositions (as
discussed above), as well as the sale of ATH in June 1998 to Select Medical
Corporation; a decrease of approximately $152,000,000 due to facilities which
the Company operated during each of the nine months ended September 30, 1999 and
1998 ("same facility operations"); partially offset by an increase of
approximately $109,400,000 due to acquisitions. (See above for a discussion of
dispositions and acquisitions).
The decrease in net operating revenues of approximately $152,000,000 for
same facility operations for the nine months ended September 30, 1999, as
compared to the same period in 1998, was due to the following: approximately
$74,200,000 decrease in ancillary revenues and approximately $36,400,000
decrease in Medicare rates both primarily due to the impact of PPS and other
provisions of the Balanced Budget Act of 1997; approximately $45,800,000
decrease due to a shift in the Company's patient mix; approximately $37,400,000
decrease due to a decline in same facility occupancy; and approximately
$12,600,000 due to various other items; partially offset by an increase of
approximately $54,400,000 due primarily to increases in Medicaid and private
rates. The Company's same facility occupancy was 87.7% for the nine months ended
September 30, 1999, as compared to 89.2% for the same period in 1998. The
Company has implemented a series of initiatives to improve its occupancy levels
and has experienced some initial success; however, it is still too early to
determine the long-term effectiveness of these initiatives. No assurance can be
given that these initiatives will in fact improve the Company's occupancy
levels. The Company's Medicare, private and Medicaid census for same facility
operations was 9%, 20% and 70%, respectively, for the nine months ended
September 30, 1999, as compared to 11%, 20% and 68%, respectively, for the same
period in 1998.
OPERATING AND ADMINISTRATIVE EXPENSES
The Company reported operating and administrative expenses of
$1,727,368,000 during the nine months ended September 30, 1999 compared to
$1,898,799,000 for the same period in 1998. The decrease of approximately
$171,400,000 consists of the following: a decrease of approximately $141,300,000
due to dispositions; a decrease of approximately $132,600,000 due to same
facility operations; partially offset by an increase of approximately
$102,500,000 due to acquisitions. (See above for a discussion of dispositions
and acquisitions).
The decrease in operating and administrative expenses of approximately
$132,600,000 for same facility operations for the nine months ended September
30, 1999, as compared to the same period in 1998, was due primarily to a shift
in the Company's patient mix, as well as a decline in same facility occupancy,
and consists of the following: approximately $70,300,000 due to a decrease in
wages and related expenses; approximately $42,300,000 due to a decrease in
contracted therapy expenses; and approximately $20,000,000 due primarily to
decreases in purchased ancillary products, nursing supplies and other variable
costs. Although, the Company's wages and related expenses decreased for the nine
months ended September 30, 1999, as compared to the same period in 1998, the
Company's weighted average wage rate and use of registry personnel continue to
increase, both of which underscore the increased difficulties many of the
Company's nursing facilities are having attracting nursing aides, assistants and
other important personnel. The Company is addressing this through several
ongoing programs and training initiatives. No assurance can be given that these
programs and training initiatives will in fact improve the Company's ability to
attract these nursing personnel.
16
<PAGE> 18
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
INTEREST EXPENSE, NET
Interest income decreased to $3,290,000 for the nine months ended September
30, 1999, as compared to $7,958,000 for the same period in 1998 primarily due to
the sale of securities in conjunction with a loss portfolio transfer transaction
during the fourth quarter of 1998. Interest expense increased to $54,029,000 for
the nine months ended September 30, 1999, as compared to $48,869,000 for the
same period in 1998 primarily due to an increase in net borrowings under the
Revolver/Letter of Credit Facility during the nine months ended September 30,
1999 as compared to the same period in 1998, imputed interest on the tentative
civil settlement of approximately $2,100,000, and the write-off of deferred
financing costs in conjunction with certain bond refundings.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $74,511,000 for the nine
months ended September 30, 1999, as compared to $69,947,000 for the same period
in 1998. Such increase was affected by the following: approximately $8,800,000
increase due to acquisitions, as well as capital additions and improvements;
partially offset by a decrease of approximately $4,200,000 due to dispositions
of, or lease terminations on, certain facilities and ATH.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had approximately $17,500,000 in cash
and cash equivalents, approximately $147,000,000 of net working capital and
approximately $191,700,000 of unused commitments under its Revolver/Letter of
Credit Facility.
Net cash provided by operating activities for the nine months ended
September 30, 1999 was approximately $118,700,000, an increase of approximately
$86,400,000 from the prior year primarily due to a reduction in patient accounts
receivable as a result of the sale of receivables to BFC (as defined below), as
well as the Company's continuing focus on cash collections, and certain income
tax refunds received during the nine months ended September 30, 1999. Net cash
used for investing and financing activities were approximately $45,200,000 and
$73,300,000, respectively, for the nine months ended September 30, 1999. The
Company received net cash proceeds of approximately $126,000,000 from the
issuance of long-term debt, approximately $41,000,000 from the dispositions of
facilities and other assets and approximately $16,600,000 from collections on
notes receivable. Such net cash proceeds, along with cash generated from
operations and cash on hand, were used to repay approximately $121,000,000 of
net borrowings under its Revolver/Letter of Credit Facility, to repay
approximately $75,600,000 of long-term debt and to fund capital expenditures
totaling approximately $69,000,000.
In January 1999, the Company entered into a $65,000,000 promissory note at
an annual interest rate of 6.50%. In October 1999, the note was renegotiated to
allow the Company to make an interest-only payment in January 2000 at an annual
interest rate of 6.50%, with the principal balance payable in two equal
installments in January 2001 and in January 2002 at an annual interest rate of
7.00%. The proceeds from this promissory note were used to pay down Revolver
borrowings and is secured by a surety bond. During the nine months ended
September 30, 1999, the Company entered into promissory notes totaling
approximately $10,820,000 in conjunction with the construction of certain
nursing facilities. Such debt instruments bear interest at rates ranging from
7.75% to 8.00%, require monthly installments of principal and interest, and are
secured by mortgage interests in the real property and security interests in the
personal property of the nursing facilities. Also during such period, the
Company entered into promissory notes totaling approximately $15,100,000 in
conjunction with the acquisitions of certain facilities. Such debt instruments
bear interest at rates ranging from 7.00% to 8.00%, require monthly installments
of principal and interest and are secured by mortgage interests in the real
property and security interests in the personal property of the acquired
facilities.
17
<PAGE> 19
BEVERLY ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
In June 1999, the Company refinanced its Medium Term Notes, increasing its
borrowings from $40,000,000 to $50,000,000. The Medium Term Notes are
collateralized by patient accounts receivable, which are sold by Beverly Health
and Rehabilitation Services, Inc. ("BHRS") (currently operating as Beverly
Healthcare), a wholly-owned subsidiary of the Company, to Beverly Funding
Corporation ("BFC"), a wholly-owned bankruptcy remote subsidiary of the Company.
As a result of this refinancing, the Company was required by Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," ("SFAS No. 125") to
deconsolidate BFC. SFAS No. 125 provides accounting and reporting standards for
sales, securitizations, and servicing of receivables and other financial assets,
secured borrowing and collateral transactions, and the extinguishments of
liabilities. It requires companies to recognize the financial and servicing
assets it controls and the liabilities it has incurred and to deconsolidate
financial assets when control has been surrendered in accordance with the
criteria provided in SFAS No. 125. Deconsolidation of BFC, which had total
assets of approximately $74,200,000, total liabilities of approximately
$55,800,000 and total stockholder's equity of approximately $18,400,000 at June
30, 1999, caused a reduction in the Company's accounts receivable-patient and
long-term debt. In addition, the Company recorded its ongoing investment in BFC
as an increase in other, net assets.
During July 1999, BFC increased its borrowings under the Medium Term Notes
to $70,000,000. In conjunction therewith, the Company, through BHRS, sold an
additional $25,000,000 of patient accounts receivable and made an additional
capital contribution of $5,000,000 to BFC. At September 30, 1999, BFC had total
assets of approximately $108,000,000, total liabilities of approximately
$74,100,000, and total stockholder's equity of approximately $33,900,000. The
Company's Statement of Cash Flows reflects the change from June 30, 1999 to
September 30, 1999 in receivables sold to BFC in the caption Accounts receivable
- - patient and the change from June 30, 1999 to September 30, 1999 in the
Company's investment in BFC in the caption Other, net - investing.
The Company has a $125,000,000 financing arrangement available for the
construction of certain facilities. The Company leases the facilities, under
operating leases with the creditor, upon completion of construction. The Company
has the option to purchase these facilities at the end of the initial lease
terms at fair market value. Total construction advances under the financing
arrangement as of September 30, 1999 were approximately $107,100,000.
Effective September 30, 1999, the Company executed an amendment to the
Credit Agreement covering the Company's $375,000,000 Revolver/Letter of Credit
Facility, as well as amendments with certain of its other lenders covering debt
of approximately $199,000,000 (collectively, the "Amendments"). Such Amendments
were required since recording of the special charges related to the tentative
settlements, as discussed herein, would have resulted in the Company's
noncompliance with certain financial covenants contained in those debt
agreements. The Amendments modify certain financial covenant levels and increase
the annual interest rates for such debt.
It is anticipated that the settlements of the Allocation Investigations, if
consummated, will require payments totaling $30,000,000 ($25,000,000 for the
tentative civil settlement and $5,000,000 for the tentative criminal settlement)
due within 30 days of signing the final settlement documents, with the remaining
$145,000,000 to be withheld from the Company's bi-weekly Medicare periodic
interim payments beginning in the year 2000 and continuing for a period of eight
years. The Company expects to use borrowings under its Revolver/Letter of Credit
Facility to make the initial $30,000,000 payments. The Company anticipates cash
flows from operations to decline approximately $18,100,000 per year as a result
of the reduction in Medicare periodic interim payments and, therefore, may incur
additional borrowings to fund ongoing cash needs in the future.
The Company currently anticipates that cash flows from operations and
borrowings under its banking arrangements will be adequate to repay its debts
due within one year of approximately $23,800,000, to fund the settlement
obligations to the federal government, to make normal recurring capital
additions and improvements of approximately $102,000,000, to make selective
acquisitions, including the purchase of previously leased facilities, to
construct new facilities, and to meet working capital requirements for the
twelve months ending September 30, 2000. If cash flows from operations or
availability under existing banking arrangements fall below expectations, the
Company may be required to delay capital expenditures, dispose of certain
assets, issue additional debt securities, or consider other alternatives to
improve liquidity.
18
<PAGE> 20
PART II
BEVERLY ENTERPRISES, INC.
OTHER INFORMATION
SEPTEMBER 30, 1999
(UNAUDITED)
ITEM 1. LEGAL PROCEEDINGS
The Company has been the subject of a federal government investigation
relating to the allocation to the Medicare program of certain nursing labor
costs in its skilled nursing facilities from 1990 to 1998. The investigation has
been conducted by the Office of Inspector General of the Department of Health
and Human Services and by the U.S. Department of Justice. In addition, a federal
grand jury in San Francisco has investigated business practices which are the
subject of the above civil investigation, and the Company's current Medicare
fiscal intermediary, Blue Cross of California, is examining cost reports of the
Company's facilities with respect to the areas that are the focus of the
government investigation.
In late July 1999, the Company announced it had reached a tentative
understanding with the U.S. Department of Justice to settle the civil and
criminal aspects of all investigations by the federal government and its fiscal
intermediary into the allocation of nursing labor hours to the Medicare program
from 1990 to 1998 (the "Allocation Investigations"). Since that time, the
Company has continued to negotiate with the federal government to complete and
execute definitive settlement documents, certain of which are subject to court
approval.
As previously reported, if the tentative civil settlement is consummated,
the Company would be obligated to reimburse the federal government $170,000,000
as follows: (i) $25,000,000 within 30 days of signing the definitive civil
settlement agreement; and (ii) $145,000,000 to be withheld from the Company's
biweekly Medicare periodic interim payments in equal installments over eight
years. In addition, the Company would agree to resubmit certain Medicare filings
to reflect reduced direct labor costs.
If the tentative criminal settlement is consummated, a subsidiary of the
Company would pay a fine of $5,000,000. The effect of this settlement would be
to exclude such subsidiary's nursing facilities from the Medicare and Medicaid
programs and would require the subsidiary to dispose of such facilities. It is
expected that this will affect no more than 10 nursing facilities.
On July 6, 1999, an amended complaint was filed by the plaintiffs in the
previously disclosed purported class action lawsuit pending against the Company
and certain of its officers in the United States District Court for the Eastern
District of Arkansas (the "Class Action"). Plaintiffs filed a second amended
complaint on September 9, 1999 which asserted claims under Section 10(b)
(including Rule 10b-5 promulgated thereunder) and under Section 20 of the
Securities Exchange Act of 1934 arising from practices that are the subject of
the Allocation Investigations. The defendants filed a motion to dismiss that
complaint on October 8, 1999. Due to the preliminary state of the Class Action
and the fact the second amended complaint does not allege damages with any
specificity, the Company is unable at this time to assess the probable outcome
of the Class Action or the materiality of the risk of loss. However, the Company
believes that it acted lawfully with respect to plaintiff investors and will
vigorously defend the Class Action.
In addition, since July 29, 1999, seven derivative lawsuits have been
filed in the state courts of Arkansas, California and Delaware (collectively,
the "Derivative Actions"). Norman M. Lyons v. David R. Banks, et al., Case No.
OT99-4041, was filed in the Chancery Court of Pulaski County, Arkansas (4th
Division) on or about July 29, 1999; Alfred Badger, Jr. v. David R. Banks, et
al., Case No. OT99-4353, was filed in the Chancery Court of Pulaski County,
Arkansas (1st Division) on or about August 17, 1999 and voluntarily dismissed
on November 3, 1999. On November 1, 1999, the defendants filed a motion to
dismiss the Lyons and Badger actions. James L. Laurita v. David R. Banks, et
al., Case No. 17348NC, was filed in the Delaware Chancery Court on or about
August 2, 1999; Kenneth Abbey v. David R. Banks, et al., Case No. 17352NC, was
filed in the Delaware Chancery Court on or about August 4, 1999; Alan Friedman
v. David R. Banks, et al., Case No. 17355NC, was filed in the Delaware Chancery
Court on or about August 9, 1999. The Laurita, Abbey and Friedman actions were
subsequently consolidated by order of the Delaware Chancery Court. On or about
October 1, 1999, the defendants moved to dismiss the Laurita, Abbey and
Friedman actions. Elles Trading Company v. David R. Banks, et al., was filed in
the Superior Court for San Francisco County, California on or about August 4,
1999. That action was removed to United States District Court for the Northern
District, and plaintiff filed a motion to
19
<PAGE> 21
BEVERLY ENTERPRISES, INC.
OTHER INFORMATION (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
remand the action to state court on or about October 14, 1999. The defendants
have not yet responded to the complaint in the Elles Trading Company action.
Richardson v. David R. Banks, et al., Case No. LR-C-99-826, was filed in the
United States District Court for the Eastern District of Arkansas (Western
Division) on November 4, 1999. The Derivative Actions each name the Company's
directors as defendants, as well as the Company as a nominal defendant. The
Badger and Lyons actions also name as defendants certain of the Company's
officers. The Derivative Actions each allege breach of fiduciary duties to the
Company and its stockholders arising primarily out of the Company's alleged
exposure to loss due to the Class Action and the Allocation Investigations. The
Lyons, Badger and Richardson actions also assert claims for abuse of control
and constructive fraud arising from the same allegations, and the Richardson
action also claims unjust enrichment. Due to the preliminary state of the
Derivative Actions and the fact the complaints do not allege damages with any
specificity, the Company is unable at this time to assess the probable outcome
of the Derivative Actions or the materiality of the risk of loss. However, the
Company believes that it acted lawfully with respect to the allegations of the
Derivative Actions and will vigorously defend the Derivative Actions.
On March 4, 1998, a jury in California returned a verdict of $95,100,000
against a nursing facility operated by a subsidiary of the Company. The verdict,
which was based on findings of fraud as well as negligence and abuse, consisted
of $365,580 in compensatory damages and $94,700,000 in punitive damages. At a
post-trial hearing on June 3, 1998, the trial judge reduced the compensatory
damages to $125,000 and reduced the punitive damages to $3,000,000. The Company
believes that these reduced damages are excessive and has appealed on this
basis. The plaintiff has cross-appealed. The Company intends to aggressively
pursue all appellate remedies available.
There are various other lawsuits and regulatory actions pending against the
Company arising in the normal course of business, some of which seek punitive
damages that are generally not covered by insurance. The Company does not
believe that the ultimate resolution of such other matters will have a material
adverse effect on the Company's consolidated financial position or results of
operations.
ITEM 6(a). EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Amendment No. 1 to Amended and Restated Credit Agreement,
dated as of September 30, 1999, among Beverly Enterprises,
Inc., the Banks listed therein and Morgan Guaranty Trust
Company of New York, as Issuing Bank and Agent
10.2 First Amendment and Restatement, dated as of June 1, 1999, of
Trust Indenture, dated as of December 1, 1994, from Beverly
Funding Corporation, as Issuer, to The Chase Manhattan Bank, as
Trustee
10.3 Series Supplement, dated as of June 1, 1999, by and between
Beverly Funding Corporation and The Chase Manhattan Bank ("1999-1
Series Supplement")
10.4 First Amendment, dated as of July 14, 1999, to the 1999-1 Series
Supplement
10.5 Master Amendment No. 1 to Amended and Restated Participation
Agreement and Amended and Restated Master Lease and Open-End
Mortgage, entered into as of September 30, 1999, among Beverly
Enterprises, Inc. as Representative, Construction Agent, Parent
Guarantor and Lessee; Bank of Montreal Global Capital Solutions,
Inc., as Lessor and Agent Lessor; and Bank of Montreal, as
Administrative Agent, Arranger and Syndication Agent
27.1 Financial Data Schedule for the nine months ended September 30,
1999
27.2 Restated Financial Data Schedule for the nine months ended
September 30, 1998
ITEM 6(b). REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated July 27, 1999, which
reported under Item 5 that the Company would record a special pre-tax charge
against 1999 second quarter earnings totaling between $175,000,000 and
$225,000,000, related to a tentative understanding reached with the U.S.
Department of Justice on potential settlements of the previously announced
federal investigations into the allocation of nursing labor hours to the
Medicare Program.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEVERLY ENTERPRISES, INC.
Registrant
Dated: November 15, 1999 By: /s/ PAMELA H. DANIELS
------------------------
Pamela H. Daniels
Vice President,
Controller and Chief
Accounting Officer
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.1 Amendment No. 1 to Amended and Restated Credit Agreement,
dated as of September 30, 1999, among Beverly Enterprises,
Inc., the Banks listed therein and Morgan Guaranty Trust
Company of New York, as Issuing Bank and Agent
10.2 First Amendment and Restatement, dated as of June 1, 1999, of
Trust Indenture, dated as of December 1, 1994, from Beverly
Funding Corporation, as Issuer, to The Chase Manhattan Bank, as
Trustee
10.3 Series Supplement, dated as of June 1, 1999, by and between
Beverly Funding Corporation and The Chase Manhattan Bank ("1999-1
Series Supplement")
10.4 First Amendment, dated as of July 14, 1999, to the 1999-1 Series
Supplement
10.5 Master Amendment No. 1 to Amended and Restated Participation
Agreement and Amended and Restated Master Lease and Open-End
Mortgage, entered into as of September 30, 1999, among Beverly
Enterprises, Inc. as Representative, Construction Agent, Parent
Guarantor and Lessee; Bank of Montreal Global Capital Solutions,
Inc., as Lessor and Agent Lessor; and Bank of Montreal, as
Administrative Agent, Arranger and Syndication Agent
27.1 Financial Data Schedule for the nine months ended September 30,
1999
27.2 Restated Financial Data Schedule for the nine months ended
September 30, 1998
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of September 30, 1999 amending the $375,000,000 Amended
and Restated Credit Agreement dated as of April 30, 1998 (the "CREDIT
AGREEMENT") among BEVERLY ENTERPRISES, INC. (the "BORROWER"), the BANKS listed
therein (the "BANKS"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Issuing
Bank (the "ISSUING BANK"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (the "AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower and certain of its Subsidiaries propose to enter into
a Settlement (the "SETTLEMENT") referred to in the Waiver dated as of June 30,
1999 to the Credit Agreement;
WHEREAS, in connection with its entry into the Settlement, the parties
hereto wish to amend the Credit Agreement as set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "HEREOF", "HEREUNDER", "HEREIN" and "HEREBY" and each other
similar reference and each reference to "THIS AGREEMENT" and each other similar
reference contained in the Credit Agreement shall from and after the Amendment
No. 1 Effective Date refer to the Credit Agreement as amended and restated
hereby.
SECTION 2. Definitions. Section 1.01 of the Credit Agreement is hereby
amended by:
(a) amending the definition of "ADJUSTED CONSOLIDATED DEBT" to read in its
entirety as follows:
"'ADJUSTED CONSOLIDATED DEBT' means at any date the sum, without
duplication, of (i) all liabilities of the Borrower and its Subsidiaries at
such date of the types classified as "current liabilities: short-term
borrowings", "current liabilities: current portion of long-term
obligations," "long-term obligations" and, to the extent arising out of
claims made by governmental authorities relating to reimbursement
obligations or settlements thereof, "other liabilities and deferred items"
on the consolidated balance sheet included in the Base Financials, (ii) all
guarantees at such date of obligations of other issuers (other than
guarantees outstanding on the Effective Date of obligations outstanding on
the Effective Date, in amounts not in excess of $79,375,000 and reported in
the Base
<PAGE> 2
Financials) and (iii) an amount equal to the product of eight multiplied by
the Consolidated Rental Expense for the four fiscal quarters of the
Borrower most recently completed on or prior to such date.";
(b) amending the definition of "BASE FINANCIALS" by deleting each reference
to the year "1997" and substituting therefor a reference to the year "1998";
(c) amending the definition of "Borrower's 1997 Form 10-K" by deleting in
such defined term and in such definition each reference to the year "1997" and
substituting therefor a reference to a reference to the year "1998";
(d) amending the definition of "Financing Documents" by (A) deleting the
word "and" and substituting therefor a comma and (B) inserting at the end of
such definition the phrase ", the Mortgages and the Pledge Agreement"; and
(e) adding the following new definitions in the appropriate alphabetical
order:
"AMENDMENT NO. 1 EFFECTIVE DATE" means the date upon which Amendment
No. 1 to the Credit Agreement dated as of September 30, 1999 became
effective in accordance with its terms.
"ATTRIBUTABLE DEBT" means, on any date, in respect of any lease of the
Borrower or any of its Subsidiaries entered into as part of a Sale and
Leaseback Transaction, (i) if such lease is a lease that is required to be
capitalized in accordance with GAAP, the capitalized amount thereof that
would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP, and (ii) if such lease is not a lease that is
required to be capitalized in accordance with GAAP, the capitalized amount
of the remaining lease payments under such lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with
GAAP if such lease were a lease that is required to be capitalized in
accordance with GAAP.
"BANK OF MONTREAL SYNTHETIC LEASE" means the Amended and Restated
Participation Agreement (the "PARTICIPATION AGREEMENT"), dated as of August
28, 1998, as amended, among certain Subsidiaries of the Borrower, the
Borrower as Representative, Construction Agent and Parent Guarantor
therein, Bank of Montreal Global Capital Solutions, Inc. as Agent Lessor
and Lessor therein, The Long-Term Credit Bank of Japan, Ltd., Los Angeles
Agency, Bank of America National Trust and Savings Associations and Bank of
Montreal as Lenders therein, The Long-Term Credit Bank of Japan, Ltd., Los
Angeles Agency as Arranger therein and Bank of Montreal as Co-Arranger,
Syndication Agent and Administrative Agent for the Lenders therein and the
Operative Documents (as defined in the Participation Agreement).
2
<PAGE> 3
"BEVERLY HEALTH" means Beverly Health and Rehabilitation Services,
Inc., a California corporation, and its successors.
"BORROWER'S JUNE 30, 1999 FORM 10-Q" means the Borrower's quarterly
report on Form 10-Q for the quarter ended June 30, 1999, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended.
"COLLATERAL" means the property in which the Agent is granted, or is
purported to be granted, a lien or security interest from time to time
under any Security Document, which lien or security interest has not been
released in accordance with the terms hereof or thereof.
"ENCORE FACILITY" means the Term Loan Agreement, dated as of December
30,1985, as amended, among Encore Nursing Center Partners, Ltd. - 85, a New
York limited partnership, Beverly Health, the Borrower and the Bank of New
York.
"FINAL SETTLEMENT" means the execution and delivery of settlement
agreements among the Borrower (and, in some cases, certain of its
Subsidiaries), the United States Department of Health and Human Services
and the United States Department of Justice finally settling the claims and
allegations referred to in the first four paragraphs under "Item 1. Legal
Proceedings" of the Borrower's June 30, 1999 Form 10-Q.
"ISSUER" has the meaning set forth in the Pledge Agreement.
"MORTGAGES" means the deeds of trust relating to the real property
collateral described in Schedule V hereto, in form and substance reasonably
satisfactory to the Agent, in each case as the same may be amended from
time to time.
"OTHER FINANCING AGREEMENTS" means the Bank of Montreal Synthetic
Lease, the PNC Facility and the Encore Facility.
"OTHER FINANCING AGREEMENTS LIENS" means the (i) Liens created under
the mortgages granted by the Borrower and certain of its Subsidiaries in
connection with the Final Settlement to secure the obligations of the
Borrowers and certain of its Subsidiaries under the Other Financing
Agreements; provided that the value (determined on the basis of an amount
equal to (A) annualized Consolidated EBITDA for such property based on the
two consecutive fiscal quarters most recently completed prior to the date
upon which such Liens are granted for which financial statements have been
delivered pursuant to Section 5.01(a) or (b) multiplied by (B) 7) of the
property subject to such Liens shall not exceed (x) in the case of the
Liens securing the Bank of Montreal Synthetic Lease $27,000,000, (y) in the
case of Liens securing the PNC Facility, $47,000,000 and (z) in the case
3
<PAGE> 4
of Liens securing the Encore Facility $20,000,000 and (ii) Liens on
property ("SUBSTITUTE COLLATERAL") substituted for property (the "ORIGINAL
COLLATERAL") subject to a Lien referred to in clause (i) above; provided
that (x) such Lien on Substitute Collateral secures the same obligations as
the Lien on the Original Collateral for which it is substituted and (y) the
value (determined on the basis of an amount equal to (A) Consolidated
EBITDA for such Substituted Property for the four consecutive fiscal
quarters most recently completed prior to the date upon which such
substitution is made for which financial statements have been delivered
pursuant to Section 5.01(a) or (b) (or, in the case of any substitution
prior to the delivery of financial statements for the fiscal year ending
December 31, 1999 pursuant to Section 5.01(a), the annualized Consolidated
EBITDA for such Substitute Collateral based on the 1999 fiscal quarters for
which financial statements have been delivered pursuant to Section 5.01(b))
multiplied by (B) 7) of such Substitute Collateral shall not exceed the
value (as so determined) of the Original Collateral for which it is
substituted.
"PERMITTED ENCUMBRANCES" has the meaning set forth in the Mortgages.
"PLEDGE AGREEMENT" means the Pledge Agreement dated as of the Amendment
No. 1 Effective Date among the Borrower, Beverly Health and the Agent,
substantially in the form of Exhibit D hereto, as the same has been or may
be amended from time to time.
"PLEDGED STOCK" has the meaning set forth in the Pledge Agreement.
"PNC FACILITY" means the Amended and Restated Reimbursement Agreement,
dated as of June 20, 1997, as amended, by and among Beverly Health, Beverly
Enterprises - Massachusetts, Inc., Beverly Enterprises - Pennsylvania, Inc.
and Beverly Enterprises - Ohio, Inc. as Borrowers therein and PNC Bank,
National Association as the Issuer of Letters of Credit therein.
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in Section
5.19.
"SECURED OBLIGATIONS" has the meaning set forth in the Pledge
Agreement and the Mortgages.
"SECURED PARTIES" has the meaning set forth in the Pledge Agreement
and the Mortgages.
"SECURITY DOCUMENTS" means the Pledge Agreement and the Mortgages,
together with all related filings, assignments, instruments, mortgages and
other papers.
"SEGREGATED COLLATERAL ACCOUNT" has the meaning set forth in the
Pledge Agreement.
4
<PAGE> 5
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 3. Accounting Terms and Determinations. Section 1.02 of the Credit
Agreement is hereby amended by deleting the reference to the year "1997" and
substituting therefor a reference to the year "1998".
SECTION 4. Representations and Warranties. (a) Section 4.02 of the Credit
Agreement is hereby amended by (i) adding immediately after the expression "or
filing" on the fifth line thereof, the parenthetical expression "(other than
filings necessary to perfect the Liens granted by the Security Documents)" and
(ii) adding, at the end thereof, the expression "(except the Liens created
pursuant to the Security Documents)".
(b) Section 4.03 of the Credit Agreement is hereby amended by (i) adding at
the end of the title thereof the phrase "; Liens", (ii) designating the
paragraph immediately following such title as paragraph "(a)" and (iii) adding
immediately after such paragraph the following new paragraph (b):
"(b) The Security Documents create valid security interests in and
Mortgage liens on the Collateral purported to be covered thereby, which
security interests and mortgage liens are and will remain perfected
security interests and mortgage liens, prior to all Liens other than
Permitted Encumbrances, and as to which, in the case of the Pledged Stock,
the Agent has control (within the meaning of Sections 8-110 and 9-115 of
the UCC), subject, in the case of the Pledged Stock, to the Agent's
maintaining possession thereof, and, in the case of the Mortgages, to the
recording of the Mortgages in the county recording offices set forth on
Schedules 1 thereto and the filing of Uniform Commercial Code financing
statements in the Uniform Commercial Code filing offices and county
recording offices set forth or Schedules 2 thereto."
(c) Subsection 4.04(a) of the Credit Agreement is hereby amended by
deleting the reference to the year "1997" and substituting therefor a reference
to the year "1998".
(d) Subsection 4.04(b) of the Credit Agreement is hereby redesignated as
Subsection 4.04(c) and amended to read in its entirety as follows:
"(c) Except for the matters referred to in the first four paragraphs
under "Item 1. Legal Proceedings" in the Borrower's June 30, 1999 Form
10-Q, since December 31, 1998 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole."
(e) Section 4.04 of the Credit Agreement is hereby amended by adding,
immediately after Subsection 4.04(a), the following new Subsection 4.04(b):
5
<PAGE> 6
"(b) The unaudited consolidated balance sheets of the Borrower and its
Consolidated Subsidiaries as of June 30, 1999 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows
for the six months then ended, set forth in the Borrower's June 30, 1999
Form 10-Q, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles
applied on a basis consistent with the Base Financials, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and cash flows for
such six month period (subject to normal year-end adjustments, the absence
of footnote disclosure and condensation pursuant to the rules of the
Securities and Exchange Commission)."
(f) Section 4.05 of the Credit Agreement is hereby amended by substituting
the phrase "1998 Form 10-K or the first four paragraphs under "Item 1. Legal
Proceedings" in the Borrower's June 30, 1999 Form 10-Q" for the phrase "1997
Form 10-K".
(g) Section 4.12 of the Credit Agreement is hereby amended by (i) adding at
the end of the title thereof the phrase "and the Pledge Agreement" and (ii)
inserting immediately following the reference to "Subsidiary Guaranty" the
phrase "or the Pledge Agreement".
(h) Article 4 of the Credit Agreement is hereby amended by adding the
following new Section 4.13 immediately following Section 4.12 of the Credit
Agreement:
"Section 4.13. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of
the Borrower and each of its Subsidiaries (including those areas affected
by suppliers and vendors) that could be adversely affected by the "YEAR
2000 PROBLEM" (that is, the risk that computer applications used by it or
any of its Subsidiaries (or their respective suppliers and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented such plan in accordance with
such timetable. The Borrower reasonably believes that all computer
applications (including those of suppliers and vendors) that are material
to the business or operations of the Borrower or any of its Subsidiaries
will on a timely basis be able to perform properly date-sensitive functions
for all dates before and from and after January 1, 2000 (that is, be "YEAR
2000 COMPLIANT"), except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect on the business,
financial position, results of operations or prospects of the Borrower and
its Consolidated Subsidiaries, taken as a whole."
6
<PAGE> 7
SECTION 5. Information. Section 5.01(d) of the Credit Agreement is hereby
amended by (i) replacing the word "and" after the expression "5.11" on the fifth
line thereof with a comma and (ii) replacing the word "hereof", following the
expression "5.13" on such fifth line, with the expression ", 5.18 and 5.19
hereof and Section 5(C) of the Pledge Agreement".
SECTION 6. Maintenance of Property; Insurance. Section 5.02(b) of the
Credit Agreement is hereby amended by adding at the end of the first sentence
thereof but before the period the following proviso:
"; provided that physical damage insurance with respect to all real
and personal property subject to a Mortgage shall, subject to reasonable
deductibles, be in an amount sufficient to cover the repair and replacement
cost of all such property and shall include a lenders loss payable
endorsement. The Borrower will furnish to the Banks, upon request from the
Agent, information presented in reasonable detail as to the insurance so
carried."
SECTION 7. Minimum Consolidated Net Worth. Section 5.05 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"Consolidated Net Worth shall be at least 90% of Consolidated Net Worth
at June 30, 1999 plus (i) 50% of the aggregate positive Consolidated Net
Income (excluding any consolidated net loss) of the Borrower and its
Consolidated Subsidiaries for each fiscal quarter ending after June 30,
1999 plus (ii) 50% of the aggregate net proceeds, including the fair market
value of property other than cash (as determined in good faith by the
Borrower's board of directors), received by the Borrower from the issuance
and sale after June 30, 1999 of any capital stock of the Borrower (other
than the proceeds of any issuance and sale of any capital stock (x) to a
Subsidiary or (y) which is required to be redeemed, or is redeemable at the
option of the holder, if certain events or conditions occur or exist or
otherwise) or in connection with the conversion or exchange of any Debt of
the Borrower into capital stock of the Borrower after June 30, 1999.".
SECTION 8. Fixed Charge Coverage Ratio. Section 5.06 of the Credit
Agreement is hereby amended by (i) deleting the phrase "the ratio set forth
below opposite the period in which such date falls:" and substituting therefor
the phrase "1.15 to 1.0." and (ii) deleting the table set forth therein.
7
<PAGE> 8
SECTION 9. Leverage Ratio. Section 5.07 of the Credit Agreement is hereby
amended by (i) inserting immediately before the reference to "EBITDAR" the word
"Consolidated" and (ii) deleting the table set forth therein and substituting
therefor the following table:
<TABLE>
<CAPTION>
Period Ratio
------ -----
- ------------------------------------------------------------------------------------------------
<S> <C>
Amendment No. 1 Effective Date through September 29, 2000 ........................ 5.75 to 1.0
- ------------------------------------------------------------------------------------------------
September 30, 2000 and thereafter ................................................ 5.50 to 1.0
- ------------------------------------------------------------------------------------------------
</TABLE>
SECTION 10. Restricted Payments on Stock. Clause (v) of the proviso in
Section 5.10 of the Credit Agreement is hereby amended to read in its entirety
as follows:
"(v) the Borrower may make any such payment or distribution if, after
giving effect thereto, the aggregate amount of all such payments or
distributions made after the Amendment No. 1 Effective Date (including,
without limitation, any such payments or distributions permitted under
subclause (ii)(A) or clause (iv) above) does not exceed (A) on any date on
and after the Final Settlement on which (x) no Event of Default shall have
occurred and be continuing or shall result from such payment and (y) the
ratio of (x) Adjusted Consolidated Debt to (y) Consolidated EBITDAR is (I)
less than 5.00 to 1.00 but not less than 4.75 to 1.00, $25,000,000, (II)
less than 4.75 to 1.00 but not less than 4.50 to 1.00, $30,000,000, and
(III) less than 4.50 to 1.00, $40,000,000 and (B) on any other date,
$10,000,000."
SECTION 11. Negative Pledge. Section 5.11 of the Credit Agreement is hereby
amended by:
(a) inserting, prior to the existing paragraph thereof, the expression
"(a)";
(b) adding, at the end of clause (i) thereof, the expression "and Liens
(other than Liens of the types referred to in clauses (v), (vi), (viii) (to the
extent such Liens constitute refinancing of Liens permitted under such clauses
(v) and (vi)) or (xi)) existing on the Amendment No. 1 Effective Date securing
Debt and other obligations outstanding on the Amendment No. 1 Effective Date".
(c) replacing the amount "$50,000,000" in clauses (xii) and (xiii) thereof
with the amount "$25,000,000";
(d) deleting the word "and" at the end of clause (xii) thereof;
(e) replacing the period at the end of clause (xiii) thereof with a
semicolon;
(f) adding a new clause (xiv) to read in its entirety "(xiv) Liens created
under the Security Documents; and";
8
<PAGE> 9
(g) adding a new clause (xv) to read in its entirety "(xv) the Other
Financing Agreements Liens."; and
(h) adding a new clause (b) at the end thereof, to read in its entirety as
follows:
"(b) The Borrower will not permit any Issuer or any Subsidiary of an
Issuer to create, assume or suffer to exist any Lien on any asset now owned
or hereafter acquired by it except (i) Liens permitted by clauses (i),
(ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xiv) and (xv) of
Section 5.11(a) above, (ii) Liens on nursing homes and related real estate
improvements and equipment of Issuers and their Subsidiaries ("PLEDGED
SUBSIDIARY MORTGAGE ASSETS") given in substitution for Liens on Pledged
Subsidiary Mortgage Assets incurred pursuant to this clause (ii) or clause
(iii) below, provided that the sum of (A) the excess of the Appraised Value
of all Pledged Subsidiary Mortgage Assets subjected to Liens pursuant to
this clause (ii) on or after the Amendment No. 1 Effective Date over the
Appraised Value of all such Pledged Subsidiary Mortgage Assets released
from Liens on or after the Amendment No. 1 Effective Date and (B) all Debt
incurred after the Amendment No. 1 Effective Date and secured by Liens
permitted under clause (iii) below shall not at any time exceed $25,000,000
and (iii) Liens not otherwise permitted under clauses (i) and (ii) of this
subsection (b), provided, that the sum of the amounts set forth in
subclause (A) of clause (ii) above and the aggregate principal amount of
all Debt incurred after the Amendment No. 1 Effective Date and secured by
Liens permitted under this clause (iii) shall not exceed $25,000,000.".
SECTION 12. Incurrence of Debt. (a) Subsection 5.13(i) of the Credit
Agreement is hereby amended by adding, at the end thereof but before the
semicolon, the expression "and Debt (other than Debt of the types referred to in
clauses (ii) through (xii) hereof) outstanding on the Amendment No. 1 Effective
Date".
(b) (i) Subsection 5.13(vi) of the Credit Agreement is hereby amended by
deleting the reference to the amount $150,000,000 and substituting therefor a
reference to the amount "$100,000,000".
(ii) Subsection 5.13(xiii) of the Credit Agreement is hereby amended
by deleting the reference to the amount "$75,000,000" and substituting
therefor a reference to the amount "$20,000,000".
(c) Section 5.13 of the Credit Agreement is hereby amended by (i) inserting
the subsection designation "(a)" immediately after the title thereof and (ii)
adding the following new Subsection (b) at the end of Section 5.13:
"(b) The Borrower will not permit any Issuer or any Subsidiary of any
Issuer to incur, assume or suffer to exist Debt other than (A) Debt
permitted under clauses (i), (ii) (but only to the extent that the Lease
Cancellation Payments relate
9
<PAGE> 10
to a facility operated by any such Issuer or Subsidiary), (iii), (iv), (v)
(to the extent the Refinanced Debt referred to therein is Debt referred to
in clauses (i), (ii) (but only to the extent that the Lease Cancellation
Payments relate to a facility operated by any such Issuer or Subsidiary),
(iii) and (iv)), (vi), (vii), (viii), (ix), (x), (xi) (but only to the
extent that the assets acquired, constructed or approved with the proceeds
of such Debt are assets of such Issuer or such Subsidiary) and (xiii) of
subsection 5.13(a) above; provided that the aggregate principal amount of
Debt of such Issuers and Subsidiaries permitted under clauses (viii) (other
than guarantees by an Issuer or any of its Subsidiaries of Debt of an
Issuer or any of its Subsidiaries) and (xiii) shall not exceed, in the
aggregate, $20,000,000 and (B) guarantees of obligations of Subsidiaries of
the Borrower, which obligations are permitted under clause (xi) of Section
5.13(a) above and arise under any of the Other Financing Agreements and
refinancings, extensions, replacements and increases of any of the
foregoing, provided that the aggregate principal amount of Debt permitted
under this clause (B) may not exceed $178,000,000.".
SECTION 13. Consolidated Capital Expenditures. Article 5 of the Credit
Agreement is hereby amended by adding, immediately after Section 5.17, new
Sections 5.18, 5.19 and 5.20, to read in their entirety as follows:
"SECTION 5.18. Consolidated Gross Capital Expenditures. Consolidated
Gross Capital Expenditures will not, for any of the fiscal years set forth
below, exceed the amount indicated opposite such fiscal year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
- --------------------------------------------------------------------------------
<S> <C>
December 31, 1999 $120,000,000
- --------------------------------------------------------------------------------
December 31, 2000 $120,000,000
- --------------------------------------------------------------------------------
December 31, 2001 $125,000,000
- --------------------------------------------------------------------------------
</TABLE>
To the extent that Consolidated Gross Capital Expenditures for any fiscal
year set forth above are less than the applicable amount specified in the
table, the difference may be carried forward to the next fiscal year (and
for this purpose, Consolidated Gross Capital Expenditures in any subsequent
fiscal year shall be applied, first, to any such carry-forward amount and,
second, to the specified amount for such year).
SECTION 5.19. Sale and Leaseback Transactions. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby it shall sell or transfer any property,
real or personal, used or useful in its business, whether now owned or
hereafter acquired, which property has been owned by the Borrower and its
Subsidiaries for more than 180 days, and
10
<PAGE> 11
thereafter rent or lease such property or other property that it intends to
use for substantially the same purpose or purposes as the property sold or
transferred (each, a "SALE AND LEASEBACK TRANSACTION"), except for Sale and
Leaseback Transactions the aggregate amount of Attributable Debt in respect
of which does not exceed $20,000,000 at any time outstanding.
Section 5.20. Mortgages. On or prior to the date (the "MORTGAGE DUE
DATE") that is on or prior to October 31, 1999,
(a) each party to any Mortgage shall have delivered to the Agent
duly executed counterparts of each Mortgage to which it is a party;
(b) the Borrower shall deliver, or cause to be delivered, to the
Agent legal opinions of local counsel reasonably satisfactory to the
Agent with respect to each of the Mortgages, which legal opinions
shall be in form and in substance reasonably satisfactory to the
Agent;
(c) the Borrower shall deliver, or cause to be delivered, to the
Agent evidence satisfactory to the Agent that such action (including,
without limitation, the filing of appropriately completed and duly
executed Uniform Commercial Code financing statements and the
recording of Mortgages) as may be necessary or as the Agent shall have
reasonably requested to perfect the Liens created pursuant to the
Mortgages shall have been taken, or that arrangements therefor
satisfactory to the Agent shall have been made;
(d) the Borrower shall deliver, or cause to be delivered, to the
Agent policies of title insurance (or commitments therefor with all
conditions marked satisfied), in form and substance satisfactory to
the Agent and issued by an insurance company or companies as are
acceptable to the Agent (the "TIC"), insuring the perfection,
enforceability and priority of the Liens created under the Mortgages
in amounts acceptable to the Agent, subject only to prior liens
permitted by the applicable Mortgage and to such exceptions as are
satisfactory to the Agent, containing such endorsements and
affirmative assurances as have been previously agreed to by, or are
otherwise satisfactory to, the Agent, and reinsured in amounts and
under reinsurance agreements in form and substance satisfactory to the
Agent; and the Borrower shall have paid or made arrangements
satisfactory to the Agent to pay to the TIC all expenses and premiums
of the TIC in connection with the issuance of such policies and in
addition shall have paid or made arrangements satisfactory to the
Agent to pay to the TIC an amount equal to the recording and stamp
taxes payable in connection with recording the Mortgages in the
appropriate county land offices;
11
<PAGE> 12
(e) the Borrower shall deliver, or cause to be delivered, to the
Agent copies of file search reports from the Uniform Commercial Code
filing office in each jurisdiction (i) in which is located any
Collateral (other than Pledged Stock) or (ii) in which is located the
chief executive office of any Subsidiary of the Borrower that owns or
holds any right, title or interest in any property that constitutes
Collateral (other than the Pledged Stock), setting forth the results
of Uniform Commercial Code file searches conducted in the name of the
Borrower or such Subsidiary, as the case may be;
(f) the Borrower shall deliver, or cause to be delivered, to the
Agent all documents the Agent may reasonably request relating to the
existence of each Subsidiary of the Borrower party to any Mortgage,
the corporate authority for and the validity of the Mortgages, and any
other matters relevant thereto, all in form and substance satisfactory
to the Agent; and
(g) the Borrower shall have paid all other costs, fees and
expenses (including, without limitation, reasonable legal fees and
expenses), and other compensation payable to the Agent with respect to
the Mortgages, in each case invoiced prior to the Mortgage Due Date.".
SECTION 14. Events of Default. (a) Section 6.01 of the Credit Agreement is
amended by:
(i) replacing the word "or" on the second line of clause (b) thereof
with a comma;
(ii) adding, following the expression "5.16" on the second line of
clause (b) thereof, the expression "5.18, 5.19 or 5.20";
(iii) deleting the word "or" at the end of subsection (k); and
(iv) inserting immediately after Subsection (l), the following new
subsections (m), (n) and (o):
"(m) the Borrower or any of the Borrower's Subsidiaries party thereto
shall fail to observe or perform any of its obligations under any of the
Security Documents within any applicable grace period;
(n)(i) the Security Documents shall at any time after the Amendment
No. 1 Effective Date (or, in the case of any Mortgage, the date upon which
such Mortgage is executed and delivered in accordance with Section 5.20),
for any reason (other than solely due to actions taken by the Agent or any
Bank) fail to create Liens in favor of the Secured Parties on the
Collateral, securing all of the Secured Obligations purported to be secured
thereby, and as to which, in the case of Pledged Stock, the Agent has
control (within the meaning of Sections 8-110
12
<PAGE> 13
and 9-115 of the UCC), subject to no other Liens other than, in the case of
Collateral covered by any Mortgage, Permitted Encumbrances, or, in the case
of any Collateral other than Pledged Stock, Liens permitted under Section
5.11(a)(x) as to which the Liens created under the Security Documents have
priority; (ii) in the case of Collateral consisting of Pledged Stock, at
any time after the Amendment No. 1 Effective Date, such Liens shall fail to
be perfected or the Agent shall fail to have control (within the meaning of
Sections 8-110 and 9-115 of the UCC) of such Pledged Stock or (iii) in the
case of Collateral not constituting Pledged Stock, at any time after the
filing of the Mortgages and UCC financing statements delivered by the
Borrower and its Subsidiaries to the Agent pursuant to Section 5.20 in the
recording or filing offices indicated thereon, such Liens shall fail to be
perfected; or
(o) the terms of the Final Settlement shall require payments by the
Borrower and its Subsidiaries to the United States Federal government and
agencies and instrumentalities thereof (i) in the aggregate in excess of
$225,000,000, (ii) up-front in excess of $30,000,000 or (iii) with a final
maturity of less than eight (8) years;"
SECTION 15. Indemnification. Section 9.03(a) of the Credit Agreement is
hereby amended by (i) inserting immediately after the word "against" in the last
sentence thereof the clause designation "(A)" and (ii) adding at the end of such
sentence but before the period the following phrase:
", (B) all costs, expenses and taxes, assessments or other charges
incurred in connection with any filing, registration, recording or
perfection of any Lien contemplated by any of the Financing Documents or
any document referred to therein or the filing or recording of any
termination statement with respect to the release of any Lien on any
Collateral and (C) all costs, expenses and other charges in respect of
title insurance procured with respect to the Liens created pursuant to the
Mortgages".
SECTION 16. Amendments and Waivers. Section 9.05 of the Credit Agreement is
hereby amended by (i) replacing the word "or" at the end of clause (iv) thereof
with a comma and (ii) inserting, immediately after clause (v) thereof but before
the period, the following expression:
"or (vi) agree to release all or substantially all of the Collateral".
SECTION 17. Consent to Execution and Deliver of Certain Financing
Documents. Section 9.09 of the Credit Agreement is hereby amended by (i)
deleting the phrase "; Release of Existing Collateral" in the title of such
Section, (ii) deleting the subsection designation "(a)" immediately after the
title of such Section, (iii) adding, at the end of the first sentence of such
Section but before the period, the expression ", each of the Mortgages and the
Pledge Agreement" and (iv) deleting in its entirety subsection (b) thereof.
13
<PAGE> 14
SECTION 18. Counterparts; Integration. Section 9.10 of the Credit Agreement
is hereby amended by (i) deleting the word "and" immediately after the word
"Notes" and substituting therefor a comma and (ii) inserting immediately after
the reference to "Subsidiary Guaranty" the phrase ", the Pledge Agreement and
the Mortgages".
SECTION 19. Amendments to Pricing Schedule. Schedule I of the Credit
Agreement is hereby replaced in its entirety by Schedule I hereto.
SECTION 20. Additional Schedule and Exhibits. Schedule V and Exhibit D
hereto are hereby added as Schedule V and Exhibit D to the Credit Agreement.
SECTION 21. New Subsidiary Guarantors. Each Subsidiary of the Borrower
listed as a "New Subsidiary Guarantor" on the signature pages hereof (each a
"NEW SUBSIDIARY GUARANTOR") hereby agrees that, as of the Amendment No. 1
Effective Date, such New Subsidiary Guarantor shall be a party to the Subsidiary
Guaranty and shall be bound for all purposes by the obligations of a Subsidiary
Guarantor set forth therein as if each such New Subsidiary Guarantor was an
original party to the Subsidiary Guaranty. In addition, the Borrower agrees it
shall cause each New Subsidiary Guarantor to sign and deliver to the Agent an
originally executed Subsidiary Guaranty no later than the Mortgage Due Date.
SECTION 22. Representations and Warranties. The Borrower represents and
warrants that as of the date hereof and after giving effect hereto:
(i) no Default has occurred and is continuing; and
(ii) each representation and warranty of the Borrower set forth in the
Credit Agreement after giving effect to this Amendment is true and correct
as though made on and as of such date.
SECTION 23. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 24. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective on the date upon which each of the
following conditions shall have been satisfied (the "AMENDMENT NO. 1 EFFECTIVE
DATE"):
(i) the Agent shall have received duly executed counterparts hereof
signed by the Borrower, the Subsidiary Guarantors, the Agent and the
Required Banks (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party);
14
<PAGE> 15
(ii) the Agent shall have received, for the ratable accounts of the
Banks, a fee in an amount equal to 0.20% of the aggregate Commitments.
(iii) the Agent shall have received duly executed counterparts of the
Pledge Agreement signed by each of the parties thereto (or, in the case of
any such party as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of telegraphic,
telex, facsimile transmission or other written confirmation from such party
of execution of a counterpart thereof by such party), together with all
certificates evidencing Pledged Stock required to be delivered thereunder;
(iv) the Agent shall have received, with sufficient copies for each
Bank, opinions of Weil, Gotshal & Manges LLP, special New York counsel to
the Borrower, and the Vice President and Deputy General Counsel of the
Borrower, substantially in the forms of Exhibit A hereto and in each case
covering such other matters relating to the Amendment and the Pledge
Agreement as the Agent may reasonably request;
(v) the Agent shall have received a certificate signed by the chief
financial officer or treasurer of the Borrower to the effect set forth in
clauses (viii) and (ix) of this Section 24;
(vi) the Agent shall have received evidence satisfactory to it that
such action (including, without limitation, the filing of appropriately
completed and duly executed Uniform Commercial Code financing statements)
as may be necessary or as the Agent shall have reasonably requested to
perfect the Liens created pursuant to the Pledge Agreement shall have been
taken, or that arrangements therefor satisfactory to the Agent shall have
been made;
(vii) the Agent shall have received all documents it may reasonably
request relating to the existence of the Borrower and each of its
Subsidiaries party to any Financing Document, the corporate authority for
and the validity of the Financing Documents, and any other matters relevant
thereto, all in form and substance satisfactory to the Agent;
(viii) the fact that, immediately after the effectiveness of this
Amendment, no Default shall have occurred and be continuing;
(ix) the fact that the representations and warranties of the Borrower
or any of its Subsidiaries contained in the Financing Documents shall be
true in all material respects on and as of the Amendment No. 1 Effective
Date after giving effect to this Amendment;
15
<PAGE> 16
(x) the Agent shall have received copies of all amendments, waivers
and other modifications entered into in connection with the Final
Settlement to any documents (other than the Financing Documents) under
which the Borrower and any of its Subsidiaries has or may incur Debt, in
each case in form and substance satisfactory to the Required Banks in their
sole discretion; and
(xi) the Agent shall have received payment of all other costs, fees
and expenses (including, without limitation, reasonable legal fees and
expenses), and other compensation payable to the Agent on or prior to the
Amendment No. 1 Effective Date in connection with this Amendment, in each
case invoiced prior to the Amendment No. 1 Effective Date.
The Agent shall promptly notify the Borrower and the Banks of the effectiveness
of this Amendment, and such notice shall be conclusive and binding on all
parties hereto.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
BEVERLY ENTERPRISES, INC.
By:
------------------------------
Title:
BANKS
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
------------------------------
Name:
Title:
BANK OF AMERICA, N.A.
By:
------------------------------
Name:
Title:
<PAGE> 18
THE BANK OF NEW YORK
By:
------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
By:
------------------------------
Name:
Title:
PNC BANK, N.A.
By:
------------------------------
Name:
Title:
BANK OF MONTREAL
By:
------------------------------
Name:
Title:
BANK OF HAWAII
By:
------------------------------
Name:
Title:
<PAGE> 19
BHF (USA) CAPITAL CORPORATION
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 20
AGENT
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By:
------------------------------
Name:
Title:
ISSUING BANK
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Issuing Bank
By:
------------------------------
Name:
Title:
<PAGE> 21
NEW SUBSIDIARY GUARANTORS
Associated Physical Therapy Practitioners, Inc.
Beverly - Branson Holdings, Inc.
Beverly - Indianapolis, LLC
Beverly - Plant City Holdings, Inc.
Beverly - Tamarac Holdings, Inc.
Beverly - Tampa Holdings, Inc.
Beverly Clinical, Inc.
Beverly Healthcare, LLC
Beverly Healthcare - California, Inc.
Beverly Rehabilitation, Inc.
Carrollton Physical Therapy Clinic, Inc.
Greenville Rehabilitation Services, Inc.
Home Health and Rehabilitation Services, Inc.
Las Colinas Physical Therapy, Inc.
Network for Physical Therapy, Inc.
North Dallas Physical Therapy Associates, Inc.
PT NET, Inc.
PT Net (Colorado), Inc.
Rehabilitation Associates of Lafayette, Inc.
The Parks Physical Therapy and Work Hardening Center, Inc.
Theraphysics Corp.
Theraphysics of New York IPA, Inc.
Theraphysics Partners of Colorado, Inc.
Theraphysics Partners of Louisiana, Inc.
Theraphysics Partners of Western Pennsylvania, Inc.
Theraphysics Partners of Texas, Inc.
All by
----------------------------------
Name:
Title:
<PAGE> 22
The undersigned Subsidiary Guarantors each
hereby consents to the foregoing Amendment:
SUBSIDIARY GUARANTORS
A-1 Home Health Services, Inc.
AGI-Camelot, Inc.
Arborland Management Company, Inc.
Beverly Assisted Living, Inc.
Beverly - Bella Vista Holding, Inc.
Beverly - Missouri Valley Holding, Inc.
Beverly - Rapid City Holding, Inc.
Beverly Enterprises International Limited
Beverly Enterprises - Alabama, Inc.
Beverly Enterprises - Arizona, Inc.
Beverly Enterprises - Arkansas, Inc.
Beverly Enterprises - California, Inc.
Beverly Enterprises - Colorado, Inc.
Beverly Enterprises - Connecticut, Inc.
Beverly Enterprises - Delaware, Inc.
Beverly Enterprises - Distribution Services, Inc
Beverly Enterprises - District of Columbia, Inc.
Beverly Enterprises - Florida, Inc.
Beverly Enterprises - Garden Terrace, Inc.
Beverly Enterprises - Georgia, Inc.
Beverly Enterprises - Hawaii, Inc.
Beverly Enterprises - Idaho, Inc.
Beverly Enterprises - Illinois, Inc.
Beverly Enterprises - Indiana, Inc.
Beverly Enterprises - Iowa, Inc.
Beverly Enterprises - Kansas, Inc.
Beverly Enterprises - Kentucky, Inc.
Beverly Enterprises - Louisiana, Inc.
Beverly Enterprises - Maine, Inc.
Beverly Enterprises - Maryland, Inc.
Beverly Enterprises - Massachusetts, Inc.
Beverly Enterprises - Michigan, Inc.
Beverly Enterprises - Minnesota, Inc.
Beverly Enterprises - Mississippi, Inc.
Beverly Enterprises - Missouri, Inc.
Beverly Enterprises - Montana, Inc.
Beverly Enterprises - Nebraska, Inc.
<PAGE> 23
Beverly Enterprises - Nevada, Inc.
Beverly Enterprises - New Hampshire, Inc.
Beverly Enterprises - New Jersey, Inc.
Beverly Enterprises - New Mexico, Inc.
Beverly Enterprises - North Carolina, Inc.
Beverly Enterprises - North Dakota, Inc.
Beverly Enterprises - Ohio, Inc.
Beverly Enterprises - Oklahoma, Inc.
Beverly Enterprises - Oregon, Inc.
Beverly Enterprises - Pennsylvania, Inc.
Beverly Enterprises - Rhode Island, Inc.
Beverly Enterprises - South Carolina, Inc.
Beverly Enterprises - Tennessee, Inc.
Beverly Enterprises - Texas, Inc.
Beverly Enterprises - Utah, Inc.
Beverly Enterprises - Vermont, Inc.
Beverly Enterprises - Virginia, Inc.
Beverly Enterprises - Washington, Inc.
Beverly Enterprises - West Virginia, Inc.
Beverly Enterprises - Wisconsin, Inc.
Beverly Enterprises - Wyoming, Inc.
Beverly Health and Rehabilitation Services, Inc.
Beverly Holdings I, Inc.
Beverly Indemnity, Ltd.
Beverly Manor Inc. of Hawaii
Beverly Real Estate Holdings, Inc.
Beverly Savana Cay Manor, Inc.
Columbia-Valley Nursing Home, Inc.
Commercial Management, Inc.
Community Care, Inc.
Compassion and Personal Care Services, Inc.
Continental Care Centers of Council Bluffs, Inc.
Eastern Home Health Supply & Equipment Co., Inc.
Forest City Building Ltd.
Hallmark Convalescent Homes, Inc.
HomeCare Preferred Choice, Inc.
Home Technology Healthcare - Mid Cumberland, Inc.
Home Technology Healthcare - Mid South, Inc.
Home Technology Healthcare - Nursing, Inc.
Home Technology Healthcare - St. Louis, Inc.
HTHC Holdings, Inc.
Hospice of Eastern Carolina, Inc.
Hospice Preferred Choice, Inc.
Hospital Facilities Corporation
<PAGE> 24
Kenwood View Nursing Home, Inc.
Liberty Nursing Homes, Incorporated
MATRIX Occupational Health, Inc.
MATRIX Rehabilitation, Inc.
Medical Arts Health Facility of Lawrenceville, Inc.
Moderncare of Lumberton, Inc.
Nebraska City S-C-H, Inc.
Nursing Home Operators, Inc.
Petersen Health Care, Inc.
South Alabama Nursing Home, Inc.
South Dakota - Beverly Enterprises, Inc.
Spectra Healthcare Alliance, Inc.
Tar Heel Holdings, Inc.
Tar Heel Home Health, Inc.
Tar Heel Home Health of Cape Fear, Inc.
Tar Heel Home Health of Dare County, Inc.
Tar Heel Home Health of North Central North Carolina, Inc.
Tar Heel Infusion Company, Inc.
TMD Disposition Company
Vantage Healthcare Corporation
Vaughn Home Health Care & Services, Inc.
All by
--------------------------------------
Name:
Title:
<PAGE> 25
SCHEDULE I
PRICING SCHEDULE
The "EURO-DOLLAR MARGIN", "CD MARGIN", "BASE RATE MARGIN", "LETTER OF
CREDIT COMMISSION RATE" and "COMMITMENT FEE RATE" for any day are the respective
rates per annum set forth below in the applicable row in the column
corresponding to the Pricing Level that applies on such day:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
===========================================================================
<S> <C> <C> <C> <C> <C>
Euro-Dollar Margin 1.125 1.375 1.750 2.000 2.250%
- ---------------------------------------------------------------------------
CD Margin 1.250 1.500 1.875 2.125 2.375%
- ---------------------------------------------------------------------------
Base Rate Margin 0.125 0.375 0.750 1.000 1.250%
- ---------------------------------------------------------------------------
Letter of Credit
Commission Rate 1.125 1.375 1.750 2.000 2.250%
- ---------------------------------------------------------------------------
Commitment Fee Rate 0.250 0.275 0.300 0.350 0.375%
- ---------------------------------------------------------------------------
</TABLE>
For purposes of this Pricing Schedule, the following terms have the
following meanings:
"PRICING RATIO" means the ratio of Adjusted Consolidated Debt to
Consolidated EBITDAR.
"LEVEL I PRICING" applies on any day if, as of the last day of the fiscal
quarter of the Borrower most recently ended on or prior to such day and as to
which the Borrower shall have delivered, or been required to deliver, on or
prior to such day a certificate pursuant to Section 5.01(d), the Pricing Ratio
is less than 3.50 to 1.0.
"LEVEL II PRICING" applies on any day if, as of the last day of the fiscal
quarter of the Borrower most recently ended on or prior to such day and as to
which the Borrower shall have delivered, or been required to deliver, on or
prior to such day a certificate pursuant to Section 5.01(d), (i) the Pricing
Ratio is less than 4.0 to 1.0 and (ii) Level I Pricing does not apply.
<PAGE> 26
"LEVEL III PRICING" applies on any day if, as of the last day of the fiscal
quarter of the Borrower most recently ended on or prior to such day and as to
which the Borrower shall have delivered, or been required to deliver, on or
prior to such day a certificate pursuant to Section 5.01(d), (i) the Pricing
Ratio is less than 4.5 to 1.0 and (ii) neither Level I Pricing nor Level II
Pricing applies.
"LEVEL IV PRICING" applies on any day if, as of the last day of the fiscal
quarter of the Borrower most recently ended on or prior to such day and as to
which the Borrower shall have delivered, or been required to deliver, on or
prior to such day a certificate pursuant to Section 5.01(d), (i) the Pricing
Ratio is less than 5.0 to 1.0 and (ii) none of Level I Pricing, Level II Pricing
or Level III Pricing applies.
"LEVEL V PRICING" applies on any day if, on such day, no other Pricing
Level applies.
"PRICING LEVEL" means any one of the five pricing levels denominated Level
I Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing.
<PAGE> 27
SCHEDULE V
<TABLE>
<CAPTION>
FACILITY NAME ADDRESS COUNTY TOTAL OWNER
# BEDS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
208 Valley Nursing & 1140 Knoxville Road Auglaize 100 Nursing Home Operators, Inc.
Rehabilitation Center St. Marys, OH 45885
- ------------------------------------------------------------------------------------------------------------------------------------
209 Community Nursing Home 850 W Poe Road Wood 100 Nursing Home Operators, Inc.
Bowling Green, OH 43402
- ------------------------------------------------------------------------------------------------------------------------------------
210 Northcrest Nursing Home Northcrest Drive, Route 6 Henry 100 Nursing Home Operators, Inc.
Napoleon, OH 43545
- ------------------------------------------------------------------------------------------------------------------------------------
261 Beverly Health & Rehab 2004 N. 22nd Street Franklin 125 Beverly Enterprises-Washington, Inc.
Center-Pasco Pasco, WA 99301
- ------------------------------------------------------------------------------------------------------------------------------------
2132 Benson Heights Rehab 22410 Benson Road SE King 91 Beverly Enterprises-Washington, Inc.
Kent, WA 98031
- ------------------------------------------------------------------------------------------------------------------------------------
2554 Gray's Harbor Health & 920 Anderson Drive Grays Harbor 136 Beverly Enterprises-Washington, Inc.
Rehab Center Aberdeen, WA 98520
- ------------------------------------------------------------------------------------------------------------------------------------
660 Beverly Manor-Honolulu 1930 Kam IV Road Honolulu 108 Beverly Manor Inc. of Hawaii
Honolulu, HI 96819
- ------------------------------------------------------------------------------------------------------------------------------------
71 Green Hill Manor Nursing 213 Industrial Road Green 126 Beverly Health and Rehabilitation Services,
Facility Greensburg, KY 42743 Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
984 Beverly Health & Old Soldiers Lane Frankiln 100 Beverly Health and Rehabilitation Services,
Rehab-Frankfort Frankfort, KY 40601 Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
EXHIBIT A
OPINION OF SPECIAL NEW YORK COUNSEL
TO THE BORROWER
September 30, 1999
To the Banks, the Issuing
Bank and the Agent
referred to below
c/o Morgan Guaranty Trust
Company of New York, as Agent,
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have acted as special counsel to Beverly Enterprises, Inc., a Delaware
corporation (the "BORROWER"), and certain subsidiaries of the Borrower, in
connection with the preparation, authorization, execution and delivery of, and
the consummation of the transactions contemplated by (i) the Amended and
Restated Credit Agreement, dated as of April 30, 1998, as amended by Amendment
No. 1 to the Credit Agreement dated as of September 30, 1999 ("AMENDMENT NO. 1")
(as so amended, the "CREDIT AGREEMENT"), among the Borrower, the banks listed on
the signature pages thereto (the "BANKS"), Morgan Guaranty Trust Company of New
York, as Issuing Bank (the "ISSUING BANK"), and Morgan Guaranty Trust Company of
New York, as Agent (the "AGENT"), and (ii) the Pledge Agreement, dated as of
September 30, 1999 (the "PLEDGE AGREEMENT"), among the Borrower, Beverly Health
and Rehabilitation Services, Inc., a California corporation ("BHRS"), and the
Agent. Amendment No. 1, the Credit Agreement and the Pledge Agreement are
collectively referred to in this opinion as the "FINANCING DOCUMENTS" and the
Borrower, BHRS and the other Subsidiaries of the Borrower party to any Financing
Document are collectively referred to in this opinion as the "LOAN PARTIES".
Capitalized terms defined in the Credit Agreement and used but not otherwise
defined herein are used herein as so defined.
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of each of the Financing Documents and such
corporate records, agreements, documents, and other instruments, and such
certificates or comparable documents of public officials and of officers and
representatives of each of the Loan Parties, and have made such inquiries of
such officers and representatives as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.
<PAGE> 29
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Loan Parties and upon the representations and warranties
of each of the Loan Parties contained in the Financing Documents. We have also
assumed (i) the valid existence of each of the Loan Parties, (ii) that each of
the Loan Parties has the requisite corporate power and authority to enter into
and perform each of the Financing Documents to which it is a party and (iii) the
due authorization, execution and delivery of each of the Financing Documents by
each party thereto.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that:
1. Each Financing Document constitutes the legal, valid and binding
obligation of each Loan Party which is a party thereto, in each case enforceable
against them in accordance with its terms, and subject to the qualification that
certain remedial provisions of the Pledge Agreement are or may be unenforceable
in whole or in part under the laws of the State of New York, but the inclusion
of such provisions does not affect the validity of the Pledge Agreement, and the
Pledge Agreement contains adequate provisions for the practical realization of
the rights and benefits afforded thereby. No opinion is expressed in this
paragraph as to the attachment, perfection or priority of any liens granted
pursuant to the Financing Documents.
2. Assuming (i) delivery in New York to, and continued possession in
New York by, the Agent (the "PLEDGEE") of all certificates that represent the
Pledged Stock (as defined in the Pledge Agreement), together with stock powers
properly executed in blank with respect thereto, and (ii) that the Pledgee was
without notice of any adverse claim (as such term is defined in Section 8-105 of
the Uniform Commercial Code in effect in the State of New York (the "UCC")) with
respect to the Pledged Stock, the execution and delivery of the Pledge Agreement
creates a valid and duly perfected lien on and security interest in the Pledged
Stock, as security for the Secured Obligations, as defined in the Pledge
Agreement, which is free of any adverse claim and as to which the Pledgee has
control (within the meaning of Section 8-106 of the UCC).
3. The security interests created under the Pledge Agreement validly
secure the Secured Obligations in respect of all future Loans made by the Banks,
and all future Letters of Credit issued by the Issuing Bank, under the Credit
Agreement, whether or not at the time such Loans are made or such Letters of
Credit are issued any Event of Default or other condition or event not within
the control of the Banks or, in the case of Letters of Credit only, the Issuing
Bank, has relieved or may relieve the Banks from their obligations to make such
Loans or the Issuing Bank from its
<PAGE> 30
obligations to issue such Letters of Credit, and are perfected to the extent set
forth in paragraph 2 above and have the same priority with respect to Secured
Obligations in respect of future Loans and future Letters of Credit as they do
with respect to Loans made or Letters of Credit issued on the date hereof.
The opinions in paragraphs 2 and 3 are subject to the following exceptions:
A. that with respect to BHRS's rights in or title to the Collateral,
we express no opinion, and have assumed that BHRS has title to the Collateral
pledged by it;
B. that with respect to (i) existing and future federal tax liens
accorded priority under law and (ii) liens created under Title IV of the
Employee Retirement Income Security Act of 1974 which are properly filed after
the date hereof, we express no opinion as to the relative priority of such liens
and the security interests created by the Pledge Agreement; and
C. that with respect to any claim (including for taxes) in favor of any
state or any of its respective agencies, authorities, municipalities or
political subdivisions which claim is given lien status and/or priority under
any law of such state, we express no opinion as to the relative priority of such
liens and the security interests created by the Pledge Agreement.
In addition, the opinions in paragraphs 2 and 3 are subject to (i) the
limitations on perfection of security interests in proceeds resulting from the
operation of Section 9-306 of the UCC; (ii) the limitations with respect to
buyers in the ordinary course of business imposed by Sections 9-307 and 9-308 of
the UCC; (iii) the limitations with respect to documents, instruments and
securities imposed by Sections 8-302, 9-304 and 9-309 of the UCC; (iv) the
provisions of Section 9-203 of the UCC relating to the time of attachment; and
(v) Section 552 of Title 11 of the United States Code (the "BANKRUPTCY CODE")
with respect to any Collateral acquired by BHRS subsequent to the commencement
of a case against or by BHRS under the Bankruptcy Code.
4. No New York or Federal governmental registration, recordation or
filing by any Loan Party is required in connection with the execution or
delivery of the Financing Documents or is necessary for the validity or
enforceability thereof.
5. The execution and delivery of the Financing Documents, the
consummation of the transactions contemplated thereby and compliance by each
Loan Party party thereto with any of the provisions thereof will not conflict
with, constitute a default under, or violate any of the terms, conditions or
provisions of the Senior Note Agreement on the date hereof.
The opinions expressed above are subject to the following comments and
qualifications.
The opinions set forth above are subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting
<PAGE> 31
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
We wish to point out that provisions of the Financing Documents that permit
any party to take action or make determinations or benefit from indemnities and
similar undertakings may be subject to a requirement that such action be taken
or such determinations be made, or that any action or inaction by any party that
may give rise to a request for payment under such undertaking be taken or not
taken, as the case may be, on a reasonable basis and in good faith.
The opinions expressed herein are limited to the laws of the State of New
York and the federal laws of the United States, and we express no opinion as to
the effect on the matters covered by this letter of the laws of any other
jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions are delivered
to you pursuant to Section 24 of Amendment No. 1 and may not be used or relied
upon by any other person (other than a Participant or Assignee permitted under
Section 9.06 of the Credit Agreement), nor may this letter or any copies hereof
be furnished to a third party (other than any such Participant or Assignee or
prospective Participant or Assignee), filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent.
Very truly yours,
<PAGE> 32
OPINION OF VICE PRESIDENT AND
DEPUTY GENERAL COUNSEL OF THE BORROWER
September 30, 1999
To the Banks, the Issuing
Bank and the Agent
referred to below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I am Vice President, Deputy General Counsel and Assistant Secretary of
Beverly Enterprises, Inc., a Delaware corporation (the "BORROWER"), and have
acted as counsel for the Borrower and the Subsidiaries of the Borrower in
connection with the preparation, authorization, execution and delivery of, and
the consummation of the transactions contemplated by (i) the Amended and
Restated Credit Agreement, dated as of April 30, 1998, as amended by Amendment
No. 1 to the Credit Agreement dated as of September 30, 1999 ("AMENDMENT NO. 1")
(as so amended, the "CREDIT AGREEMENT"), among the Borrower, the banks listed on
the signature pages thereto (the "BANKS"), Morgan Guaranty Trust Company of New
York, as Issuing Bank (the "ISSUING BANK"), and Morgan Guaranty Trust Company of
New York, as Agent (the "AGENT"), and (ii) the Pledge Agreement, dated as of
September 30, 1999 (the "PLEDGE AGREEMENT"), among the Borrower, Beverly Health
and Rehabilitation Services, Inc., a California corporation, and the Agent.
Amendment No. 1, the Credit Agreement and the Pledge Agreement are collectively
referred to in this opinion as the "FINANCING DOCUMENTS" and the Borrower and
its Subsidiaries party to any Financing Document are collectively referred to in
this opinion as the "LOAN PARTIES". Capitalized terms defined in the Credit
Agreement and used but not otherwise defined herein are used herein as so
defined.
I, or other lawyers in the law department of the Borrower under my
supervision, have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and officers of the Loan Parties and other
instruments as I have deemed appropriate and, subject to the limitations
expressed below, have conducted such other investigations of fact and law as I
have deemed necessary or advisable for purposes of this opinion. I have assumed
the due authorization, execution and delivery of the documents referred to in
paragraph 2 below by each party thereto other than the Loan Parties.
<PAGE> 33
I am opining herein only to the application of United States Federal law
and the General Corporation Law of the State of Delaware. Based upon the
foregoing, I am of the opinion that:
1. Each Loan Party is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted except where the
failure to obtain such governmental licenses, authorizations, consents and
approvals would not, in my reasonable judgment, have a material adverse effect
on the consolidated financial position of the Borrower and its Consolidated
Subsidiaries.
2. The execution, delivery and performance by each Loan Party of each
Financing Document to which it is a party (i) are within the corporate powers of
such Loan Party and have been duly authorized by all necessary corporate action
of such Loan Party, (ii) except for the filing and recording necessary to
perfect a Lien or security interest in the Collateral, require no action by or
in respect of, or filing with, any governmental body, agency or official by any
Loan Party, (iii) do not contravene the certificate of incorporation or by-laws
of any Loan Party, (iv) to the best of my knowledge, do not contravene any
material provision of law or regulation applicable to any Loan Party, (v) to the
best of my knowledge, do not contravene or constitute a default under any
agreement, judgment, injunction, order, decree or other instrument that is
material individually or in the aggregate and that is binding upon any Loan
Party, and (vi) to the best of my knowledge, will not result in the creation or
imposition of any Lien on any asset of any Loan Party (except the Liens created
or to be created pursuant to the Pledge Agreement).
3. Each Loan Party owns the Pledged Stock delivered by it pursuant to
the Pledge Agreement, free and clear of all Liens (other than Liens created or
to be created pursuant to the Pledge Agreement).
4. Except as disclosed in the Borrower's 1998 Form 10-K or the
Borrower's June 30, 1999 Form 10-Q, to the best of my knowledge, there is no
action, suit or proceeding pending against, or threatened against or affecting,
any Loan Party before any court or arbitrator or any governmental body, agency
or official in which, in my judgment, there is a reasonable possibility of an
adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries or which in any manner draws into
question the validity of any of the Financing Documents.
The opinions expressed above should be read in conjunction with the
following:
(A) The opinion expressed in paragraph 1 above as to due incorporation,
valid existence, good standing and corporate power, and the opinion expressed in
clauses (i) and (iii) of paragraph 2 above as to corporate powers and
non-contravention of the certificate of incorporation or by-laws, insofar as
such opinions apply to Subsidiaries of the Borrower that are incorporated under
the laws of any jurisdiction other than
<PAGE> 34
the State of Delaware, is based upon my general knowledge and experience rather
than upon the opinions or advice of counsel licensed to practice law in
jurisdictions other than the State of Delaware.
(B) The opinion as to governmental licenses, governmental
authorizations, governmental consents and governmental approvals expressed in
paragraph 1 above is based upon my general knowledge and experience rather than
upon the opinions or advice of counsel licensed to practice law in the
applicable jurisdictions.
(C) The opinions as to filings and actions, contravention of law and
creation or imposition of Liens expressed in clauses (ii), (iv) and (vi) of
paragraph 2 are based upon my general knowledge and experience and are to the
best of my knowledge rather than based upon the opinions or advice of counsel
licensed to practice law in the applicable jurisdictions.
(D) Please be advised that several of the instruments described in
clause (v) of paragraph 2 provide that they are governed by the laws of
jurisdictions in which I am not licensed to practice law. I have not obtained
opinions or advice of counsel licensed to practice law in these jurisdictions in
rendering the opinion expressed in clause (v) of paragraph 2. I am not aware of
any provision in the instruments described in clause (v) of paragraph 2 which
the execution, delivery or performance of the Financing Documents would violate.
Please be further advised that there may be law or other precedent in
jurisdictions governing such documents which would expand or contradict the
plain meaning of the language contained in the documents.
In giving the foregoing opinions, I express no opinion as to the effect (if
any) of any law of any jurisdiction in which any Bank is located which limits
the rate of interest that such Bank may charge or collect.
This opinion is delivered to you pursuant to Section 24 of Amendment
No. 1 and is not to be used, quoted or relied upon by any other person or entity
(other than Participants and Assignees permitted under Section 9.06 of the
Credit Agreement), without my prior written consent.
Very truly yours,
John W. MacKenzie,
Vice President,
Deputy General Counsel and
Assistant Secretary
<PAGE> 35
EXHIBIT D
FORM OF PLEDGE AGREEMENT
AGREEMENT dated as of September 30, 1999 among BEVERLY ENTERPRISES, INC., a
Delaware corporation (the "BORROWER"), BEVERLY HEALTH AND REHABILITATION
SERVICES, INC., a California corporation (the "PLEDGOR"), and Morgan Guaranty
Trust Company of New York, as Agent (the "AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks (the "BANKS"), Morgan Guaranty Trust
Company of New York, as issuing bank (the "ISSUING BANK"), and the Agent have
entered into an Amended and Restated Credit Agreement dated as of April 30,
1998, as amended by Amendment No. 1 dated as of September 30, 1999 ("AMENDMENT
NO. 1") (as so amended and as may be further amended from time to time, the
"CREDIT AGREEMENT");
WHEREAS, in order to induce the Banks, the Agent and the Issuing Bank to
enter into Amendment No. 1, the Borrower has agreed to cause the Pledgor to
grant a continuing security interest in and to the Collateral (as hereafter
defined) to secure the Borrower's obligations under the Credit Agreement and the
Notes issued pursuant thereto:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. Unless
otherwise defined herein, or unless the context otherwise requires, all terms
used herein which are defined in the New York Uniform Commercial Code as in
effect on the date hereof shall have the meanings therein stated. The following
additional terms, as used herein, have the following respective meanings:
"COLLATERAL" has the meaning set forth in Section 3(A).
"COLLATERAL ACCOUNT" has the meaning set forth in Section 9(A).
"CONTINGENT DEBT" means any obligation of any Obligor in respect of any
undrawn Letter of Credit.
<PAGE> 36
"FINANCIAL ASSET" means:
(i) a Security; or
(ii) an obligation of a person or a share, participation, or other
interest in a person or in property or an enterprise of a person, which is,
or is of a type, dealt in or traded on financial markets, or which is
recognized in any area in which it is issued or dealt in as a medium for
investment.
As context requires, the term means either the interest itself or the means
by which a person's claim to it is evidenced, including a certificated or
uncertificated Security, a Security certificate, or a Security Entitlement.
"ISSUER" means each company listed on Schedule I hereto;
"LIQUID INVESTMENTS" has the meaning set forth in Section 9(B).
"OBLIGORS" means the Borrower and the Pledgor.
"OUTSTANDING" means, when used with respect to Contingent Debt at any time,
the aggregate Letter of Credit Exposures of the Banks at such time.
"PLEDGED STOCK" means (i) the Schedule Shares and (ii) any other capital
stock required to be pledged to the Agent pursuant to Section 3(B).
"PLEDGOR" means Beverly Health and Rehabilitation Services, Inc., a
California corporation, and its successors.
"PROCEEDS" means, with respect to any property or assets, all proceeds of
such property or assets, within the meaning of the UCC, together with all
interest, dividends, profits, cash and other property from time to time
received, receivable or otherwise distributed in respect of such property or
assets.
"SCHEDULE SHARES" means the shares of capital stock of the Issuers listed
on Schedule I hereto; provided that upon the consummation of any merger of any
Issuer into any other Issuer that is permitted under the Credit Agreement, the
Schedule Shares shall not include any capital stock of such Issuer that is
canceled or extinguished upon the consummation of such merger.
"SECURED OBLIGATIONS" means the obligations secured under this Agreement,
including (i) all obligations of the Obligors in respect of principal of and
interest on the Loans and the Notes, (ii) all Reimbursement Obligations
(including interest thereon) and other obligations of the Obligors in respect of
Letters of Credit, (iii) all other amounts payable by the Obligors under the
Credit Agreement or any other Financing Document and (iv) any renewals or
extensions of any of the foregoing. The Secured Obligations shall include,
without limitation, any interest, costs, fees and expenses which accrue on or
with respect to any of the foregoing, whether before or
<PAGE> 37
after the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of any Obligor, and any such interest,
costs, fees and expenses that would have accrued but for the commencement of any
such case, proceeding or other action.
"SECURED PARTIES" means the Banks, the Issuing Bank and the Agent.
"SECURITY" means an obligation of an issuer or a share, participation, or
other interest in an issuer or in property or an enterprise of an issuer:
(i) which is represented by a Security certificate in bearer or
registered form, or the transfer of which may be registered upon books
maintained for that purpose by or on behalf of the issuer;
(ii) which is one of a class or series or by its terms is divisible
into a class or series of shares, participations, interests, or
obligations; and
(iii) which:
(A) is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by Article 8 of the UCC.
"SECURITY ENTITLEMENT" means the rights and property interest of an
entitlement holder with respect to a Financial Asset specified in Part 5 of
Article 8 of the UCC.
"SECURITY INTERESTS" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"SEGREGATED COLLATERAL ACCOUNT" has the meaning set forth in Section 9(C).
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York; provided that if, by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
<PAGE> 38
SECTION 2. Representations and Warranties.
Each Obligor represents and warrants as follows:
(a) Title to Pledged Stock. The Pledgor owns all of the Pledged Stock, free
and clear of any Liens other than the Security Interests. The Pledged Stock
described on Schedule I hereto constitutes all of the issued and outstanding
capital stock of each Issuer as of the date hereof and the Pledged Stock will
constitute all of the issued and outstanding capital stock of each Issuer at all
times hereafter. All of the Pledged Stock has been duly authorized and validly
issued, is fully paid and non-assessable and is subject to no options to
purchase or similar rights of any Person. The Obligors are not and will not
become a party to or otherwise bound by any agreement, other than this Agreement
and the Credit Agreement, which restricts in any manner the rights of any
present or future holder of any of the Pledged Stock with respect thereto,
except for (x) restrictions on the ability of the Borrower and its Subsidiaries
to sell, transfer or otherwise dispose of all or substantially all of their
assets, taken as a whole, or (y) negative pledge provisions, provided that such
provisions permit Liens on the Collateral securing the Secured Obligations.
(b) Validity, Perfection and Priority of Security Interests. (i) Upon the
delivery of the certificates representing the Pledged Stock to the Agent in
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Collateral subject to no prior Lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests, except for any filing that may be required to continue
the perfection of the Security Interests in proceeds under Section 9-306 of the
UCC. Neither Obligor and none of their respective Subsidiaries has performed or
will perform any acts which might prevent the Agent from enforcing any of the
terms and conditions of this Agreement or which would limit the Agent in any
such enforcement. (ii) If and when any Financial Asset or Security Entitlement
is held in the Collateral Account, the Agent will have "control" (as defined in
Article 8 of the UCC) thereof and will be a "protected purchaser" (as defined in
said Article 8) thereof.
(c) UCC Filing Locations. The chief executive office of each Obligor is
located at its address set forth on Schedule II hereto. Under the Uniform
Commercial Code as in effect in the State in which such office is located, no
filing (other than in the county in which such office is located and the office
of the secretary of state of such State) is required to perfect a security
interest in collateral consisting of general intangibles.
<PAGE> 39
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment of (i) in the case of
the Pledgor, its obligations with respect to any Secured Obligation arising
under or in respect of the Subsidiary Guaranty or this Agreement or (ii) in the
case of the Borrower, its obligations with respect to any Secured Obligation, in
each case in accordance with the terms thereof, each Obligor hereby assigns and
pledges to and with the Agent for the benefit of the Secured Parties and grants
to the Agent for the benefit of the Secured Parties, security interests in all
of the following property of such Obligor, whether now owned or existing or
hereafter acquired or arising (all being collectively referred to as the
"COLLATERAL"):
(xii) the Pledged Stock, all of its rights and privileges with respect
to the Pledged Stock and all Proceeds of the foregoing;
(xiii) the Collateral Account, all cash deposited therein from time to
time, the Liquid Investments made pursuant to Section 9(B) and all Proceeds
of such Liquid Investments; and
(xiv) the Segregated Collateral Account, all cash deposited therein
from time to time, the Liquid Investments made pursuant to Section 9(C) and
all Proceeds of such Liquid Investments.
The security interests granted pursuant to clauses (i) and (ii) of the preceding
sentence shall be for the benefit of all Secured Parties and the security
interests granted pursuant to clause (iii) of the preceding sentence shall be
solely for the benefit of the Issuing Bank and, to the extent that amounts held
in the Segregated Collateral Account are subject to transfer to the Collateral
Account pursuant to Section 9(C), for the benefit of all Secured Parties.
Contemporaneously with the execution and delivery hereof, the Pledgor is
delivering certificates representing the Schedule Shares in pledge hereunder.
(b) In the event that any Issuer at any time issues any additional or
substitute shares of capital stock of any class, the Pledgor will immediately
pledge and deposit with the Agent certificates representing all such shares as
additional security for the Secured Obligations of the Pledgor. All such shares
constitute Pledged Stock and are subject to all provisions of this Agreement.
(c) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of any Obligor or any of its Subsidiaries with respect
to any of the Collateral or any transaction in connection therewith.
<PAGE> 40
SECTION 4. Delivery of Pledged Stock.
All certificates representing Pledged Stock delivered to the Agent by the
Pledgor pursuant hereto shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, with (if requested by the Agent) signatures guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.
SECTION 5. Further Assurances.
(a) Each Obligor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may request, in order to create,
preserve, perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, each Obligor hereby authorizes the
Agent to execute and file, in the name of such Obligor or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing statement
relating to this Agreement) which the Agent in its sole discretion may deem
necessary or appropriate to further perfect the Security Interests.
(b) Each Obligor agrees that it will not change (i) its name, identity or
corporate structure in any manner or (ii) the location of its chief executive
office, in each case, unless it shall have given the Agent not less than 30
days' prior notice thereof.
(c) The Pledgor will not permit any Issuer or any Subsidiary of any Issuer
to (i) consolidate or merge with or into any other Person, unless (I) an Issuer
is the surviving corporation, (II) all of the outstanding capital stock of such
Issuer remains pledged hereunder and (III) no consideration other than capital
stock of such Issuer is paid to any Person or (ii) sell, lease or otherwise
transfer (including by merger or dividend or distribution), in one or more
transactions (other than (I) transactions each of which, together with any
related transactions, relates to assets with a fair market value of less than
$10,000,000 and (II) assignments or grants of security interests in receivables
permitted under clause (B) of the proviso to Section 5.12 of the Credit
Agreement), assets with an aggregate fair market value of more than $50,000,000,
unless either (x) prior to such sale, lease or transfer, the Borrower reduces
the aggregate amount of the Commitments by at least 50% of the amount of the net
proceeds received by the Borrower and its Subsidiaries in connection with such
sale, lease or transfer or (y) the Borrower and its Subsidiaries grant to the
Agent Liens on property reasonably acceptable to the Required Banks having an
aggregate value (determined on the basis of an amount equal to (1) Consolidated
EBITDA for such property for the four consecutive fiscal quarters most recently
completed prior to the date upon which such Liens are granted for which
financial statements have been delivered pursuant to Section 5.01(a) or (b) of
the Credit Agreement (or, if such determination is being made prior to the
delivery of financial statements for the fiscal
<PAGE> 41
year ending December 31, 1999 pursuant to Section 5.01(a) of the Credit
Agreement, the annualized Consolidated EBITDA for such property based on the
1999 fiscal quarters for which such financial statements have been delivered
pursuant to Section 5.01(b) of the Credit Agreement) multiplied by (2) 7) at
least equal to the value (as so determined) of the property so sold, leased or
transferred; provided that if, prior to such sale, lease or transfer, the
Borrower gives the Agent written notice that it, in good faith, intends to
acquire or construct additional operating assets of the Issuers and their
Subsidiaries in an amount at least equal to the net proceeds of such sale, lease
or transfer within 180 days after the consummation of such sale, lease or
transfer, then no such Commitment reduction or new Liens shall be required on or
prior to the date of consummation of such sale, lease or transfer so long as the
Borrower and its Subsidiaries (A) expend an amount at least equal to the amount
of such net proceeds to acquire or construct operating assets owned by the
Issuers and their Subsidiaries within 180 days following such consummation or
(B) the Borrower shall reduce the Commitments or provide Liens in the amounts
and in the manner provided in clauses (x) and (y) above on the earlier of the
180th day following such consummation and the date upon which it shall determine
that it will not make the expenditures provided for in clause (A) above.
SECTION 6. Record Ownership of Pledged Stock.
The Agent may at any time or from time to time, in its sole discretion,
cause any or all of the Pledged Stock to be transferred of record into the name
of the Agent or its nominee. The Pledgor will promptly give to the Agent copies
of any notices or other communications received by it with respect to Pledged
Stock registered in the name of the Pledgor and the Agent will promptly give to
the Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
(a) Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right to retain all dividends and other payments and
distributions made upon or with respect to the Pledged Stock other than:
(xv) dividends paid or payable other than in cash in respect of, or
instruments or other property received, receivable or otherwise distributed
in respect of, or in exchange for, any Pledged Stock,
(xvi) dividends or other distributions paid or payable in cash in
respect of any Pledged Stock in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, or
(xvii) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Stock, all of which shall be forthwith
delivered to the Agent to hold as Collateral.
<PAGE> 42
(b) Upon the occurrence and during the continuance of an Event of Default
all rights of the Pledgor to receive dividends and other payments and
distributions which it would otherwise be authorized to receive and retain
pursuant to Section 7(A) above shall cease, and all such rights shall thereupon
become vested in the Agent who shall thereupon have the sole right to receive
and hold as Collateral all Proceeds on the Collateral.
(c) All amounts which are received by the Pledgor contrary to the
provisions of this Section shall be received in trust for the benefit of the
Agent, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Agent as Collateral in the same form as received
(with any necessary endorsement).
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and the Agent
shall, upon receiving a written request from the Pledgor accompanied by a
certificate signed by its principal financial officer stating that no Event of
Default has occurred and is continuing, deliver to the Pledgor or as specified
in such request such proxies, powers of attorney, consents, ratifications and
waivers in respect of any of the Pledged Stock which is registered in the name
of the Agent or its nominee as shall be specified in such request and be in form
and substance satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof. The Agent will
promptly notify the Borrower of any action taken by it pursuant to this Section,
provided that the absence of such notification shall not limit any right of the
Agent hereunder.
SECTION 9. Collateral Account.
(a) There is hereby established with the Agent a cash collateral account
(the "COLLATERAL ACCOUNT") in the name and under the control of the Agent into
which there shall be deposited from time to time the cash proceeds of the
Collateral required to be delivered to the Agent pursuant to any provision of
the Financing Documents, but not moneys received by the Agent for deposit in the
Segregated Collateral Account. Any income received by the Agent with respect to
the balance from time to time standing to the credit of the Collateral Account,
including any interest or capital gains on Liquid Investments, shall remain, or
be deposited, in the Collateral Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Collateral Account together
with any Liquid Investments from time to time made pursuant to Section 9(B)
shall vest in the Agent, shall constitute part of the Collateral
<PAGE> 43
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided.
(b) Amounts on deposit in the Collateral Account shall be invested and
re-invested from time to time in such Liquid Investments as the Borrower shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Agent, provided that, if an Event of Default has occurred and is
continuing, the Agent shall, if instructed by the Required Banks, liquidate any
such Liquid Investments and apply or cause to be applied the proceeds thereof to
the payment of the Secured Obligations in the manner specified in Section 14.
For this purpose, "LIQUID INVESTMENTS" means Temporary Cash Investments;
provided that (i) each Liquid Investment shall mature within 30 days after it is
acquired by the Agent and (ii) in order to provide the Agent, for the benefit of
itself, the Issuing Bank and the Banks, with a perfected security interest
therein, each Liquid Investment shall be either:
(xviii) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Agent, which (together with
any appropriate instruments of transfer) are delivered to, and held by, the
Agent or an agent thereof (which shall not be the Borrower or any of its
affiliates) in the State of New York; or
(xix) in book-entry form and issued by the United States and subject to
pledge under applicable state law and Treasury regulations and as to which
(in the opinion of counsel to the Agent) appropriate measures shall have
been taken for perfection of the Security Interests.
(c) Amounts otherwise distributable by the Agent in accordance with Section
14 in respect of any Outstanding Contingent Debt shall (in lieu of being
distributed in accordance with Section 14), and amounts paid to the Agent
pursuant to Section 2.07(g) of the Credit Agreement shall, be deposited in a
segregated collateral account (the "SEGREGATED COLLATERAL ACCOUNT") for the
benefit of the Issuing Bank. If all or any portion of any Outstanding Contingent
Debt thereafter becomes due and payable and is not timely paid by any Obligor,
the Agent, upon notice from the Issuing Bank of the amount so due and unpaid,
shall pay to the Issuing Bank an amount equal to the product of (i) such due and
unpaid amount multiplied by (ii) a fraction, the numerator of which is the
balance in the Segregated Collateral Account immediately prior to such payment
and the denominator of which is the aggregate principal amount of all Contingent
Debt Outstanding immediately prior to the time at which the applicable
Outstanding Contingent Debt became due and payable. If at any time when an Event
of Default has occurred and is continuing the aggregate principal amount of all
Outstanding Contingent Debt shall be reduced other than by such Contingent Debt
becoming due, the excess of (i) the balance in the Segregated Collateral Account
over (ii) an amount equal to the product of (A) the balance in the Segregated
Collateral Account multiplied by (B) a fraction, the numerator of which is the
aggregate principal amount of Contingent Debt Outstanding immediately after such
reduction and the denominator of which is the aggregate principal amount of all
Contingent
<PAGE> 44
Debt Outstanding immediately prior to such reduction, shall be withdrawn from
the Segregated Collateral Account and deposited in the Collateral Account for
distribution in accordance with the terms of Section 14. If at any time when
there is no Event of Default which has occurred and is continuing the balance in
the Segregated Collateral Account exceeds the greater of (i) the aggregate
Revolving Commitments of all Banks and (ii) the aggregate Revolving Exposures of
all Banks, such excess shall be withdrawn from the Segregated Collateral Account
and paid over to the Borrower. The Agent shall invest and reinvest moneys on
deposit in the Segregated Collateral Account in such Liquid Investments as
directed by the Issuing Bank or, in the absence of such direction, in such
Liquid Investments as the Agent shall deem appropriate in its sole discretion
and, in the absence of gross negligence or willful misconduct, the Agent shall
not be responsible for any loss resulting from any such investment. The Agent
shall pay into the Segregated Collateral Account any interest or other income
derived from the investment or reinvestment of moneys from such account.
SECTION 10. General Authority.
Each Obligor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of such Obligor, the
Agent, the Issuing Bank, the Banks or otherwise, for the sole use and benefit of
the Agent, the Issuing Bank and the Banks, but at the expense of such Obligor,
to the extent permitted by law to exercise, at any time and from time to time
while an Event of Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(xx) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(xxi) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(xxii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent
were the absolute owner thereof, and
(xxiii) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the applicable Obligor not less than ten
days' prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral of such Obligor except any Collateral which
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Obligors agree that
such notice constitutes "REASONABLE NOTIFICATION" within the meaning of Section
9-504(3) of the Uniform Commercial Code.
<PAGE> 45
SECTION 11. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the Agent
may exercise on behalf of the Banks all the rights of a secured party under the
UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Agent may, without being required to give any
notice, except as herein provided or as may be required by mandatory provisions
of law, (i) withdraw all cash and Liquid Investments in the Collateral Account
and apply such cash and Liquid Investments and other cash, if any, then held by
it as Collateral as specified in Section 14 and (ii) if there shall be no such
cash or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Agent may deem satisfactory. Any Bank may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations, at any
private sale). The Agent is authorized, in connection with any such sale, if it
deems it advisable so to do, (i) to restrict the prospective bidders on or
purchasers of any of the Pledged Stock to a limited number of sophisticated
investors who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or sale of any of
such Pledged Stock, (ii) to cause to be placed on certificates for any or all of
the Pledged Stock or on any other securities pledged hereunder a legend to the
effect that such security has not been registered under the Securities Act of
1933 and may not be disposed of in violation of the provisions of said Act, and
(iii) to impose such other limitations or conditions in connection with any such
sale as the Agent deems necessary or advisable in order to comply with said Act
or any other law. Each Obligor covenants and agrees that it will execute and
deliver such documents and take such other action as the Agent deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of any
Obligor which may be waived, and each Obligor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 10 shall (1) in case of a public sale,
state the time and place fixed for such sale, (2) in case of sale at a broker's
board or on a securities exchange, state the board or exchange at which such
sale is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and (3)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot as
an entirety or in separate parcels, as the Agent
<PAGE> 46
may determine. The Agent shall not be obligated to make any such sale pursuant
to any such notice. The Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchaser to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
SECTION 12. Expenses.
Each Obligor agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been required to
pay by reason of the Security Interests or to free any of the Collateral
from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel and of any other experts, which the Agent
may incur in connection with (w) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the value of
the Collateral and the validity, perfection, rank and value of any Security
Interest, (x) the collection, sale or other disposition of any of the
Collateral, (y) the exercise by the Agent of any of the rights conferred
upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest for each day until
paid at 2% plus the rate applicable to Base Rate Loans for such day.
SECTION 13. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal
<PAGE> 47
to that which it accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any agent
or bailee selected by the Agent in good faith.
SECTION 14. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Collateral Account shall be applied (subject
to Section 9(C)) by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization, including
reasonable compensation to agents and counsel for the Agent, and all expenses,
liabilities and advances incurred or made by the Agent in connection therewith,
and any other unreimbursed expenses for which the Agent or any Bank is to be
reimbursed pursuant to Section 9.03 of the Credit Agreement or Section 12 hereof
and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of accrued but unpaid interest, commitment fees,
letter of credit fees or commissions or similar charges in respect of the
Secured Obligations in accordance with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
provided that for purposes of this clause, the unpaid principal amount of the
Secured Obligations in respect of Contingent Debt at any time shall be deemed to
be equal to the aggregate Letter of Credit Exposures of all Banks at such time
less the balance held at such time in the Segregated Collateral Account;
fourth, to the ratable payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and
finally, to payment to the applicable Obligor or its successors or assigns, or
as a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
SECTION 15. Concerning the Agent.
The provisions of Article 7 of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and
<PAGE> 48
methods of realization upon the Collateral) the Agent shall act or refrain from
acting in accordance with written instructions from the Required Banks or, in
the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by any
Obligor.
SECTION 16. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in any
jurisdiction, the Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the Agent,
or to act as separate agent or agents on behalf of the Banks with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Agent, include provisions for the protection of such co-agent
or separate agent similar to the provisions of Section 15).
SECTION 17. Termination of Security Interests; Release of Collateral.
(a) Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Obligors. At any time and from time to time prior to such termination of the
Security Interests, the Agent may release any of the Collateral with the prior
written consent of the Required Banks (or, if required under Section 9.05 of the
Credit Agreement, all the Banks). Upon any such termination of the Security
Interests or release of Collateral, the Agent will, at the expense of the
Borrower, execute and deliver to the Obligors such documents as the Borrower
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be.
(b) Upon the consummation of any merger of any Issuer into any other Issuer
that is permitted under the Credit Agreement, the Agent will, upon the request
and at the expense of the Borrower, deliver to the Borrower any certificates
then held by it evidencing exclusively capital stock of such Issuer canceled or
extinguished upon the consummation of such merger.
SECTION 18. Notices.
All notices hereunder shall be given, in the case of the Borrower or the Agent,
in accordance with Section 9.01 of the Credit Agreement and, in the case of any
other party hereto, in accordance with Section 5.01 of the Subsidiary Guaranty.
<PAGE> 49
SECTION 19. Waivers, Non-Exclusive Remedies.
No failure on the part of the Agent to exercise, and no delay in exercising
and no course of dealing with respect to, any right under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Agent of any right under the Credit Agreement or this Agreement preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the Credit Agreement are cumulative and are not exclusive
of any other remedies provided by law.
SECTION 20. Successors and Assigns.
This Agreement is for the benefit of the Agent, the Issuing Bank and the
Banks and their successors and assigns, and in the event of an assignment of all
or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on the Obligors and their
respective successors and assigns.
SECTION 21. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by or on behalf of
the Obligors and the Agent with the consent of the Required Banks.
SECTION 22. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF
ANY JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH
JURISDICTION. EACH OBLIGOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF
ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OBLIGOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OBLIGOR AND
THE AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 50
SECTION 23. Severability.
If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent and the Banks in order to carry out
the intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 24. Effectiveness.
This Agreement shall become effective immediately at such time as the Agent
shall have received duly executed counterparts hereof signed by each Obligor and
the Agent (or, in the case of any party as to which an executed counterpart
hereof shall not have been received, the Agent shall have received, in form
satisfactory to it, telegraphic, telex or other written confirmation from such
party of the execution of a counterpart hereof by such party).
SECTION 25. Counterparts.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
BEVERLY ENTERPRISES, INC.
By:
--------------------------
Name:
Title:
BEVERLY HEALTH AND
REHABILITATION
SERVICES, INC.
By:
--------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By:
--------------------------
Name:
Title:
<PAGE> 52
Schedule I to Pledge Agreement
Pledged Stock
<TABLE>
<CAPTION>
NUMBER OF NUMBER PERCENTAGE
ISSUER HOLDER CLASS OF SHARES OF SHARES OWNED BY
STOCK AUTHORIZED ISSUED HOLDER
<S> <C> <C> <C> <C> <C>
Beverly Enterprises-Alabama, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
Beverly Enterprises-Arkansas, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Florida, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
Beverly Enterprises-Georgia, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Massachusetts, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Minnesota, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
Beverly Enterprises-Mississippi, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
Beverly Enterprises-Missouri, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Nebraska, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-North Carolina, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
Beverly Enterprises-Ohio, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Pennsylvania, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-South Carolina, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
South Dakota-Beverly Enterprises, Inc. Beverly Health and Rehabilitation Services, Inc. Common 10,000 10,000 100%
Beverly Enterprises-Virginia, Inc. Beverly Health and Rehabilitation Services, Inc. Common 50,000 10,000 100%
Beverly Enterprises-Wisconsin, Inc. Beverly Health and Rehabilitation Services, Inc. Common 1,000,000 10,000 100%
</TABLE>
<PAGE> 53
SCHEDULE II
The chief executive office of the Obligors is located at:
Prior to October 15, 1999:
5111 Rogers Avenue, Suite 40-A
Fort Smith, Arkansas 72919-0155
On and after October 15, 1999:
Beverly Corporate Center
1000 Beverly Way
Fort Smith, Arkansas 72919
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT AND RESTATEMENT
dated as of June 1, 1999
of
TRUST INDENTURE
dated as of December 1, 1994
FROM
BEVERLY FUNDING CORPORATION
(as Issuer)
TO
THE CHASE MANHATTAN BANK
(as Trustee)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT.........................................................1
GRANTING CLAUSES..............................................................1
ARTICLE I DEFINITIONS
SECTION 1.1. Definitions.................................................1
ARTICLE II THE HEALTH CARE NOTES
SECTION 2.1. Forms Generally.............................................9
SECTION 2.2. Terms of Health Care Notes.................................10
SECTION 2.3. Denominations; Health Care Notes Issuable in Series........10
SECTION 2.4. Execution, Authentication, and Delivery....................11
SECTION 2.5. Temporary Health Care Notes................................12
SECTION 2.6. Registration; Registration of Transfer and Exchange........12
SECTION 2.7. Mutilated, Destroyed, Lost, or Stolen Health Care Notes....13
SECTION 2.8. Persons Deemed Owner.......................................14
SECTION 2.9. Payment of Principal and Interest; Principal and Interest
Rights Preserved....................................14
SECTION 2.10. Cancellation..............................................16
SECTION 2.11. Amount and Delivery of Health Care Notes..................16
SECTION 2.12. Book-Entry Health Care Notes..............................18
SECTION 2.13. Notices to Clearing Agency................................19
SECTION 2.14. Definitive Notes..........................................19
SECTION 2.15. Transfer Restrictions.....................................20
ARTICLE III COVENANTS
SECTION 3.1. Payment of Principal and Interest..........................22
SECTION 3.2. Maintenance of Office or Agency............................22
SECTION 3.3. Money for Payments To Be Held in Trust.....................23
SECTION 3.4. Opinions as to Trust Estate................................24
SECTION 3.5. Performance of Obligations: Servicing of Receivables.......25
SECTION 3.6. Annual Statement as to Compliance..........................26
SECTION 3.7. Purchase of Receivables....................................27
SECTION 3.8. Lines of Business; Change of Location......................27
SECTION 3.9. Additional Stock...........................................27
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.10. Maintenance of Existence..................................27
SECTION 3.11. Compliance with Laws......................................27
SECTION 3.12. Notice of Proceedings.....................................28
SECTION 3.13. Limitation on Debt........................................28
SECTION 3.14. Negative Pledge...........................................28
SECTION 3.15. Consolidations, Mergers and Sales of Assets...............28
SECTION 3.16. Restricted Payments.......................................28
SECTION 3.17. Corporate Existence.......................................29
SECTION 3.18. Books and Records.........................................31
SECTION 3.19. Notice of Events of Default or Defaults...................31
SECTION 3.20. Representations and Warranties of the Issuer Relating to
the Issuer..........................................31
SECTION 3.21. Representations and Warranties of the Issuer Relating to
this Indenture, any Series Supplement, the Related
Documents and the Purchased Receivables.............33
SECTION 3.22. Rating Agency Information.................................34
SECTION 3.23. Subordination of Officer and Director Indemnification.....34
ARTICLE IV SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture....................34
SECTION 4.2. Application of Trust Money.................................35
SECTION 4.3. Repayment of Moneys Held by Paying Agent...................35
ARTICLE V REMEDIES
SECTION 5.1. Events of Default..........................................35
SECTION 5.2. Acceleration of Maturity: Rescission and Annulment.........37
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.............................................38
SECTION 5.4. Additional Remedies........................................40
SECTION 5.5. Appointment of Servicers; Collection of Medicaid, Medicare
and Department of Veterans' Affairs Receivables;
Sale of Purchased Receivables.......................42
SECTION 5.6. Limitation of Suits........................................42
SECTION 5.7. Unconditional Rights of Health Care Noteholders To Receive
Principal and Interest........................43
SECTION 5.8. Restoration of Rights and Remedies.........................43
SECTION 5.9. Rights and Remedies Cumulative.............................44
SECTION 5.10. Delay or Omission Not a Waiver............................44
SECTION 5.11. Control by Health Care Noteholders........................44
SECTION 5.12. Waiver of Past Defaults...................................45
SECTION 5.13. Undertaking for Costs.....................................45
SECTION 5.14. Waiver of Stay or Extension Laws..........................45
SECTION 5.15. Action on Health Care Notes...............................46
SECTION 5.16. Performance and Enforcement of Certain Obligations........46
SECTION 5.17. Application of Proceeds...................................46
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VI THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities........................47
SECTION 6.2. Notice of Defaults and Amortization Events.................49
SECTION 6.3. Certain Rights of the Trustee..............................49
SECTION 6.4. Not Responsible for Recitals or Issuance of Health Care
Notes...............................................50
SECTION 6.5. May Hold Health Care Notes.................................51
SECTION 6.6. Interest on Money Held in Trust............................51
SECTION 6.7. Compensation and Reimbursement.............................52
SECTION 6.8. Corporate Trustee Required; Eligibility....................52
SECTION 6.9. Resignation and Removal; Appointment of Successor..........53
SECTION 6.10. Acceptance of Appointment by Successor Trustee............54
SECTION 6.11. Merger, Conversion, Consolidation or Succession to
Business of Trustee.................................55
SECTION 6.12. Co-Trustee and Separate Trustee...........................55
SECTION 6.13. Reports to Holders of Health Care Notes...................57
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. Collection of Money........................................57
SECTION 7.2. Trust Accounts.............................................57
SECTION 7.3. General Provisions Regarding Accounts......................60
SECTION 7.4. Release of Trust Estate....................................61
SECTION 7.5. Opinion of Counsel.........................................61
ARTICLE VIII SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Health Care
Noteholders.........................................62
SECTION 8.2. Supplemental Indentures with Consent of Health Care
Noteholders.........................................64
SECTION 8.3. Execution of Supplemental Indentures or Amendments to Sale
and Servicing Agreement.............................65
SECTION 8.4. Effect of Supplemental Indenture...........................65
SECTION 8.5. Reference in Health Care Notes to Supplemental Indentures..66
SECTION 8.6. Amendments of Sale and Servicing Agreement Without Consent
of Health Care Noteholders..........................66
SECTION 8.7. Amendment of Sale and Servicing Agreement With Consent of
Health Care Noteholders.............................67
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE IX OPTIONAL REDEMPTION OF HEALTH CARE NOTES
SECTION 9.1. Optional Redemption by Issuer..............................67
SECTION 9.2. Form of Optional Redemption Notice.........................68
SECTION 9.3. Health Care Notes Payable on Redemption Date or Optional
Partial Optional Redemption Date....................69
SECTION 9.4. Sale of Collateral to Effect Redemption....................69
ARTICLE X MISCELLANEOUS
SECTION 10.1. Compliance Certificates and Opinions, etc.................70
SECTION 10.2. Form of Documents Delivered to Trustee....................71
SECTION 10.3. Acts of Health Care Noteholders...........................71
SECTION 10.4. Notices to Health Care Noteholders; Waiver................72
SECTION 10.5. Alternative Payment and Notice Provisions.................73
SECTION 10.6. Effect of Headings and Table of Contents..................73
SECTION 10.7. Successors and Assigns....................................73
SECTION 10.8. Separability..............................................73
SECTION 10.9. Benefits of Indenture.....................................73
SECTION 10.10. [Intentionally Omitted]..................................73
SECTION 10.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL................................73
SECTION 10.12. Counterparts.............................................74
SECTION 10.13. Nonpetition Covenant.....................................74
SECTION 10.14. Confidentiality..........................................74
SECTION 10.15. Effect on Existing Indenture.............................74
</TABLE>
v
<PAGE> 6
FIRST AMENDMENT AND RESTATEMENT, dated as of June 1, 1999 (this
"Indenture"), of the TRUST INDENTURE, dated as of December 1, 1994 (as
heretofore amended or otherwise modified, the "Existing Indenture"), between
BEVERLY FUNDING CORPORATION, a Delaware corporation (the "Issuer"), and THE
CHASE MANHATTAN BANK (as successor to CHEMICAL BANK), a New York banking
corporation, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more Series of Health Care Notes, issuable as
provided in this Indenture. Each such Series of Health Care Notes will be
issued only under a separate Series Supplement to this Indenture duly executed
and delivered by the Issuer and the Trustee. The Issuer is entering into this
Indenture, and the Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
GRANTING CLAUSES
For the consideration recited above and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Issuer, and as security for the due and punctual payment in full of the
Obligations, the Issuer hereby pledges, assigns, transfers, sets over, conveys,
hypothecates, delivers and confirms the Collateral, all and singular, to the
Trustee, and hereby grants to the Trustee a continuing first and prior security
interest in, and general first lien on, the Collateral. The Issuer further
assigns to the Trustee all of the Issuer's right to take, or consent to, any
action, inaction, condition or circumstance under, or with respect to, any or
all of the Collateral. Until payment in full of all the Obligations, the
pledge, assignment, transfer, setting over, conveyance, hypothecation, delivery
and confirmation of, and security interest in, the Collateral pursuant hereto
shall continue in full force and effect.
The security interests granted pursuant hereto (and the rights and
powers granted to the Trustee hereunder with respect thereto or to the
Collateral) are granted as security only, and shall not subject the Trustee to,
or transfer or in any way affect or modify, any obligation or liability of the
Issuer under any of the Collateral or any transaction which gave rise thereto.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. For all purposes of this Indenture, unless
otherwise specified in the applicable Series Supplement, or as the context may
otherwise require, capitalized
1
<PAGE> 7
terms used herein shall have the respective meanings set forth below, or if not
defined below, the respective meanings set forth in the Sale and Servicing
Agreement:
"Accumulation Subaccount" has the meaning specified in Section 7.2(b).
"Act" has the meaning specified in Section 10.3(a).
"Aggregate Outstanding Amount" means, with respect to any Series, the
principal amount of all Outstanding Health Care Notes of such Series at the
date of determination.
"Authorized Officer" means any officer of the Issuer who is authorized
to act for the Issuer in matters relating hereto and who is identified on the
list of Authorized Officers delivered to the Trustee on the date hereof (as
such list may be modified or supplemented by the Issuer from time to time
thereafter).
"Book-Entry Health Care Notes" means a beneficial interest in the
Health Care Notes, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 2.12.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions or trust companies in New York, New York, Fort
Smith, Arkansas or the city in which the Corporate Trust Office is located, are
authorized or obligated by law, regulation or executive order to remain closed.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means, with respect to any Series of Health Care Notes,
the date of issuance of such Series specified in the applicable Series
Supplement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Collateral" shall mean all of the Issuer's right, title and interest
in, to and under the following, whether now owned or hereafter acquired: (a)
the Sale and Servicing Agreement and the other Related Documents, (b) the
Purchased Receivables and all accounts, chattel paper, contract rights,
instruments, general intangibles and other obligations of any kind consisting
of, arising from, or relating to the Purchased Receivables and all rights in
and to all other Contractual Obligations securing or otherwise relating to the
Purchased Receivables, (c) all bank accounts (including, without
2
<PAGE> 8
limitation, the Collection Account and the Distribution Account (and all
subaccounts thereof) and the Expense Account) and all amounts, instruments,
Securities and investments credited to, deposited or held in any such account,
(d) the Records, (e) all Eligible Investments and (f) all additions and
accessions to, and all substitutions or replacements for, and all payments,
dividends, interest, cash, instruments, proceeds, products, distributions
(whether in money, Securities or other property) and collections from or with
respect to any or all of the foregoing.
"Collection Account" has the meaning specified in Section 7.2(a).
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934,
or, if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body then performing such duties.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee located at 450 West 33rd Street, 14th Floor, New York, New York
10001 Attention: Capital Markets Fiduciary Services; or such other address as
the Trustee may designate from time to time by notice to the Health Care
Noteholders and the Issuer, or the principal corporate trust office of any
successor Trustee (or such other addresses as a successor Trustee may designate
from time to time by notice to the Health Care Noteholders and the Issuer).
"Debt" of any Person means, at any date, without duplication: (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business and payable no more than 120 days from the date of
incurrence thereof, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person under take-or-pay or similar
contracts, (vi) all obligations of such Person to reimburse or indemnify the
issuer of a letter of credit or Guaranty for drawings or payments thereunder,
(vii) all obligations of such Person in respect of interest rate swap
agreements, currency swap agreements and other similar agreements and
arrangements designed to protect such person against adverse movements in
interest rates or foreign exchange rates, (viii) all Debt of others secured by
a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person; and (ix) all Debt of others Guaranteed by such Person; provided, that,
the obligations created pursuant to the daily estimated settlement procedures
set forth in Article VI of the Sale and Servicing Agreement shall not
constitute "Debt".
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Distribution Account" has the meaning specified in Section 7.2(b).
3
<PAGE> 9
"DTC Agreement" has the meaning, with respect to any Series, specified
in the applicable Series Supplement.
"Event of Default" has the meaning specified in Section 5.1.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Vice President, the Secretary or the Treasurer of such corporation; and
with respect to any partnership, any general partner thereof.
"Existing Indenture" has the meaning specified in the preamble.
"Expense Account" has the meaning specified in Section 7.2(c).
"Expense Subaccount" has the meaning specified in Section 7.2(b).
"Final Maturity Date" means, with respect to any Health Care Note of
any Series, the date, if any, specified in such Health Care Note and the
applicable Series Supplement as the fixed date on which the unpaid principal
amount of such Health Care Note is due and payable.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person or in any manner providing for the payment of
any Debt of any other Person or otherwise protecting the holder of such Debt
against loss (whether by agreement to keep-well, to purchase assets, goods,
securities or services, or to maintain financial statement condition or
otherwise); provided, that, the term "Guaranty" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guaranty" used as a verb has a corresponding meaning.
"Health Care Note Owner" means, with respect to a Book-Entry Health
Care Note, the Person who is the beneficial owner of such Book-Entry Health
Care Note, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly or as an
indirect participant, in accordance with the rules of such Clearing Agency).
"Health Care Noteholder" means the Person in whose name a Health Care
Note is registered.
"Health Care Notes" means the medium term health care-related
receivables backed notes of one or more Series each authorized by, and
authenticated and delivered under, this Indenture and the related Series
Supplements.
"Health Care Note Register" and "Health Care Note Registrar" have the
respective meanings specified in Section 2.6.
"Holder" has the same meaning specified in the definition of "Health
Care Noteholder" in this Section 1.1.
4
<PAGE> 10
"Indenture" means this instrument as originally executed and, as from
time to time supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, as so
supplemented or amended, or both, and shall include the forms and terms of the
Health Care Notes established hereunder. The words "herein", "hereof",
"hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision.
"Independent" means, when used with respect to any specified Person,
that the Person (1) is in fact independent of the Issuer and any other obligor
upon the Health Care Notes and any other Person with an ownership interest in
the Trust Estate and of any Affiliate of any of the foregoing Persons, (2) does
not have any direct financial interest or any material indirect financial
interest in the Issuer or in any such other obligor or any such other Person
with such an ownership interest in the Trust Estate or in any Affiliate of any
of the foregoing Persons, and (3) is not connected with the Issuer or any such
other obligor or any Affiliate of the Issuer or any such other Person with such
an ownership interest in the Trust Estate as an officer, employee, promoter,
underwriter, trustee, partner, director, or person performing similar
functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.1 hereof, made by an
Independent appraiser or other expert appointed by an Issuer Order, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in the Indenture and that the signer is Independent within the
meaning thereof.
"Interest Accrual Period" shall have the meaning, with respect to any
Series, specified in the applicable Series Supplement.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"Maturity" means, with respect to any Series of Health Care Notes, the
date on which the unpaid principal of such Series of Health Care Notes becomes
due and payable, whether at the Final Maturity Date or by declaration of
acceleration, call for redemption, or otherwise.
"Maximum Rate" shall have the meaning, with respect to any Series,
specified in the applicable Series Supplement.
"Minimum Denomination" means, with respect to any Health Care Note,
the minimum denomination therefor specified in the applicable Series
Supplement, which minimum denomination shall not be less than $1,000,000.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto.
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"Obligations" means all principal, premium, if any, interest on, and
any other amounts payable with respect to, all Health Care Notes of all Series.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.1 hereof, and
delivered to the Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be counsel for
the Issuer and who shall be satisfactory to the Trustee, and which opinion
shall be addressed to the Trustee as Trustee, shall comply with any applicable
requirements of Section 10.1 hereof, and shall be in form and substance
satisfactory to the Trustee.
"Outstanding" means, as of the date of determination, all Health Care
Notes theretofore authenticated and delivered under the Indenture except:
(i) Health Care Notes theretofore canceled by the Health Care
Note Registrar or delivered to the Health Care Note Registrar for
cancellation;
(ii) Health Care Notes or portions thereof for whose payment
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent in trust for the Holders of such Health
Care Notes (provided, however, that if such Health Care Notes are to
be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor, satisfactory to the Trustee, has
been made); and
(iii) Health Care Notes in exchange for or in lieu of which
other Health Care Notes have been authenticated and delivered pursuant
to this Indenture unless proof satisfactory to the Trustee is
presented that any such Health Care Notes are held by a bona fide
purchaser;
provided that in determining whether the Holders of the requisite Aggregate
Outstanding Amount of the Health Care Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Health Care
Notes owned by the Issuer, any other obligor upon the Health Care Notes, any
other Person with an ownership interest in the Trust Estate or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Health Care Notes that a Responsible Officer of the
Trustee knows to be so owned shall be so disregarded. Health Care Notes so
owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Health Care Notes and that the pledgee is not
the Issuer, any other obligor upon the Health Care Notes, any other Person with
an ownership interest in the Trust Estate or any Affiliate of any of the
foregoing Persons.
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"Optional Partial Redemption" means a redemption of a portion of the
Health Care Notes of a Series at the applicable Redemption Price pursuant to
Section 9.1 (b).
"Optional Partial Redemption Date" means any Distribution Date
(including any Payment Date) on which the Trustee, on behalf of the Issuer,
redeems Health Care Notes pursuant to an Optional Partial Redemption.
"Paying Agent" means the Trustee or any other Person (which other
Person shall have a short-term deposit rating in the highest rating category
issued by the Rating Agency) that meets the eligibility standards for the
Trustee specified in Section 6.8 and is authorized by the Issuer to make the
payments to and distributions from the Collection Account, the Distribution
Account (and all subaccounts thereof) and the Expense Account, including,
without limitation, payment of principal of and/or interest on the Health Care
Notes on behalf of the Issuer.
"Payment Date" means, with respect to any Series, the date or dates
specified as Payment Dates in the applicable Series Supplement.
"Payment Subaccount" has the meaning specified in Section 7.2(b).
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Health Care Note" means, with respect to any particular
Health Care Note, every previous Health Care Note evidencing all or a portion
of the same debt as that evidenced by such particular Health Care Note; and,
for the purpose of this definition, any Health Care Note authenticated and
delivered under Section 2.7 in lieu of a mutilated, lost, destroyed, or stolen
Health Care Note shall be deemed to evidence the same debt as the mutilated,
lost, destroyed, or stolen Health Care Note.
"Proceeding" means any suit in equity, action at law, or other
judicial or administrative proceeding.
"Rating Agency" means Moody's.
"Record Date" means, with respect to a Payment Date, the close of
business on the last day of the calendar month preceding such Payment Date.
"Redemption Date" means, with respect to any Series, the Payment Date
specified by the Issuer for the redemption of the Health Care Notes of such
Series pursuant to Section 9.1.
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"Redemption Price" means, at any time with respect to any Series, the
then applicable redemption price as specified in the applicable Series
Supplement.
"Registered Holder" means the Person in whose name a Health Care Note
is registered on the Health Care Note Register on the applicable Record Date.
"Related Documents" means the Sale and Servicing Agreement, the
Selling Subsidiary Agreement, the DTC Agreements, each Series Supplement and
other documents and certificates delivered in connection therewith.
"Required Reserve" shall have the meaning, with respect to any Series,
specified in the applicable Series Supplement.
"Reserve Deficiency" shall have the meaning, with respect to any
Series, specified in the applicable Series Supplement.
"Reserve Subaccount" has the meaning specified in Section 7.2(b).
"Responsible Officer" means, when used with respect to the Trustee,
any officer of the Trustee assigned by the Trustee to administer its corporate
trust affairs and having direct responsibility for the administration of this
Agreement, including any Vice President, Assistant Vice President, Trust
Officer, any Assistant Secretary, any trust officer or any officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers.
"Restricted Payment" has the meaning specified in Section 3.16.
"Sale and Servicing Agreement" means the Second Amendment and
Restatement, dated as of June 1, 1999, of the Master Sale and Servicing
Agreement, originally dated as of December 1, 1990, among the Issuer, Beverly
Enterprises Inc. and various wholly-owned subsidiaries of Beverly Enterprises
Inc., as from time to time amended, supplemented or modified.
"Scheduled Amortization Date" means, with respect to any Health Care
Note of any Series, the date, if any, specified in such Health Care Note and
the applicable Series Supplement as the fixed date on which the unpaid
principal amount, if any, of such Health Care Note begins to be amortized.
"Series" means each series of Health Care Notes issued and
authenticated pursuant to this Indenture and a related Series Supplement.
"Series Alternate Note Interest Rate" shall have the meaning, with
respect to any Series, specified in the applicable Series Supplement.
"Series Base Reserve Percent" shall have the meaning, with respect to
any Series, specified in the applicable Series Supplement.
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"Series Dynamic Reserve Floor Percent" shall have the meaning, with
respect to any Series, specified in the applicable Series Supplement.
"Series Interest Rate Spread" shall have the meaning, with respect to
any Series, specified in the applicable Series Supplement.
"Series Liquidation Payment Frequency" shall have the meaning, with
respect to any Series, specified in the applicable Series Supplement.
"Series Note Interest Rate" means, with respect to any Series, the
annual rate at which interest accrues on the Health Care Notes of such Series,
as specified (or, in the case of a floating interest rate, determined as
specified) in the related Series Supplement.
"Series Special Obligations" means all amounts payable to the Health
Care Noteholders of any Series specified as such in the applicable Series
Supplement.
"Series Rate Increment" shall have the meaning, with respect to any
Series, specified in the applicable Series Supplement.
"Series Rating Multiple" shall have the meaning, with respect to any
Series, specified in the applicable Series Supplement.
"Series Supplement" means an indenture supplemental to this Indenture
entered into pursuant to Section 2.11(8) that authorizes a particular Series of
Health Care Notes.
"State" means any one of the 50 States of the United States of
America, or the District of Columbia.
"Trust Estate" means the Collateral and all other money, instruments,
and other property that are subject or intended to be subject to the lien and
security interest of this Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, or any similar Federal statute hereafter enacted.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the jurisdiction, relevant to the related
Purchased Receivables, as amended from time to time.
ARTICLE II
THE HEALTH CARE NOTES
SECTION 2.1. Forms Generally. The Health Care Notes of any Series and
the Trustee's certificate of authentication shall be in substantially the form
set forth in the related Series
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Supplement, with such appropriate insertions, omissions, substitutions, and
other variations as are required or permitted by this Indenture or by the
related Series Supplement and may have such letters, numbers, or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the
Health Care Notes may be listed, or as may, consistently herewith, be
determined by the officers executing such Health Care Notes, as evidenced by
their execution of the Health Care Notes. Any portion of the text of any Health
Care Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Health Care Note.
The Definitive Notes shall be printed, lithographed, or engraved or
produced by any combination of these methods (with or without steel engraved
borders) or may be produced in any other manner permitted by the rules of any
securities exchange on which the Health Care Notes may be listed, all as
determined by the officers executing such Health Care Notes, as evidenced by
their execution of such Health Care Notes.
SECTION 2.2. Terms of Health Care Notes. The terms of the Health Care
Notes contained in any Series Supplement are part of the terms of such Series
Supplement and this Indenture.
SECTION 2.3. Denominations; Health Care Notes Issuable in Series. The
Health Care Notes shall be issuable as registered Health Care Notes in the
Minimum Denomination specified in the applicable Series Supplement and, except
as otherwise provided in such Series Supplement, in integral multiples of
$1,000.
The Health Care Notes may, at the election of and as authorized by an
Authorized Officer of the Issuer, be issued in one or more Series, and shall be
designated generally as the "Health Care Notes" of the Issuer, with such
further particular designations added or incorporated in such title for the
Health Care Notes of any particular Series as an Authorized Officer of the
Issuer may determine. Each Health Care Note shall bear upon its face the
designation so selected for the Series to which it belongs. The Health Care
Notes of each Series are and will be equally and ratably secured by the
Collateral and each Series of Health Care Notes will rank pari passu with each
other Series of Health Care Notes issued hereunder. All Health Care Notes of
the same Series shall be identical in all respects except for the denominations
thereof. All Health Care Notes of a particular Series issued under this
Indenture shall be in all respects equally and ratably entitled to the benefits
hereof without preference, priority, or distinction on account of the actual
time or times of authentication and delivery, all in accordance with the terms
and provisions of this Indenture.
Each Series of Health Care Notes shall be created by a Series
Supplement authorized by an Authorized Officer of the Issuer and establishing
the terms and provisions of such Series. The several Series may differ as
between Series, in respect of any of the following matters:
(1) designation of the Series;
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(2) its Series Note Interest Rate (or, in the case the Series
Note Interest Rate is to be a floating rate, the method of determining
the Series Note Interest Rate and its Maximum Rate, if any) and the
Series Alternate Note Interest Rate, if applicable;
(3) its Payment Dates;
(4) its Scheduled Amortization Date and its Final Maturity Date;
(5) the place or places for the payment of principal;
(6) its Scheduled Accumulation Date, Accumulation Period,
Required Reserve, and its Reserve Deficiency;
(7) the authorized denominations and whether such Health Care
Notes shall be Book-Entry Health Care Notes;
(8) the provisions for optional redemption by the Issuer;
(9) its amortization terms;
(10) the definitions of terms related to such Series to be
specified in the related Series Supplement pursuant to Article I; and
(11) any other provisions expressing or referring to the
terms and conditions upon which the Health Care Notes of the
applicable Series are to be issued under this Indenture that are not
in conflict with the provisions of this Indenture and that do not
prevent the satisfaction of the Rating Agency Condition upon the
issuance of the Health Care Notes of such Series.
SECTION 2.4. Execution, Authentication, and Delivery. The Health Care
Notes shall be executed on behalf of the Issuer by any one of its Authorized
Officers. The signature of any such Authorized Officers on the Health Care
Notes may be manual or facsimile.
Health Care Notes bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Health Care
Notes or did not hold such offices at the date of such Health Care Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Health Care Notes executed by the Issuer
to the Trustee for authentication and delivery pursuant to an Issuer Order; and
the Trustee shall authenticate and deliver such Health Care Notes as in this
Indenture provided and not otherwise.
Each Health Care Note shall be dated as of the date of its
authentication.
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No Health Care Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears on
such Health Care Note a certificate of authentication substantially in the form
provided for in the related Series Supplement executed by the Trustee by the
manual signature of one of its authorized signatories, and such certificate
upon any Health Care Note shall be conclusive evidence, and the only evidence,
that such Health Care Note has been duly authenticated and delivered hereunder.
SECTION 2.5. Temporary Health Care Notes. Pending the preparation of
Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order
the Trustee shall authenticate and deliver, temporary Health Care Notes which
are printed, lithographed, typewritten, mimeographed, or otherwise produced, in
any denomination, substantially of the tenor of the Definitive Notes in lieu of
which they are issued and with such variations not inconsistent with the terms
of this Indenture as the Authorized Officers executing such Health Care Notes
may determine, as evidenced by their execution of such Health Care Notes.
If temporary Health Care Notes are issued, the Issuer will cause
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the temporary Health Care Notes shall be
exchangeable for Definitive Notes upon surrender of the temporary Health Care
Notes at the office or agency of the Issuer to be maintained as provided in
Section 3.2 hereof, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Health Care Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Health Care Notes shall in all respects be entitled to
the same benefits under this Indenture as Definitive Notes.
SECTION 2.6. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Health Care Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Health Care Notes and the registration of
transfers of Health Care Notes. Unless otherwise specified in a Series
Supplement, the Trustee shall be "Health Care Note Registrar" for the purpose
of registering Health Care Notes and transfers of Health Care Notes as herein
provided. Upon any resignation of any Health Care Note Registrar, the Issuer
shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of Health Care Note Registrar. If a Person other
than the Trustee is appointed by the Issuer as Health Care Note Registrar, the
Issuer shall give the Trustee prompt written notice of the appointment of such
Health Care Note Registrar and of the location, and any change in the location,
of the Health Care Note Register, and the Trustee shall have the right to
inspect the Health Care Note Register at all reasonable times and to obtain
copies thereof, and the Trustee shall have the right to rely upon and shall be
protected in relying upon a certificate executed on behalf of the Health Care
Note Registrar by an Executive Officer thereof as to the names and addresses of
the Holders of the Health Care Notes and the principal amounts and number of
such Health Care Notes. Upon surrender for registration of transfer of any
Health Care Note at the office or agency of the Issuer to be maintained as
provided in Section 3.2 hereof, the Issuer shall execute,
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and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Health Care Notes in any authorized
denominations, of a like Series and aggregate principal amount.
At the option of the Holder thereof, Health Care Notes may be
exchanged for other Health Care Notes in any authorized denominations, of a
like Series and aggregate principal amount, upon surrender of the Health Care
Notes to be exchanged at such office or agency. Whenever any Health Care Notes
are so surrendered for exchange, the Issuer shall execute, and the Trustee
shall authenticate and deliver, the Health Care Notes which the Health Care
Noteholder making the exchange is entitled to receive.
All Health Care Notes issued upon any registration of transfer or
exchange of Health Care Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Health Care Notes surrendered upon such registration of
transfer or exchange.
Every Health Care Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by a commercial bank or trust company located, or
having a correspondent located, in The City of New York or the city in which
the Corporate Trust Office is located, or by a member firm of a national
securities exchange, and such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Health Care Notes, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Health
Care Notes, other than exchanges pursuant to Section 2.5 hereof not involving
any transfer.
SECTION 2.7. Mutilated, Destroyed, Lost, or Stolen Health Care Notes.
If (i) any mutilated Health Care Note is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Health Care Note, and (ii) there is delivered to the Trustee such
security or indemnity as may be required by it to hold the Issuer and the
Trustee harmless, then, in the absence of notice to the Issuer, the Health Care
Note Registrar or the Trustee that such Health Care Note has been acquired by a
bona fide purchaser, the Issuer shall execute and upon its request the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Health Care Note, a new Health Care Note
of like Series, tenor and principal amount, bearing a number not
contemporaneously outstanding; provided, however, that if any such destroyed,
lost or stolen Health Care Note, but not a mutilated Health Care Note, shall
have become or within seven days shall be due and payable, or shall have been
selected or called for redemption, instead of issuing a new Health Care Note,
the Issuer may pay such destroyed, lost or stolen Health Care Note when so due
or payable or upon the Redemption Date without surrender thereof. If, after the
delivery of such new Health Care Note or payment of a destroyed, lost or stolen
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Health Care Note pursuant to the proviso to the preceding sentence, a bona fide
purchaser of the original Health Care Note in lieu of which such new Health
Care Note was issued presents for payment such original Health Care Note, the
Issuer and the Trustee shall be entitled to recover such new Health Care Note
(or such payment) from the Person to whom it was delivered or any Person taking
such new Health Care Note from such Person to whom such new Health Care Note
was delivered or any assignee of such Person, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor
to the extent of any loss, damage, cost or expense incurred by the Issuer or
the Trustee in connection therewith.
Upon the issuance of any new Health Care Note under this Section 2.7,
the Issuer may require the payment by the Holder of such Health Care Note of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Trustee) connected therewith.
Every new Health Care Note issued pursuant to this Section 2.7 in
replacement of any mutilated, destroyed, lost or stolen Health Care Note shall
constitute an original additional contractual obligation of the Issuer, whether
or not the mutilated, destroyed, lost or stolen Health Care Note shall be at
any time enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Health Care
Notes duly issued hereunder. The provisions of this Section 2.7 are exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Health Care Notes.
SECTION 2.8. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Health Care Note, the Issuer, the Trustee and
any agent of the Issuer or the Trustee may treat the Person in whose name any
Health Care Note is registered (as of the day of determination or as of such
other date as may be specified in the applicable Series Supplement) as the
owner of such Health Care Note for the purpose of receiving payments of
principal of and interest, if any, on, or any other amounts with respect to,
such Health Care Note and for all other purposes whatsoever, whether or not
such Health Care Note be overdue, and neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee shall be affected by notice to the contrary.
SECTION 2.9. Payment of Principal and Interest; Principal and Interest
Rights Preserved.
(1) The Health Care Notes shall accrue interest as provided in the
form of the Health Care Note attached to the related Series Supplement at the
Series Note Interest Rate (or, if applicable, the Series Alternate Note
Interest Rate) specified or as determined therein, and such interest shall be
payable on each Payment Date as specified therein. Any installment of interest
or principal, if any, payable on any Health Care Note which is punctually paid
or duly provided for by the Issuer on the applicable Payment Date shall be paid
to the Person in whose name such Health Care Note (or one or more Predecessor
Health Care Notes) is registered on the Record Date for such Payment Date, by
check mailed first-class, postage prepaid to such Person's address as it
appears on the Health Care
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Note Register on such Record Date or in such other manner as may be provided in
the related Series Supplement, except that with respect to Health Care Notes
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.) or in the name of a Holder of Health
Care Notes representing at least $5,000,000 in aggregate initial principal
amount of any Series, payments will be made by wire transfer in immediately
available funds to the account designated by such nominee or Holder in writing
in form satisfactory to the Trustee at least five (5) Business Days prior to
such Payment Date and, except for the final installment of principal payable
with respect to such Health Care Note on a Payment Date or on any Final
Maturity Date (or the Redemption Price for any Health Care Note called for
redemption), which shall be payable as provided below. The funds represented by
any such checks returned undelivered shall be held in accordance with Section
3.3 hereof.
(2) Unless otherwise provided in the applicable Series Supplement, the
Health Care Notes of each Series shall have the Scheduled Amortization Date and
Final Maturity Date as shall be specified in such Health Care Notes and the
related Series Supplement. The principal of each Health Care Note shall be
payable in one or more installments ending no later than the Final Maturity
Date thereof unless payable earlier either because (x) an Event of Default
shall have occurred and be continuing and the Health Care Notes have been
accelerated in accordance with Section 5.2 hereof, or (y) the Issuer shall have
called for the redemption of the Health Care Notes of the applicable Series
pursuant to Section 9.1. The entire unpaid principal amount of each Health Care
Note shall be due and payable on the earliest of the Final Maturity Date
thereof, the date of the acceleration referred to above and the Redemption
Date, if any, thereof. In addition, payments of principal on the Health Care
Notes of any Series may be made in whole or in part on any Payment Date on or
following its Scheduled Amortization Date or following the occurrence of an
Amortization Event, until paid in full. The Issuer may also elect to make
Optional Partial Redemptions pursuant to Section 9.1(b). All principal payments
on the Health Care Notes of a Series (including Optional Partial Redemption
payments) shall be made pro rata to the Health Care Noteholders entitled
thereto. The Trustee shall notify the Person in whose name a Health Care Note
is registered at the close of business on the Record Date immediately preceding
the Payment Date on which the Issuer expects that the final installment of
principal of and interest on the Health Care Notes of each Series will be paid
(together with any other amounts due and payable to the Health Care Noteholders
of such Series). The Issuer agrees to notify the Trustee of any Event of
Default and, no later than 15 days prior to the related Record Date, of the
Payment Date on which the Issuer expects the final installment of principal of
and interest on the Health Care Notes of each Series will be paid. The notice
to be mailed by the Trustee shall be mailed no later than ten days prior to
such final Payment Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Health Care Note and shall
specify the place where such Health Care Note may be presented and surrendered
for payment of such installment. Notices in connection with redemptions of
Health Care Notes shall be mailed to Health Care Noteholders as provided in
Section 9.2 hereof.
(3) Subject to the foregoing provisions of this Section, each Health
Care Note delivered under this Indenture upon registration or transfer of or in
exchange for or in lieu of any other Health
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Care Note shall carry the rights to unpaid principal and interest, if any, that
were carried by such other Health Care Note.
SECTION 2.10. Cancellation. All Health Care Notes surrendered for
payment, registration of transfer, exchange or redemption shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and shall be
promptly canceled by it. The Issuer may at any time deliver to the Trustee for
cancellation any Health Care Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Health Care Notes so delivered shall be promptly canceled by the Trustee. No
Health Care Notes shall be authenticated in lieu of or in exchange for any
Health Care Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Health Care Notes may be held or
disposed of by the Trustee in accordance with its standard retention or
disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it.
SECTION 2.11. Amount and Delivery of Health Care Notes. The aggregate
principal amount of Health Care Notes that may be authenticated and delivered
under this Indenture is unlimited, subject to the following:
With respect to only the original issuance of the Health Care Notes of
any Series, compliance with the following conditions and delivery of the
following documents are required:
(1) Issuer Order. An Issuer Order authorizing and directing the
execution, authentication and delivery of the Health Care Notes of such Series
by the Trustee and specifying the principal amount of Health Care Notes of such
Series to be authenticated.
(2) Authorizations. Either (i) a certificate of authorization or other
official document evidencing the due authorization, approval or consent of any
governmental body or bodies at the time having jurisdiction in the premises,
together with an Opinion of Counsel that the Trustee is entitled to rely
thereon and that the authorization, approval, or consent of no other
governmental body is required for the valid issuance, authentication and
delivery of such Health Care Notes, or (ii) an Opinion of Counsel that no such
authorization, approval, or consent of any governmental body is required.
(3) Authorizing Certificate. A certificate of an Authorized Officer of
the Issuer certifying that (i) the Issuer has duly authorized the execution and
delivery of this Indenture (in the case of the first Series issued pursuant to
this Indenture), the related Series Supplement and the execution,
authentication and delivery of the Health Care Notes of such Series, (ii) the
Indenture remains in full force and effect as to the Issuer (in the case of
subsequent Series issued pursuant to this Indenture and a related Series
Supplement), (iii) the representations and warranties of the Issuer contained
in this Indenture and any other Related Documents are true and correct as of
the date of issuance of such new Series and (iv) the Series Supplement for such
Series of Health Care Notes shall be in the form attached thereto, which Series
Supplement shall specify the terms and provisions of such Series, including,
without limitation, the Final Maturity Date, if any, the principal amount and
the Series Note
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Interest Rate (and, if applicable, the Series Alternate Note Interest Rate) of
such Health Care Notes to be authenticated and delivered.
(4) Certificates of the Issuer. An Officer's Certificate from the
Issuer, dated as of the applicable Closing Date, to the effect that no Default
or Event of Default under this Indenture has occurred and is continuing and
that the issuance of the Health Care Notes applied for will not result in any
Default or Event of Default or in any breach of any of the terms, conditions or
provisions of or constitute a default under any indenture, mortgage, deed of
trust or other agreement or instrument to which the Issuer is a party or by
which it or its property is bound or any order of any court or administrative
agency entered in any Proceeding to which the Issuer is a party or by which it
or its property may be bound or to which it or its property may be subject; and
that all conditions precedent provided in this Indenture relating to the
authentication and delivery of the Health Care Notes applied for have been
complied with.
(5) Opinion of Counsel. An Opinion of Counsel, portions of which may
be delivered by counsel for the Issuer and portions of which may be delivered
by counsel for the Servicer, dated the applicable Closing Date, to the
collective effect that:
(a) the Indenture and such Series Supplement have been duly
qualified under the Trust Indenture Act or no such qualification is
necessary;
(b) the Issuer has the power and authority to execute and
deliver such Series Supplement (and, in the case of the first Series
to be authenticated hereunder, this Indenture) and to issue the Health
Care Notes, and each of such Series Supplement (and, in the case of
the first Series to be authenticated hereunder, this Indenture), and
the Health Care Notes of such Series have been duly authorized and the
Issuer is duly organized and in good standing under the laws of the
jurisdiction of its organization;
(c) such Series Supplement and the Indenture have been duly
authorized, executed and delivered by the Issuer;
(d) the Health Care Notes applied for have been duly authorized
and executed and, when authenticated in accordance with the provisions
of the Indenture and delivered, will constitute valid and binding
obligations of the Issuer entitled to the benefits of the Indenture
and such Series Supplement;
(e) either (A) the Registration Statement covering the Health Care
Notes of such Series is effective under the Securities Act of 1933
and, to the best of such counsel's knowledge and information, no stop
order suspending the effectiveness of such Registration Statement has
been issued under the Securities Act of 1933 nor have proceedings
therefor been instituted or threatened by the Commission or (B) the
Health Care Notes of such Series are exempt from the registration
requirements under the Securities Act of 1933;
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(f) the Issuer is not now and, assuming that the Issuer uses the
proceeds of the sale of the Health Care Notes of such Series for the
purpose of acquiring Receivables in accordance with the terms of the
Sale and Servicing Agreement, following the sale of the Health Care
Notes to the underwriter, underwriters, placement agent or agents or
similar Person or to the Health Care Noteholder thereof, the Issuer
will not be required to be registered under the Investment Company Act
of 1940; and
(g) such other matters as required by the related Series
Supplement or as the Trustee may reasonably require.
(6) Sale and Servicing Agreement; No Amortization Event or Default.
Delivery of an Officer's Certificate from the Issuer dated the date of delivery
of the Health Care Notes to the effect that the conditions precedent to the
Effective Date under the Sale and Servicing Agreement shall have been
fulfilled; and no Amortization Event, Default or Event of Default shall have
occurred and is continuing.
(7) Required Rating. The Trustee shall receive written evidence that
the issuance of the Health Care Notes of such new Series satisfies the Rating
Agency Condition.
(8) Series Supplement. A Series Supplement providing for the issuance
of such new Series shall be entered into between the Issuer and Trustee.
(9) Requirements of Series Supplement. Such other funds, accounts,
documents, certificates, agreements, instruments or opinions as may be required
by the terms of the Series Supplement creating such Series or as the Trustee
may reasonably require.
(10) Notices. At least five (5) Business Days prior to the
effectiveness thereof, the Trustee shall provide any Holder of at least 50% of
the Aggregate Outstanding Amount of each preexisting Series a copy of the
Series Supplement creating such new Series.
(11) Other Requirements. Such other documents, certificates,
agreements, instruments or opinions as the Trustee may reasonably require.
SECTION 2.12. Book-Entry Health Care Notes. If specified in the
related Series Supplement, any Series of Health Care Notes, upon original
issuance, shall be issued in the form of a single typewritten Health Care Note
representing the Book-Entry Health Care Notes, to be delivered to The
Depository Trust Company, the initial Clearing Agency (in the United States) or
Cedel or Euroclear (in Europe) or indirectly through organizations that are
participants in such systems, by, or on behalf of, the Issuer. Such Health Care
Note shall initially be registered on the Health Care Note Register in the name
of Cede & Co., the nominee of the initial Clearing Agency, and no Health Care
Note Owner shall receive a definitive Health Care Note representing such Health
Care Note Owner's interest in such Health Care Note, except as provided in
Section 2.14. Cedel and Euroclear will hold omnibus positions on behalf of
Cedel's participants and Euroclear's participants,
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respectively, through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective depositories (collectively, the
"Depositaries") which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. Unless and until
definitive, fully registered Health Care Notes (the "Definitive Notes") have
been issued to Health Care Note Owners pursuant to Section 2.14:
(i) the provisions of this Section 2.12 shall be in full force and
effect;
(ii) the Health Care Note Registrar and the Trustee may deal with
the Clearing Agency for all purposes (including the payment of
principal of and interest on, or any other amounts with respect to,
the Health Care Notes) as the authorized representative of the Health
Care Note Owners;
(iii) to the extent that the provisions of this Section 2.12
conflict with any other provisions of this Agreement, the provisions
of this Section 2.12 shall control;
(iv) the rights of Health Care Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Health Care Note Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to
the DTC Agreement, unless and until Definitive Notes are issued
pursuant to Section 2.14, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on, or any
other amounts with respect to, the Health Care Notes to such Clearing
Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Health Care
Notes evidencing a specified percentage of the Aggregate Outstanding
Amount of the Health Care Notes, the Clearing Agency shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Health Care Note Owners and/or
Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in the Health Care
Notes and has delivered such instructions to the Trustee.
SECTION 2.13. Notices to Clearing Agency. With respect to any Series
of Health Care Notes originally issued in the form of a Book-Entry Health Care
Note, whenever a notice or other communication to the Health Care Noteholders
is required under this Indenture, unless and until Definitive Notes shall have
been issued to Health Care Note Owners pursuant to Section 2.14, the Trustee
shall give all such notices and communications specified herein to be given to
Holders of the Health Care Notes to the Clearing Agency.
SECTION 2.14. Definitive Notes. With respect to any Series of Health
Care Notes originally issued in the form of a Book-Entry Health Care Note, if
(i)(A) the Issuer advises the Trustee in writing that the Clearing Agency is no
longer willing or able to properly discharge its
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responsibilities under the related DTC Agreement, and (B) the Servicers or
Master Servicer are unable to locate a qualified successor, (ii) the Issuer at
its option advises the Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of
an Event of Default, Health Care Note Owners representing beneficial interests
aggregating more than 50% of the Aggregate Outstanding Amount of the Health
Care Notes of such Series advise the Trustee and the Clearing Agency
Participants in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interests of the Health Care Note
Owners of such Series, then the Trustee shall notify all Health Care Note
Owners, through the Clearing Agency, of the occurrence of any such event and of
the availability of Definitive Notes to Health Care Note Owners requesting the
same. Upon surrender to the Trustee of the single typewritten Health Care Note
representing the Book-Entry Health Care Notes by the Clearing Agency,
accompanied by registration instructions, the Trustee shall issue the
Definitive Notes in accordance with the instructions of the Clearing Agency.
None of the Issuer, the Health Care Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Health Care Noteholders.
SECTION 2.15. Transfer Restrictions.
(1) General. No Holder may, in any transaction or series of
transactions, directly or indirectly (each of the following, a "transfer"), (i)
sell, assign or otherwise in any manner dispose of all or any part of its
interest in any Health Care Note issued to it, whether by act, deed, merger or
otherwise or (ii) mortgage, pledge or create a lien or security interest in
such interest unless such transfer satisfies the conditions set forth in this
Section 2.15. No purported transfer of any interest in any Health Care Note or
any portion thereof which is not made in accordance with this Section shall be
given effect by or be binding upon the Trustee and any such purported transfer
shall be null and void ab initio and vest in the transferee no rights against
the Trustee.
(2) Conditions to Transfer. A Holder may transfer a Health Care Note
only in accordance with the following provisions:
(i) Transfer of Interests in Health Care Notes. Health Care Notes
may be transferred for one another only in accordance with such
procedures as are substantially consistent with the provisions of this
Section 2.15 (including the certification requirements) intended to
ensure that such exchanges or transfers are exempt from the
registration requirements of the Securities Act and as may from time
to time be adopted by the Issuer.
(ii) Transfer Restrictions. No transfer of any Health Care Note
shall be made unless (A) the registration requirements of the
Securities Act of 1933 (the "1933 Act") and any applicable state
securities or "blue sky" laws are complied with, or (B) such transfer
is made to a Person (1) that the transferor reasonably believes after
due inquiry is a "qualified institutional buyer" (a "QIB") as defined
in Rule 144A ("Rule 144A") under the 1933 Act that is acting for its
own account (and not for the account of others) or as a fiduciary or
agent
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for others (which others are QIBs) to whom notice is given that the
transfer is being made in reliance on Rule 144A under the 1933 Act or
(2) in an offshore transaction in accordance with Regulation S under
the 1933 Act.
In addition, no transfer of a Health Care Note, or interest
therein, is to be made unless the prospective transferee can
represent, and such transferee shall be deemed to have represented,
that at least one of the following statements is an accurate
representation as to the source of funds to be used by it to pay the
purchase price of the Health Care Note, or interest therein, or as to
its acquisition of the Health Care Note, or interest therein, as
applicable: (i) if it is an insurance company, either (1) the source
is a separate account that is maintained solely in connection with
such prospective transferee's fixed contractual obligations under
which the amounts payable, or credited, to any employee benefit plans
subject to Part 4, Subtitle B, Title I of Employee Retirement Security
Act of 1974, as amended ("ERISA"), plans within the meaning of Section
497(e)(1) of the Code (including an individual retirement account or
Keogh plan) and persons treated as using "plan assets" of such plans
pursuant to the United States Department of Labor Regulation Section
2510.3-101 or other applicable law (each a "Benefit Plan") and to any
participant or beneficiary of such Benefit Plan (including any
annuitant) are not affected in any manner by the investment
performance of the separate account; or (2) the source is an
"insurance company general account" within the meaning of Department
of Labor Prohibited Transaction Class Exemption ("PTCE")95-60, and the
amount of reserves and liabilities for the contract(s) held by or on
behalf of each Benefit Plan which has an interest in such prospective
transferee's general account as a contract holder, together with the
amount of reserves and liabilities for the general account contracts
held by or on behalf of any such other Benefit Plan maintained by the
same employer (or an affiliate thereof) or by the same employee
organization, does not exceed and, so long as such Health Care Note,
or interest therein, is held by such insurance company general
account, will not exceed (unless no portion of such excess results
from an increase in the assets allocated to such insurance company
general account by such a Benefit Plan, not including the reinvestment
of such insurance company general account's earnings as assets
allocated to such insurance company general account by such a Benefit
Plan), 10% of the total reserves and liabilities of such prospective
transferee's general account plus surplus as determined pursuant to
the provisions of Section I(a) of PTCE 95-60; or (ii) its acquisition
and holding of the Health Care Note, or interest therein, will not
give rise to a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code; or (iii) the source does not
include assets of any Benefit Plan. Such prospective transferee shall
also be deemed to agree not to sell or otherwise transfer the Health
Care Note to any person without obtaining the same representation and
warranties and the same obligations from such purchaser or other
transferee.
(iii) Intentionally omitted.
(3) Invalid Transfers. If a Responsible Officer of the Trustee becomes
aware that (i) a transfer or attempted or purported transfer of any interest in
any Health Care Note was consummated
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in compliance with the provisions of this Section 2.15 on the basis of an
incorrect certification from the transferee or purported transferee, (ii) a
transferee failed to deliver to the Trustee any certificate required to be
delivered hereunder or (iii) the holder of any interest in a Health Care Note
is in breach of any representation or agreement set forth in any certificate or
any deemed representation or agreement of such holder, the Trustee shall not
register such attempted or purported transfer, and if such a transfer has been
registered, such transfer shall be absolutely null and void ab initio and shall
vest no rights in the purported transferee (such purported transferee, a
"Disqualified Transferee") and the last preceding Holder of such Health Care
Note that was not a Disqualified Transferee shall be restored to all rights as
a Holder thereof retroactively to the date of transfer of such Health Care Note
by such Holder.
Notwithstanding anything contained herein to the contrary, the Trustee
shall not be responsible for ascertaining whether any transfer complies with
the registration provisions or exemptions from the Securities Act or applicable
state securities law; provided that if a certificate is specifically required
to be delivered to the Trustee by a purchaser or transferee of a Health Care
Note, the Trustee shall be under a duty to examine the same to determine
whether on its face it conforms to the requirements of this Indenture and shall
promptly notify the party delivering the same if such certificate does not so
conform.
ARTICLE III
COVENANTS
SECTION 3.1. Payment of Principal and Interest. The Issuer will duly
and punctually pay the principal of, interest on and any other amounts due with
respect to the Health Care Notes in accordance with the terms of the Health
Care Notes, the related Series Supplements and this Indenture. Amounts properly
withheld under the Code by any Person from a payment to any Health Care
Noteholder of interest, principal and/or any other amount shall be considered
as having been paid by the Issuer to such Health Care Noteholder for all
purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will maintain
in the Borough of Manhattan, The City of New York, State of New York, an office
or agency where Health Care Notes may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Health Care Notes and this Indenture may be served. The Issuer
hereby initially appoints the Trustee to serve as its agent for the foregoing
purposes. The Issuer will give prompt written notice to the Trustee of the
location, and of any change in the location, of any such office or agency. If
at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Trustee with the address thereof, such surrenders,
notices, and demands may be made or served at the Corporate Trust Office, and
the Issuer hereby appoints the Trustee as its agent to receive all such
surrenders, notices, and demands.
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SECTION 3.3. Money for Payments To Be Held in Trust. As provided
herein, all payments of amounts due and payable with respect to any Health Care
Notes that are to be made from amounts withdrawn from the Collection Account
and the Distribution Account (and all subaccounts thereof) pursuant to Sections
7.2(e), 7.2(f), 9.1 and 9.4, as applicable, hereof shall be made on behalf of
the Issuer by the Trustee or by another Paying Agent, and no amounts so
withdrawn from the Distribution Account (or any subaccount thereof) shall be
paid over to the Issuer except as provided in Section 7.2.
If the Paying Agent is not the Trustee, the Issuer will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of amounts due with
respect to the Health Care Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(2) give the Trustee notice of any default of which it has actual
knowledge by the Issuer (or any other obligor upon the Health Care
Notes) in the making of any payment required to be made with respect
to the Health Care Notes;
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent;
(4) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Health Care
Notes if at any time it ceases to meet the standards required to be
met by a Paying Agent at the time of its appointment; and
(5) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Health Care Notes of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which the sums were held by such Paying Agent; and upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Health Care Note
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and remaining unclaimed for six years after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer on Issuer
Request; and the Holder of such Health Care Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof (but
only to the extent of the amounts so paid to the Issuer), and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, shall at the expense and
direction of the Issuer cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, or in the city in which the Corporate
Trust Office is located, 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 publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Trustee shall also adopt and employ, at the
expense and direction of the Issuer, any other reasonable means of notification
of such repayment (including, but not limited to, mailing notice of such
repayment to Holders whose Health Care Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Trustee or of
any Paying Agent, at the last address of record for each such Holder).
SECTION 3.4. Opinions as to Trust Estate.
(a) On or before the Closing Date for each Series, the Issuer shall
furnish to the Trustee an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken with respect to the
Collateral, the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements,
as are necessary to perfect and make effective (or continue) the lien and
security interest of this Indenture therein and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action is
necessary to perfect or to make such lien and security interest effective.
(b) On or before March 31 in each calendar year beginning at least six
(6) months after the issuance of any Series of the Health Care Notes while such
Series is outstanding, the Issuer shall furnish to the Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, all required
action has been taken with respect hereto, to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any Uniform Commercial Code financing statements and continuation statements
as is necessary to perfect or to maintain the lien and security interest
created hereby in the Collateral and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to
perfect or to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture until March 31 in the
following calendar year.
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SECTION 3.5. Performance of Obligations: Servicing of Receivables.
(a) The Issuer will not take any action, and will use its best efforts
not to permit any action to be taken by others, that would release any Person
from any material covenant or obligation under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination, or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture or such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties hereunder, and any performance of such duties by a Person
identified to the Trustee in an Officer's Certificate of the Issuer shall be
deemed to be action taken by the Issuer. Initially, the Issuer has, pursuant to
the Sale and Servicing Agreement, contracted with the Master Servicer and the
Servicers to assist the Issuer in performing its duties hereunder.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Related Documents
and in the instruments and agreements included in the Trust Estate, including
but not limited to filing or causing to be filed all Uniform Commercial Code
financing statements and applications required to be filed by the terms of this
Indenture and the Related Documents in accordance with and within the time
periods provided for herein and therein. Except as otherwise expressly provided
therein, the Issuer shall not waive, amend, modify, supplement or terminate any
Related Document or any provision thereof without the consent of the Trustee.
(d) If the Issuer shall have knowledge of the occurrence of a
Servicing Default under the Sale and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Rating Agency thereof, and shall specify in
such notice the action, if any, the Issuer is taking with respect of such
default. If a Servicing Default shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Sale and Servicing Agreement
with respect to the Receivables, the Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) The Issuer agrees that:
(i) It will defend its title to the Collateral against all claims
of all Persons whomsoever.
(ii) It will keep the Collateral free from all Liens, other than
the Lien created pursuant hereto, and will pay or cause to be paid
promptly when due all taxes, fees, assessments and other charges now
or hereafter imposed upon any of the Collateral.
(iii) Except pursuant to the Sale and Servicing Agreement, it will
not sell, assign, pledge, exchange or dispose of any of the Collateral
in any manner whatsoever or attempt to do any of the foregoing or
agree to any modification or cancellation of, or substitution for,
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any of the Collateral. In the event of any disposition of any of the
Collateral, the Proceeds will remain Collateral hereunder. The receipt
by the Trustee of all or any part of the Proceeds of any sale,
assignment, pledge, exchange or disposition of any of the Collateral
shall not be deemed or construed to be a consent by the Trustee to any
such sale, assignment, pledge, exchange or other disposition.
(iv) It will keep or cause to be kept accurate and complete
records concerning the Collateral, including without limitation all
payments and Proceeds received therefrom.
(v) It will execute and file such financing statements (including
without limitation amendments thereto and continuation statements
thereof), assignments, and other documents and instruments, and do all
such other acts, relating to the Collateral and the Trustee's and
Health Care Noteholders' respective interests therein as the Trustee
or the Holders of at least 50% in Aggregate Outstanding Amount of
Health Care Notes of any Series may reasonably request; and will not
file or permit to be filed any financing statement (or amendment or
continuation statement) with respect to any of the Collateral not
naming the Trustee (or the Master Servicer who then assigns its rights
thereunder to the Trustee) as the only secured party. The Issuer
hereby appoints the Trustee as its attorney-in-fact (without requiring
the Trustee to act as such) to execute any financing statements
(including without limitation any amendments thereto or continuation
statements thereof).
(vi) It will at any time and from time to time, at its expense
promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or that the Trustee or
the Holders of at least 50% in Aggregate Outstanding Amount of Health
Care Notes of any Series may reasonably request, to perfect and
protect any security interest granted or purported to be granted
hereby or to enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Collateral including, without
limitation, (i) if any Collateral is evidenced by a promissory note or
other instrument, such note or instrument shall be duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Trustee and (ii) the
Issuer shall execute and file such financing or continuation
statements or amendments thereto, and such other instruments or
notices as may be necessary or as the Trustee or the Holders of at
least 50% in Aggregate Outstanding Amount of Health Care Notes of any
Series may reasonably request, in order to perfect and preserve the
pledge, assignment and security interest granted or purported to be
granted hereby.
SECTION 3.6. Annual Statement as to Compliance. The Issuer will
deliver to the Trustee, within 90 days after the end of each fiscal year of the
Issuer (commencing with the 1999 fiscal year) an Officer's Certificate stating,
as to the Authorized Officer signing such Officer's Certificate, that:
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(1) a review of the activities of the Issuer during such year and
of performance under this Indenture and the Related Documents has been
made under such Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has fulfilled all its obligations under this
Indenture and the Related Documents throughout such year, or, if there
has been a default in the fulfillment of any such obligation,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.7. Purchase of Receivables. After the Transfer Termination
Date, the Issuer shall not purchase or otherwise fund the purchase of any
Receivables until the Net Note Balance of Health Care Notes of all Series has
been reduced to zero and any other amounts due thereunder, hereunder or under
any Related Document have been paid. The Issuer will not take any action which
would permit the Seller, Beverly or any Selling Subsidiary to have the right to
refuse to perform any of its respective obligations under the Sale and
Servicing Agreement.
SECTION 3.8. Lines of Business; Change of Location.
(a) The Issuer shall not engage directly or indirectly in any line of
business except as permitted by its Certificate of Incorporation as in effect
on the date of issuance of the initial Series of Health Care Notes hereunder,
and the Issuer shall not amend the related provision of its Certificate of
Incorporation unless the Rating Agency Condition shall have been satisfied.
(b) The Issuer will not, without providing at least 20 days notice to
the Trustee and without filing such new financing statements or amendments to
any previously filed financing statements as the Trustee may require, (i)
change the location of its chief executive office, principal place of business
or the location of the offices where any Records the Issuer maintains relating
to the Receivables are kept or (ii) change its name, identity or corporate
structure in any manner which would, could or might make any financing
statement or continuation statement filed by the Issuer in accordance herewith
seriously misleading within the meaning of ?9-402(7) of any applicable
enactment of the UCC.
SECTION 3.9. Additional Stock. The Issuer shall not issue any
additional shares of capital stock of any class or issue warrants or grant any
options or other similar rights with respect thereto.
SECTION 3.10. Maintenance of Existence. The Issuer shall preserve and
maintain its corporate existence and all of its rights, privileges and
franchises necessary in the normal conduct of its business.
SECTION 3.11. Compliance with Laws. The Issuer shall take no action
that would require the registration of the Issuer or any of its Securities
under any Applicable Securities Laws.
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The Issuer shall comply in all respects with the requirements of all applicable
Requirements of Law, such compliance to include, without limitation, paying all
taxes, assessments, pension obligations and governmental charges imposed upon
the Issuer or its properties, except such taxes, assessments and governmental
charges, if any, as are being contested in good faith and as to which adequate
reserves have been provided.
SECTION 3.12. Notice of Proceedings. The Issuer shall promptly give
notice in writing to the Trustee and the Rating Agency of all litigation,
arbitration proceedings and regulatory proceedings affecting the Issuer, the
Collateral or the property of the Issuer.
SECTION 3.13. Limitation on Debt. The Issuer shall not create, assume
or suffer to exist any Debt, except for Health Care Notes of one or more Series
issued in compliance with the provisions hereof.
SECTION 3.14. Negative Pledge. Except for (x) Liens created hereby and
(y) Liens (not incurred in connection with the borrowing of money) which in the
aggregate are not material to the Issuer or its assets (which, in the case of
this clause (y) shall not exceed $25,000 in the aggregate outstanding during
the term of this Indenture), the Issuer shall not create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it.
SECTION 3.15. Consolidations, Mergers and Sales of Assets. The Issuer
shall not (i) consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer (by investment, assignment, contribution or
otherwise) all or any substantial portion of its assets to any other Person
(except as permitted by its Certificate of Incorporation as in effect on the
date of the issuance of the initial Series of Health Care Notes hereunder, by
Sections 2.2 or 5.4 of the Sale and Servicing Agreement or by Sections 5.11 and
9.4 of this Indenture). The Issuer will not make loans or advance credit to
other Persons, purchase other assets other than Purchased Receivables or
Eligible Investments, nor make capital expenditures greater than $25,000 per
year.
SECTION 3.16. Restricted Payments. The Issuer shall not declare or
make any dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any class of its
capital stock, or return any capital to its shareholders as such, or purchase,
redeem or otherwise acquire for value any shares of any class of its capital
stock or any warrants, rights or options to acquire any such shares, now or
hereafter outstanding (collectively, a "Restricted Payment"), unless (x)
immediately after (and giving effect to) payment of such Restricted Payment (1)
no Amortization Event, Default or Event of Default (without regard to any grace
periods referenced in the definitions thereof) has occurred and is continuing
and (2) the Net Purchased Receivables equals or exceeds the Minimum Required
Receivables Balance; and (y) declaration and payment of such Restricted Payment
is permitted under (and complies with) all applicable Requirements of Law.
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SECTION 3.17. Corporate Existence.
(a) The Issuer shall keep in full effect its existence, rights and
franchises as a corporation under the laws of the state of its incorporation
and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of the Related Documents and each other
instrument or agreement necessary or appropriate to the proper administration
thereof and the transactions contemplated thereby.
(b) The Issuer shall observe the applicable legal requirements for the
recognition of the Issuer as a legal entity separate and apart from Beverly and
its other Affiliates, including, without limitation, as follows:
(i) the Issuer shall maintain separate corporate records, books of
account and financial statements (each of which shall be sufficiently
full and complete to permit a determination of the Issuer's assets and
liabilities and to permit a determination of the obligees thereon and
the time for performance on each of the Issuer's obligations) from
those of Beverly and its other Affiliates;
(ii) except as expressly permitted by the Sale and Servicing
Agreement for Collections of Purchased Receivables prior to transfer
thereof to the Collection Account (which transfer is to occur within
two Business Days of receipt of such Collection by the applicable
Servicer), the Issuer shall not commingle any of its assets or funds
with those of Beverly or any of its other Affiliates;
(iii) the Issuer shall maintain records permitting a determination
on a daily basis of the amount and location of any of its funds which
are commingled as permitted under clause (ii) above;
(iv) the Board of Directors of the Issuer shall be elected
independently from the Board of Directors of Beverly and its other
Affiliates and shall at all times include at least two Independent
Directors (for purposes hereof, "Independent Directors" means shall
mean the members of the Board of Directors of the Issuer who are not,
and have not at any time been: (x) a director, officer, employee or
shareholder of Beverly or any other Affiliate thereof, (y) a director,
officer, employee or shareholder of any other Person or entity that,
directly or indirectly, controls or is under common control with
Beverly) or (z) a member of the immediate family of any of the
foregoing;
(v) the Board of Directors and stockholders of the Issuer shall
hold all regular and special meetings appropriate to authorize
corporate actions. Regular meetings of directors will be held at least
annually. The Board of Directors may act from time to time through one
or more committees of the Board in accordance with the Issuer's
by-laws. Appropriate minutes of all meetings of the Issuer's Board of
Directors (and committees thereof) and of the stockholders meetings
shall be kept by the Issuer;
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(vi) taking into account the services to be performed on the
Issuer's behalf by the Servicers and the Master Servicer under the
Sale and Servicing Agreement, the Issuer shall have sufficient
officers and employees to run its business and operations. At least
one senior officer of the Issuer (who may also be a member of the
Board of Directors of the Issuer) shall not be a director, officer or
employee of Beverly or any of its other Affiliates;
(vii) decisions with respect to the Issuer's business and daily
operations shall be independently made by the Issuer (although the
officer making any particular decision may also be an officer or
director of Beverly) and shall not be dictated by Beverly or any of
its other Affiliates. Any permitted transactions between the Issuer
and Beverly or any of its other Affiliates shall be on arms-length
terms and (other than the purchase of Receivables pursuant to the Sale
and Servicing Agreement) shall receive prior approval of a majority of
the Board of Directors including at least two Independent Directors of
the Issuer; provided, that dividends from the Issuer to Beverly shall
not require the approval of any Independent Director of the Issuer if
the requisite dividend committee has approved such dividend;
(viii) the Issuer shall act solely in its own corporate name and
through its own authorized officers and agents. Neither Beverly nor
any of its other Affiliates shall be appointed or act as agent of the
Issuer, except as expressly contemplated by the Sale and Servicing
Agreement;
(ix) the Issuer shall prepare instruments of assignment naming it
as purchaser for all Purchased Receivables sold to it. In all cases,
the data and records (including computer records) used by the Issuer
or the Servicers in the collection and administration of Purchased
Receivables shall reflect the Issuer's ownership interest therein;
(x) although the Issuer's directors, officers and employees (other
than the Independent Directors referred to in clause (vi) above) may
also be employees of Beverly or any of its other Affiliates and may
participate in their employee benefit plans, and the Issuer shall
reimburse Beverly or any of its other Affiliates in full for their
services, all of which efforts and services shall be carried on in
arms length transactions;
(xi) the Issuer shall be responsible for the payment of all
expenses, indebtedness and other obligations incurred by it and shall
reimburse Beverly or any of its other Affiliates for any
organizational expenses related to the Issuer and the expenses of the
initial offering and sale of the Health Care Notes that Beverly or any
such other Affiliate had incurred;
(xii) neither Beverly nor any of its other Affiliates shall
advance funds to the Issuer, other than capital contributions from
Beverly made to enable the Issuer to pay the purchase price of
Purchased Receivables, and neither Beverly nor any other Affiliate of
Beverly will otherwise supply funds to, or Guaranty debts of, the
Issuer;
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(xiii) the Issuer will maintain (x) a separate office which shall
be physically separate from space occupied by Beverly, or any of its
other Affiliates (but may be separate space occupied solely by the
Issuer at the offices of Beverly or any of its other Affiliates) and
shall be identified as the Issuer's office so it can be identified by
outsiders and (y) a phone number separate from Beverly and its other
Affiliates;
(xiv) the Issuer shall not enter into any Guaranty, or otherwise
become liable, with respect to any obligation of Beverly or any of its
other Affiliates;
(xv) the Issuer shall at all times hold itself out to the public
under the Issuer's own name as a legal entity separate and distinct
from Beverly and its Affiliates (the foregoing to include, but not be
limited to, use of materially separate and distinct letterhead and
telephone number(s)); and
(xvi) any financial reports required of the Issuer shall comply
with generally accepted accounting principles and shall be issued
separately from any reports prepared for Beverly and any of its
Affiliates.
SECTION 3.18. Books and Records. The Issuer shall keep proper books of
record and account, in which full and correct entries shall be made of all its
financial transactions and its assets and business in accordance with United
States generally accepted accounting principles, consistently applied.
SECTION 3.19. Notice of Events of Default or Defaults. The Issuer
agrees to give the Trustee and the Rating Agency prompt written notice of each
Event of Default or Default hereunder, each default on the part of the Master
Servicer, any Servicer or any Seller, as the case may be, of its obligations
under the Sale and Servicing Agreement and any Amortization Event under the
Sale and Servicing Agreement.
SECTION 3.20. Representations and Warranties of the Issuer Relating to
the Issuer. The Issuer hereby represents and warrants to the Trustee as of the
date hereof and as of the applicable Closing Date of each Series of Health Care
Notes that:
(1) Organization and Good Standing. The Issuer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or incorporation and has full corporate power
and authority and legal right to own its properties and conduct its business as
presently owned or conducted, to execute, deliver and perform its obligations
under this Indenture, each Series Supplement and the other Related Documents to
which it is a party and to execute and deliver to the Trustee the Health Care
Notes of each Series.
(2) Due Qualification. The Issuer is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses and
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approvals would render any Purchased Receivable unenforceable by the Issuer or
the Trustee or would have a material adverse effect on the Collateral, the
Trust Estate or the Health Care Noteholders; provided, however, that no
representation or warranty is made with respect to any qualifications, licenses
or approvals which the Trustee would have to obtain to do business in any
jurisdiction in which the Trustee seeks to enforce directly any Purchased
Receivable.
(3) Due Authorization. The execution, delivery and performance of this
Indenture, each Series Supplement and each other Related Documents to which is
a party by the Issuer and the execution and delivery to the Trustee of the
Health Care Notes of each Series and the consummation by the Issuer of the
transactions provided for in this Indenture and the Related Documents, have
been duly authorized by the Issuer by all necessary corporate action on the
part of the Issuer.
(4) No Conflict. The execution and delivery by the Issuer of this
Indenture, each Series Supplement, each other Related Document to which it is a
party and the Health Care Notes of each Series, the performance of the
transactions contemplated by this Indenture, each Series Supplement and each
Related Document to which it is a party and the fulfillment of the terms hereof
and thereof applicable to the Issuer (including, without limitation, the
transfer of the Purchased Receivables to the Issuer and the granting of a
security interest on such Purchased Receivables (and the other Collateral) to
the Trustee), will not conflict with or violate any Requirements of Law
applicable to the Issuer or conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a material default under, any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the Issuer is a
party or by which it or its properties are bound.
(5) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Issuer, threatened against or affecting the
Issuer before any Governmental Authority seeking to prevent the consummation of
any of the transactions contemplated by this Indenture, each Series Supplement
and each other Related Document to which it is a party or seeking any
determination or ruling that, in the reasonable judgment of the Issuer, would
materially and adversely affect the performance by the Issuer of its
obligations under this Indenture, each Series Supplement and each Related
Document to which it is a party.
(6) All Consents. All authorizations, consents, orders or approvals of
or registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Issuer in connection with the execution and
delivery by the Issuer of the Indenture, each Series Supplement and each other
Related Document to which it is a party have been duly obtained, effected or
given and are in full force and effect.
(7) Investment Company. The Issuer is not an "investment company", or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act.
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(8) Place of Business. The Issuer's principal place of business and
chief executive office and the location of the Records pertaining to the
Receivables is 5111 Rogers Avenue, Suite 40-A, Fort Smith, Arkansas 72919.
SECTION 3.21. Representations and Warranties of the Issuer Relating to
this Indenture, any Series Supplement, the Related Documents and the Purchased
Receivables. The Issuer hereby represents and warrants to the Trustee as of the
date hereof and, as of the Closing Date of each Series of Health Care Notes, or
as of such other date or times as are specified therein, that:
(a) this Indenture, each Series Supplement and each Related
Documents to which it is a party constitutes a legal, valid and
binding obligation of the Issuer enforceable against the Issuer in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect,
affecting the enforcement or creditors' rights in general, and except
as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity);
(b) each Purchased Receivable and all other Collateral have been
conveyed to the Trust Estate free and clear of any Lien;
(c) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by the Issuer in connection with the
conveyance of each Purchased Receivable and all other Collateral to
the Trustee have been duly obtained, effected or given and are in full
force and effect;
(d) the Issuer has taken all reasonable steps necessary for this
Indenture to constitute a grant of a first priority perfected
"security interest" (as defined in the UCC) in the Trust Estate,
which, in the case of existing Collateral and then proceeds thereof,
is enforceable by the Trustee upon execution and delivery of this
Indenture and which will be enforceable by the Trustee with respect to
such Purchased Receivables and all other Collateral hereafter created
and the proceeds thereof upon such creation. Upon the filing of the
Uniform Commercial Code financing statements and, in the case of
Purchased Receivables and all other Collateral hereafter created and
the proceeds thereof, upon the creation thereof, the Trustee shall
have a first priority perfected security or ownership interest in such
property and proceeds; and
(e) except as otherwise expressly provided in this Indenture or
any Series Supplement, neither the Issuer nor any Person claiming
through or under the Issuer has any claim to or interest in the
Collection Account, the Distribution Account (or any subaccount
thereof) or the Expense Account.
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SECTION 3.22. Rating Agency Information. The Issuer will provide the
Rating Agency with all financial and operational information with respect to
the Issuer as the Rating Agency may reasonably require, including but not
limited to financial statements of Beverly (including the Selling Subsidiaries)
and delinquency, default and recovery information on the Purchased Receivables.
SECTION 3.23. Subordination of Officer and Director Indemnifications.
Any indemnification obligations of the officers and the directors of the Issuer
arising under the Certificate of Incorporation or Bylaws of the Issuer shall be
subordinated to any obligations of the Issuer under the Related Documents.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Health Care Notes of
any Series except as to: (i) rights of registration of transfer and exchange,
(ii) substitution of mutilated, destroyed, lost or stolen Health Care Notes,
(iii) rights of Health Care Noteholders to receive payments of principal and
premium thereof, interest thereon and any amounts due with respect thereto,
(iv) the rights, obligations, and immunities of the Trustee hereunder and (v)
the rights of Health Care Noteholders as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them, and
the Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to Health Care Notes of such Series, when
(1) either:
(A) all Health Care Notes of such Series theretofore authenticated
and delivered (other than (i) Health Care Notes that have been
destroyed, lost, or stolen and that have been replaced or paid as
provided in Section 2.7 hereof and (ii) Health Care Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3 hereof) have
been delivered to the Trustee for cancellation; or
(B) all Health Care Notes of such Series not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their Final Maturity Date
within one year, or
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(iii) 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 at the expense, of
the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has, pursuant to the
terms of this Indenture, deposited or caused to be deposited with the Trustee
cash or direct obligations of or obligations guaranteed by the United States of
America, in trust for such purpose, an amount sufficient to pay and discharge
the entire indebtedness on such Health Care Notes not theretofore delivered to
the Trustee for cancellation, for principal, premium, interest and any other
amounts that would be payable at their Final Maturity Date or Redemption Date
(if Health Care Notes shall have been called for redemption pursuant to Section
9.1 hereof), as the case may be;
(2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(3) the Issuer has delivered to the Trustee an Officer's Certificate,
an Opinion of Counsel, and an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section 10.1
hereof and each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Health Care Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Trustee may determine, to the Holders of the particular Health Care Notes for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal, interest and
other applicable amounts; but such moneys need not be segregated from other
funds except to the extent required herein or required by law.
SECTION 4.3. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the
Health Care Notes, all moneys then held by any Paying Agent other than the
Trustee under the provisions of this Indenture with respect to such Health Care
Notes shall, upon demand of the Issuer, be paid to the Trustee to be held and
applied according to Section 3.3 hereof, and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default. "Event of Default" with respect to any
Series, wherever used herein, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or
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pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Health Care Note
when and as the same becomes due and payable, and such default shall
continue for a period of five (5) Business Days; or
(2) default in the payment of the principal of or any installment
of the principal of any Health Care Note when and as the same becomes
due and payable; or
(3) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture, in any Series
Supplement or in any Related Document (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section 5.1 specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any Series Supplement, or in any Related Document or in any
certificate or other writing delivered pursuant hereto or thereto or
in connection herewith or therewith proving to have been incorrect in
any material respect as of the time when the same shall have been
made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation
or warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% of the Aggregate
Outstanding Amount of the Health Care Notes of such Series, a written
notice specifying such default or incorrect representation or warranty
and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(4) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of its property or any part of the Trust Estate in an
involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official or the Issuer or for any substantial
part of its property or any part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(5) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such
law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of its property or
any part of the Trust Estate, or make any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay
its debts as such debts become due, or the taking of action by the
Issuer in furtherance of any of the foregoing; or
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(6) any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied in respect of an obligation
(alleged or otherwise) of the Issuer in excess of $5,000,000 against
any of the property of the Issuer and such judgment, writ or similar
process shall not be released, vacated or stayed or fully bonded
within 30 days after its issue of levy; or
(7) any default shall occur under any obligation of the Issuer
with an outstanding principal of greater than $5,000,000 which default
shall, if not cured, permit the acceleration of all amounts due and
payable under such obligation; or
(8) this Indenture shall, for any reason (other than pursuant to
the terms hereof), cease to create a valid and perfected first
priority lien and security interest in the Collateral, or any Lien,
other than as expressly permitted hereby or by the Related Documents,
shall exist in respect of the Collateral.
SECTION 5.2. Acceleration of Maturity: Rescission and Annulment.
Subject to the following sentence, if an Event of Default should occur and be
continuing with respect to a Series, then and in every such case the Trustee
may, and upon the request of the Holders of Health Care Notes representing more
than 50% of the Aggregate Outstanding Amount of the Health Care Notes of such
Series the Trustee shall, declare all the Health Care Notes of all Series to be
immediately due and payable, by a notice in writing to the Issuer, and upon any
such declaration the unpaid principal amount of all such Health Care Notes,
together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable. Notwithstanding the
foregoing sentence, if an Event of Default described in Section 5.1(4) or (5)
should occur and be continuing, all Series of Health Care Notes shall be
automatically accelerated without delivery of any notice to the Issuer.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, except with
respect to an Event of Default described in Section 5.1(4) or (5), the Holders
of Health Care Notes representing more than 50% of the Aggregate Outstanding
Amount of the Health Care Notes of each Series, by written notice to the Issuer
and the Trustee, may rescind and annul such declaration and its consequences
if:
(1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all Health
Care Notes of all Series and all other amounts that would then be
due hereunder or upon such Health Care Notes if the Event of
Default giving rise to such acceleration had not occurred; and
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(B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements, and advances of
the Trustee and its agents and counsel; and
(2) all Events of Default with respect to all Series, other than
the nonpayment of the principal of the Health Care Notes of all Series
that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.12 hereof.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
(1) The Issuer covenants that (i) if default is made in the payment of
any interest on, or any other amounts owing with respect to, any Health Care
Note of a Series (other than the principal and premium thereof), when and as
the same becomes due and payable, and such default continues for a period of
five (5) Business Days, or (ii) default is made in the payment of the principal
of or any installment of the principal and premium of any Health Care Note of a
Series, when and as the same becomes due and payable, the Issuer will, upon
demand of the Trustee, pay to it, for the benefit of the Holders of the Health
Care Notes of such Series, the whole amount then due and payable on such Health
Care Notes for principal, premium and interest (including by way of
acceleration of the Health Care Notes), with interest upon the overdue
principal and any other amounts due hereunder and, to the extent payment at
such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the rate then borne by the Health Care Notes of such Series
(or, if the applicable Series Supplement so provides, the default rate
specified therein) and in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee
and its agents and counsel.
(2) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
may institute a Proceeding for the collection of the sums so due and unpaid and
to foreclose upon or take any other action in respect of the Collateral, and
may prosecute such Proceeding to judgment or final decree, and may enforce the
same against the Issuer or other obligor upon such Health Care Notes and
collect in the manner provided by law out of the Collateral or any property of
the Issuer (but subject to the provisions of Section 5.5) or other obligor upon
such Health Care Notes, wherever situated, the moneys adjudged or decreed to be
payable. (1)
(3) If an Event of Default occurs and is continuing, the Trustee may,
as more particularly provided in Section 5.4, in its discretion, proceed to
protect and enforce its rights and the rights of the Health Care Noteholders,
by such appropriate Proceedings as the Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or any Related Document or in aid
of the exercise of any power granted herein or any Related Document, or to
enforce any other proper remedy or legal or equitable
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right vested in the Trustee by this Indenture or any Related Document or by law
(but subject to the provisions of Section 5.5).
(4) In case there shall be pending, relative to the Issuer or any
other obligor upon the Health Care Notes or any Person having or claiming an
ownership interest in the Trust Estate, Proceedings under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Issuer or its property
or such other obligor or Person, or in case of any other comparable judicial
Proceedings relative to the Issuer or other obligor upon the Health Care Notes
of any Series or any Person having or claiming any ownership interest in the
Trust Estate, or to the creditors or property of the Issuer or such other
obligor or Person, the Trustee, irrespective of whether the principal of any
Health Care Notes of any Series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section
5.3, shall be entitled and empowered, by intervention in such Proceedings or
otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal, interest and any other documents owing and unpaid in
respect of the Health Care Notes and to file such other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for reasonable compensation to the
Trustee and each predecessor Trustee, and their respective agents,
attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee, except as a result of negligence or bad faith)
and of the Health Care Noteholders allowed in such Proceedings,
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Health Care Notes in any election of a
trustee, a standby trustee or Person performing similar functions in
any such Proceedings,
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Health Care Noteholders and
of the Trustee on their behalf, and
(iv) to 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 or the Holders of Health Care Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Health Care
Noteholders to make payments to the Trustee, and, in the event that the Trustee
shall consent to the making of payments directly to such Health Care
Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover
reasonable
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compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
(5) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Health Care Noteholder any plan of reorganization, arrangement, adjustment, or
composition affecting the Health Care Notes or the rights of any Holder thereof
or to authorize the Trustee to vote in respect of the claim of any Health Care
Noteholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar person.
(6) All rights of action and of asserting claims under this Indenture,
or under any of the Health Care Notes of any Series, may be enforced by the
Trustee without the possession of any of the Health Care Notes of such Series
or the production thereof in any trial or other Proceedings relative thereto,
and any such action or Proceedings instituted by the Trustee shall be brought
in its own name as trustee of an express trust, and any recovery of judgment,
subject to the payment of the expenses, disbursements and compensation of the
Trustee, each predecessor Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Holders of the Health Care Notes of
such Series.
(7) In any Proceedings brought by the Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party), the Trustee shall be held to represent all
the Holders of the Health Care Notes, and it shall not be necessary to make any
Health Care Noteholder a party to any such Proceedings.
SECTION 5.4. Additional Remedies. If an Event of Default shall have
occurred and be continuing with respect to a Series, the Trustee may do one or
more of the following (subject to Section 5.5 hereof):
(1) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Health Care Notes of such Series or under this Indenture with respect
thereto, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer and any other obligor upon such
Health Care Notes moneys adjudged due;
(2) the Trustee shall have the right to receive, endorse, assign
or deliver, in its own name or the name of the Issuer, any and all
checks, drafts and other instruments for the payment of money relating
to or constituting part of the Collateral, and the Issuer hereby
waives notice of presentment, protest and nonpayment of any instrument
so endorsed. In furtherance of the foregoing, the Issuer hereby
irrevocably appoints the Trustee, or any of its officers or designees,
the Issuer's lawful attorney-in-fact (without requiring any of them so
to act), with power of substitution, in the name of the Issuer (i) to
endorse the name of the Issuer upon any of the Collateral, including
Proceeds; (ii) to demand, collect, receive payment
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<PAGE> 46
of, receipt for and give discharges and releases of any of the
Collateral; (iii) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on any of the Collateral
or to enforce any rights in respect thereof; (iv) to initiate, settle,
compromise, adjust or defend any actions, suits or proceedings
relating to or pertaining to any of the Collateral; (v) if directed by
the Holders of Health Care Notes pursuant to Section 5.11, to sell,
transfer, assign, discount, negotiate or otherwise deal in all or any
portion of the Collateral or Proceeds; (vi) generally to perform all
other acts necessary or desirable to realize on, and obtain the
benefits of, the Collateral and otherwise to carry out the intention
of this Agreement, as fully and effectively as though the Trustee were
the absolute owner thereof, and the Issuer hereby ratifies and
confirms all that the Trustee shall do by virtue of this appointment;
and (vii) to direct the actions of the Master Servicer and the
Servicers and to take any and all other actions as, and in the name
of, the Issuer pursuant to the Sale and Servicing Agreement. In any
action hereunder, the Trustee shall be entitled to the appointment of
a receiver to take possession of all or any portion of the Trust
Estate and the Trustee shall not be responsible or liable for any loss
or destruction of all or any part of the Collateral unless the same
shall happen through negligence or willful misconduct of the Trustee.
Subject to Section 6.1(a), the Trustee shall not, under any
circumstances, absent its negligence or willful misconduct, have any
liability for any error or omission made in the settlement, collection
or payment or other disposition of any or all of the Collateral or of
any instrument received in payment therefor. The costs of collection,
sale or other disposition, notification and enforcement, including,
without limitation, reasonable counsel fees and disbursements, shall
be borne solely, or reimbursed to the Trustee by, the Issuer.
(3) After receipt of directions from the requisite Health Care
Noteholders pursuant to Section 5.11 hereof, the Trustee, with or
without taking possession, may on behalf of the Health Care
Noteholders sell or cause to be sold, in one or more sales, at such
price as the Trustee may deem adequate, and for cash or on credit or
for future delivery, with or without assumption of any credit risk the
Collateral in its entirety but not in part, at a public or private
sale, without demand of performance or notice or intention to sell or
of time or place of sale (except such notice as may be required by
applicable statute and cannot be waived), and the Trustee may be the
purchaser of all or any portion of the Collateral so sold. The
purchaser(s) at any such sale shall thereafter hold the same
absolutely, free from any claim or right of whatever kind, including
any equity of redemption, of the Issuer, any such demand, notice,
claim, right or equity being hereby expressly waived and released. The
Trustee shall under no circumstances incur any liability as a result
of the sale of the Collateral or any part thereof, at any sale
conducted in accordance with the foregoing. The Issuer hereby waives
any claims against the Trustee, and the Health Care Noteholders
arising by reason of the fact that the price at which the Collateral
may have been sold at any private sale was less than the price which
might have been obtained at a public sale or was less than the then
total unpaid Obligations.
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SECTION 5.5. Appointment of Servicers; Collection of Medicaid,
Medicare and Department of Veterans' Affairs Receivables; Sale of Purchased
Receivables.
(1) The Trustee (at the express direction of the Issuer) hereby
irrevocably appoints the Servicers as its agents for purposes of enforcing all
rights and remedies of the Trustee in the Collateral set forth herein, and the
Trustee shall in no way be liable for the failure of any such agents to enforce
such rights and remedies, the manner in which such rights and remedies are
enforced or the supervision of such agents. At the request of the Trustee, the
Issuer shall cause the Servicers to promptly pay to the Trustee, for the
benefit of Health Care Noteholders, all proceeds realized upon the enforcement
of such remedies.
(2) Notwithstanding anything to the contrary in this Agreement, the
Trustee shall not be liable or responsible for servicing the Receivables or for
any of the duties or obligations of the Master Servicer or any Servicer, as the
case may be, under the Sale and Servicing Agreement or this Indenture or
otherwise (and shall not be liable or responsible for the acts or omissions of
the Master Servicer or any Servicer, as the case may be, or failure to act in
reliance upon any action or failure to act by the Master Servicer or any
Servicer, as the case may be). Subject to Section 6.1(a), the Trustee shall not
be bound to ascertain or inquire as to the truth or accuracy of any information
provided to it by the Master Servicer or any Servicer, as the case may be, but
may for any purpose conclusively rely upon any information given to it by any
of them.
(3) Notwithstanding any provision hereof or of any Related Document to
the contrary, all Medicaid, Medicare or Department of Veterans' Affairs or
other payments which are made by an Obligor with respect to any Purchased
Receivable shall be collected from such Obligor only by the Servicer which
furnished the services for which such payments are made, except to the extent
that an Obligor may be required to submit any such payments directly to a
Person other than the Servicer pursuant to a court-ordered assignment which is
valid, binding and enforceable under applicable federal and state Medicaid,
Medicare and Department of Veterans' Affairs laws, rules and regulations;
neither this Indenture nor any Related Document shall be construed to permit
any other Person, in violation of applicable federal and state Medicaid,
Medicare or Department of Veterans' Affairs laws, rules and regulations to
collect or receive, or to be entitled to collect or receive, any such payments
prior to the Servicer's receipt thereof. The Trustee shall not be responsible
for the collection of Receivables.
SECTION 5.6. Limitation of Suits. No Holder of any Health Care Note of
a Series shall have any right to institute any Proceeding, judicial or
otherwise, with respect to this Indenture and such Series, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to such Series;
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(2) the Holders of more than 50% of the then Aggregate Outstanding
Amount of the Health Care Notes of such Series shall have made written
request to the Trustee to institute such Proceeding in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in complying with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request, and offer of indemnity has failed to institute such
Proceedings; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of at
least 50% of the Aggregate Outstanding Amount of the Health Care Notes
of such Series;
it being understood and intended that no one or more Holders of Health Care
Notes of a Series shall have any right in any manner whatever by virtue of, or
by availing of, any provision of this Indenture to affect, disturb or prejudice
the rights of any other Holders of Health Care Notes or to obtain or to seek to
obtain priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from groups of the requisite amounts of Holders of
Health Care Notes of two or more Series, the Trustee shall act at the direction
of the group of Holders of Health Care Notes with the greater Aggregate
Outstanding Amount of Health Care Notes, however should the Trustee receive
conflicting or inconsistent requests and indemnity from groups of the requisite
amount of Holders of the Health Care Notes of two or more Series with the same
Aggregate Outstanding Amount of Health Care Notes the Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
SECTION 5.7. Unconditional Rights of Health Care Noteholders To
Receive Principal and Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Health Care Note shall have the right, which is
absolute and unconditional, to receive payment of the principal of and
interest, if any, on, and any other amounts with respect to, such Health Care
Note on or after the respective due dates thereof expressed in such Health Care
Note or in this Indenture (or, in the case of redemption, on or after the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
SECTION 5.8. Restoration of Rights and Remedies. If the Trustee or any
Health Care Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Health Care Noteholder, then and in every such case the Issuer, the
Trustee and the Health Care Noteholders shall, subject to any determination in
such Proceeding, be restored
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severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Health Care Noteholders shall
continue as though no such Proceeding had been instituted.
SECTION 5.9. Rights and Remedies Cumulative. No right or remedy
conferred upon or reserved to the Trustee or to the Health Care Noteholders
herein or any Related Document is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, under any Related Document or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Trustee or any Holder of any Health Care Note to exercise any right or
remedy accruing hereunder or under any Related Document upon any Default or
Event of Default shall impair any such right or remedy or constitute a waiver
of any such Default or Event of Default or an acquiescence therein. Every right
and remedy given herein or in any Related Document or by law to the Trustee or
to the Health Care Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Health Care Noteholders,
as the case may be.
SECTION 5.11. Control by Health Care Noteholders. The Holders of more
than 50% of the Aggregate Outstanding Amount of the Health Care Notes of any
Series shall have the right to direct the time, method, and place of (x)
conducting any Proceeding for any remedy available to the Trustee with respect
to the Health Care Notes of such Series or (y) exercising any trust or power
conferred on the Trustee hereunder or under any Related Document with respect
to such Series; provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture or any Related Document;
(2) any direction to the Trustee to sell or liquidate the Trust
Estate pursuant to Section 5.4 of this Indenture shall be by the
Holders of the Health Care Notes of any Series representing not less
than 50% of the Aggregate Outstanding Amount of such Series, shall be
subject to Section 5.5 hereof. The direction of such Holders of Health
Care Notes shall specify the time and place of such proposed sale and
the proposed Person to acquire the Collateral to be sold or
liquidated; and
(3) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1 hereof, the Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Health Care Noteholders not
consenting to such action.
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SECTION 5.12. Waiver of Past Defaults. Prior to the acceleration of
the Maturity of the Health Care Notes of all Series as provided in Section 5.2
hereof, the Holders of Health Care Notes of not less than 50% of the then
Aggregate Outstanding Amount of the Health Care Notes of each Series may waive
any past Default or Event of Default and its consequences except a Default (a)
in payment of principal and premium of, interest on, or any Series Special
Obligations with respect to, any of the Health Care Notes, (b) in respect of a
covenant or provision hereof which cannot be modified or amended without the
consent of the Holder of each Health Care Note of all Series affected or (c)
with respect to an Event of Default described in Section 5.1(4) or (5). In the
case of any such waiver, the Issuer, the Trustee and the Holders of the Health
Care Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent therein.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Health Care Note by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, 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, suffered, or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 5.13 shall not apply to (a) any suit instituted by the Trustee, (b) any
suit instituted by any Health Care Noteholder, or group of Health Care
Noteholders, in each case holding in the aggregate more than 10% of the
Aggregate Outstanding Amount of the Health Care Notes of a Series, or (c) any
suit instituted by any Health Care Noteholder for the enforcement of the
payment of principal of or interest on, or any other amounts with respect to,
any Health Care Note on or after the respective due dates expressed in such
Health Care Note and in this Indenture (or, in the case of redemption, on or
after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not 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, that may affect the covenants or the performance of this
Indenture or the Related Documents; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay, or impede the execution of
any power granted to the Trustee herein or in the Related Documents, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
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SECTION 5.15. Action on Health Care Notes. The Trustee's right to seek
and recover judgment on the Health Care Notes of a Series or under this
Indenture shall not be affected by the seeking, obtaining or application of any
other relief under or with respect to this Indenture or the Sale and Servicing
Agreement. Neither the Lien of this Indenture, the absolute sale represented by
the Sale and Servicing Agreement nor any rights or remedies of the Trustee or
the Health Care Noteholders for any Series shall be impaired by the recovery of
any judgment by the Trustee against the Issuer or by the levy of any execution
under such judgment upon any portion of the Trust Estate or upon any of the
assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain Obligations.
(1) Whether or not an Amortization Event, a Default or an Event of
Default has occurred or is continuing, the Issuer agrees to take all such
lawful action to compel or secure the performance and observance by the Seller,
the Master Servicer, Beverly and the Servicers, as applicable, of each of its
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement, in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement, including, without
limitation, the transmission of notices of default on the part of the Seller,
the Master Servicer, Beverly or the Servicers and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller, the Master Servicer, Beverly or the Servicers of each of their
obligations under the Sale and Servicing Agreement. The Issuer hereby appoints
the Trustee its attorney-in-fact, with full power of substitution, for the
purpose of taking such action in the name of the Issuer, in the event the
Issuer fails to take such action, which appointment is coupled with an interest
and is irrevocable. Under no circumstances shall this Section 5.16(a) be
construed to create any duty of the Trustee not otherwise expressly provided
for in this Indenture.
(2) If an Event of Default has occurred and is continuing, the Trustee
may, and, at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Holders of at least 50% of
the Aggregate Outstanding Amount of any Series of Health Care Notes shall,
exercise all rights, remedies, powers, privileges and claims of the Issuer
against the Seller, the Master Servicer, Beverly or the Servicers under or in
connection with the Sale and Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the Seller,
the Master Servicer or the Servicers of each of their obligations thereunder
and to give any consent, request, notice, direction, approval, extension or
waiver to the Sale and Servicing Agreement, and any right of the Issuer to take
such action shall be suspended.
SECTION 5.17. Application of Proceeds. The proceeds of any sale or
liquidation of Collateral pursuant to Section 5.11 of this Indenture taken by
the Trustee shall (after payment of the costs and expenses of the Trustee) be
applied as provided in Section 6.3 of the Sale and Servicing Agreement and
Article VII of this Indenture. In the event of any conflict between the Sale
and
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Servicing Agreement and Article VII of this Indenture, whether existing now or
by virtue of any amendment or supplement to either of such documents, the
provisions of Article VII of this Indenture shall control.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(1) Except during the continuance of an Event of Default as to which a
Responsible Officer the Trustee has actual knowledge:
(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; but in the case of any such certificates or
opinions which by any provision hereof or any Related Document are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture or such Related
Document.
(2) In case an Event of Default of which a Responsible Officer of the
Trustee has actual knowledge has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(3) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
this Agreement or at the direction of the Holders of at least 50% of
the Aggregate Outstanding Amount of the Health Care Notes of any
Series, relating to the time, method and place of conducting any
Proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture or any
Related Document.
(4) Whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct or affecting the eligibility
of or affording protection to the Trustee shall be subject to the
provisions of this Section.
(5) Except as provided in Section 7.3(c), the Trustee shall not be
liable for interest on any money received by it.
(6) No provision of this Indenture or any Related Document shall
require the Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, unless
it shall have first received indemnity reasonably satisfactory to it
against such risk or liability.
(7) The permissive right of the Trustee to take actions enumerated
in this Indenture or any Related Document shall not be construed as a
duty, and the Trustee shall not be answerable for other than its own
negligence or willful misconduct.
(8) The Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any default (except an Event of
Nonpayment) or Event of Default unless a Responsible Officer of the
Trustee shall have received written notice thereof. In the absence of
receipt of such notice, the Trustee may conclusively assume that there
is no default or Event of Default.
(9) Subject to the other provisions of this Indenture and without
limiting the generality of this Section 6.1, the Trustee shall have no
duty (A) to see to any recording, filing, or depositing of this
Indenture or any agreement referred to herein or any financing
statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any
thereof, (B) to see to any insurance, (C) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust Estate other than from funds
available in the Distribution Account, (D) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to
the Trustee pursuant to this Indenture or the Sale and Servicing
Agreement believed by the Trustee to be genuine and to have been
signed or presented by the proper party or parties.
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SECTION 6.2. Notice of Defaults and Amortization Events. Within 10
days after having actual knowledge of the occurrence of any Default or any
Amortization Event, the Trustee shall transmit by mail to all Holders of Health
Care Notes and the Rating Agency, notice of such Default or such Amortization
Event hereunder known to the Trustee.
SECTION 6.3. Certain Rights of the Trustee. Except as otherwise
provided in Section 6.1 hereof in connection with the administration of this
Indenture or with any Related Document:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Issuer mentioned herein or in
any Related Document shall be sufficiently evidenced by an Issuer
Request or Issuer Order;
(c) whenever in the administration of this Indenture or acting
under any Related Document the Trustee shall deem it desirable that a
matter be proved or established prior to taking, suffering or omitting
any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may request from the Issuer and, in the
absence of bad faith on its part, rely and be protected in so relying
upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or any Related
Document or to institute, conduct or defend any litigation hereunder
or in relation hereto at the request or direction of any of the Health
Care Noteholders pursuant to this Indenture or any Related Document,
unless such Health Care Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with such
request or direction;
(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, direction, consent,
order, bond, note or other paper or document, 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,
on reasonable prior notice to the Issuer, to examine the books,
records and premises of the Issuer, personally or by agent or
attorney, during the Issuer's normal business hours;
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(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith which action or omission it believes to be
authorized or within its rights or powers; and
(i) for all purposes of this Indenture and any Related Document,
the Trustee shall be deemed to have knowledge or awareness of facts
and circumstances only when a Responsible Officer has actual knowledge
of such facts and circumstances or has received written notice of such
facts and circumstances.
(j) the Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust Estate created hereby or the
powers granted hereunder.
SECTION 6.4. Not Responsible for Recitals or Issuance of Health Care
Notes.
(1) The recitals contained herein and in the Health Care Notes, except
the certificates of authentication on the Health Care Notes, shall be taken as
the statements of the Issuer, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations with respect to any
Receivable or the Trust Estate or as to the validity or sufficiency of this
Indenture, any Related Document or of the Health Care Notes. The Trustee shall
not be accountable for the use or application by the Issuer of Health Care
Notes or the proceeds thereof or any money paid to the Issuer or upon Issuer
Order pursuant to the provisions hereof.
(2) Except as otherwise expressly provided herein and without limiting
the generality of the foregoing, the Trustee shall have no responsibility or
liability for or with respect to the existence or validity of any Receivable,
the perfection of any security interest (whether as of the date hereof or at
any future time), the validity of the assignment of any portion of the Trust
Estate to the Trustee or of any intervening assignment, the receipt by it or
the Servicers or the Master Servicer of any Receivable, the performance or
enforcement of any Receivable, the compliance by the Issuer or the Servicers or
the Master Servicer with any covenant or the breach by the Issuer or the
Servicers or the Master Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any such warranty or
representation, any investment of money in the Collection Account or any loss
resulting therefrom, the acts or omissions of the Issuer or the Servicers or
the Master Servicer, any action of the Servicers or the Master Servicer taken
in the name of the Trustee or the validity of the Sale and Servicing Agreement.
(3) The Trustee shall: (i) review each certificate delivered to it
pursuant to clause (B) of Section 4.2(b) of the Sale and Servicing Agreement
and determine whether such certificate appears on its face to comply with the
terms of the Sale and Servicing Agreement, (ii) review each Officer's
Certificate delivered to it pursuant to Section 5.6 of the Sale and Servicing
Agreement to determine
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whether such Officer's Certificate appears on its face to comply with the terms
of the Sale and Servicing Agreement; (iii) review each public accountant's
statement delivered to it pursuant to Section 5.7 of the Sale and Servicing
Agreement to determine whether such statement appears on its face to comply
with the terms of the Sale and Servicing Agreement; (iv) review each Monthly
Trustee Report delivered to it to (A) determine whether it appears on its face
to be regular and to comply with the terms of the Sale and Servicing Agreement
and (B) examine the Loss Ratio and Delinquency Ratio for positive indications
by the Master Servicer of an Amortization Event; and (v) review each Daily
Trustee Report delivered to it to (A) determine whether it appears on its face
to be regular and to comply with the terms of the Sale and Servicing Agreement,
(B) verify the daily balances set forth on page 2 thereof to the amounts on
deposit in the applicable Issuer Accounts based upon the accounting records of
the Trustee and (C) examine the Net Purchased Receivables and the Minimum
Required Receivables Balance for positive indications by the Master Servicer of
an Amortization Event. The Trustee shall advise the Person delivering such
certificate, statement or report of any defect noted by the Trustee in
connection with such review and, if in connection therewith, the Trustee notes
the occurrence of an Amortization Event or an Event of Default, the Trustee
shall give notice thereof to Noteholders in accordance with Section 6.2 of this
Indenture and otherwise comply with the applicable requirements hereof and of
the Sale and Servicing Agreement. This Section 6.4(c) shall be subject in all
respects to Section 6.1 of this Indenture.
(4) The Trustee shall not have any obligation or liability under any
Receivable by reason of or arising out of this Indenture or the receipt by the
Trustee of any payment relating to any Receivable pursuant hereto, nor shall
the Trustee be required or obligated in any manner to perform or fulfill any of
the obligations of the Issuer under or pursuant to any Receivable, or to make
any payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it, or the sufficiency of any performance by any party,
under any Receivable.
(5) Until the complete satisfaction and discharge of this Indenture,
the Trustee shall retain all reports, statements and other documents delivered
to it in accordance with provisions of the Sale and Servicing Agreement.
SECTION 6.5. May Hold Health Care Notes. Subject to the terms of this
Indenture, the Trustee, any Paying Agent, any Health Care Note Registrar or any
other agent of the Issuer in its individual or any other capacity, may become
the owner or pledgee of Health Care Notes and may otherwise deal with the
Issuer with the same rights it would have if it were not Trustee, Paying Agent,
Health Care Note Registrar, or such other agent.
SECTION 6.6. Interest on Money Held in Trust. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Issuer and except to the extent of income or other
gain on investments that are deposits in or certificates of deposits or other
obligations of the Trustee in its commercial capacity and income or other gain
actually received by the Trustee on Eligible Investments.
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SECTION 6.7. Compensation and Reimbursement.
(1) The Issuer agrees:
(1) to pay the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation, expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection
with the acceptance or administration of this trust, including the
reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of
any of their powers or duties hereunder or under any Related Document.
(2) [intentionally omitted]
(3) The Trustee shall have, and the Issuer hereby grants to the
Trustee, as security for the performance of the Issuer under this Section 6.7,
a lien prior to the lien of the Health Care Notes of any Series on the
Collateral (to the extent of the allocations of Collections set forth in
Section 6.3 of the Sale and Servicing Agreement); provided, however, that such
lien shall in no event extend to funds or Eligible Investments held in trust
for the payment of principal of, interest on, or any other amounts in respect
of, the Health Care Notes of any Series.
SECTION 6.8. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder which shall be a corporation organized and
doing business under the laws of the United States of America or of any State
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $100,000,000 and subject to
supervision or examination by the United States of America. If such Trustee
publishes reports of conditions at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then, for the
purposes of this Section 6.8, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI.
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SECTION 6.9. Resignation and Removal; Appointment of Successor.
(1) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor trustee under Section 6.10 hereof.
(2) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Issuer and by
mailing notice of resignation by first-class mail, postage prepaid, to holders
of the Health Care Notes at their addresses appearing on the Health Care Note
Register. Upon receiving notice of resignation, the Issuer shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by an Authorized Officer, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor trustee or
trustees. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee or any Health Care Noteholder may, on behalf
of himself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(3) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 hereof; or
(2) (i) the Trustee shall become incapable of acting, (ii) there
shall have been entered a decree or order for relief by a court having
jurisdiction in the premises in respect of the Trustee in an
involuntary case under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
conservator, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Trustee or for any substantial part of its
property, or ordering the winding up or liquidation of its affairs and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days or (iii) the Trustee commences a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, conservator, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the
Trustee or of any substantial part of its property, or the making by
it of any assignment for the benefit of creditors or the Trustee fails
generally to pay its debts as such debts become due or takes any
corporate action in furtherance of any of the foregoing;
then, in any such case the Issuer by an Issuer Order may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate, executed on
behalf of the Issuer by an Authorized Officer, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
trustee, or, any Health Care Noteholder may, on behalf of such Holder and all
others
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similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(4) The Holders of at least 50% of the Aggregate Outstanding Amount of
the Health Care Notes of any Series, or the Issuer with the consent of at least
50% of the Aggregate Outstanding Amount of Health Care Notes of any Series, may
at any time remove the Trustee, with respect to such Series, and appoint a
successor trustee by delivering to the Trustee to be removed, to the successor
trustee so appointed and to the Issuer, copies of the record of the Act taken
by the Holders of the Health Care Notes, as provided for in Section 10.3
hereof.
(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Issuer, by an Issuer Order, shall promptly appoint a successor trustee.
If within one year after such resignation, removal, or incapability or the
occurrence of such vacancy, a successor trustee shall be appointed by Act of
the Holders of at least 50% of the Aggregate Outstanding Amount of the Health
Care Notes of each Series delivered to the Issuer and the retiring trustee, the
successor trustee so appointed shall forthwith upon its acceptance of such
appointment become the successor trustee and supersede the successor trustee
appointed by the Issuer. If no successor trustee shall have been so appointed
by the Issuer or the Health Care Noteholders and shall have accepted
appointment in the manner hereinafter provided, any Health Care Noteholder may,
on behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(6) The Issuer shall give notice of each removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Holders of Health Care Notes as their names and addresses appear in the Health
Care Note Register. Each notice shall include the name of the successor trustee
and the address of its Corporate Trust Office.
SECTION 6.10. Acceptance of Appointment by Successor Trustee. Every
successor trustee appointed hereunder shall execute, acknowledge and deliver to
the Issuer and its predecessor trustee an instrument accepting such appointment
hereunder and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts,
duties and obligations of its predecessor hereunder; but, on request of the
Issuer or the successor trustee, such predecessor trustee shall, upon payment
of its charges then unpaid, execute and deliver an instrument transferring to
such successor trustee all the rights, powers, and trusts of the Trustee so
ceasing to act; and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such Trustee so ceasing to act hereunder
subject nevertheless to its lien, if any, provided for in Section 6.7
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hereof. Upon request of any such successor trustee, the Issuer shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.10, the Issuer shall mail notice thereof by first-class mail,
postage prepaid, to the Holders of the Health Care Notes at their last
addresses appearing upon the Health Care Note Register. If the Issuer fails to
mail such notice within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed
at the expense of the Issuer.
No successor trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article VI.
SECTION 6.11. Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Health Care Notes have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating trustee may adopt
such authentication and deliver the Health Care Notes so authenticated with the
same effect as if such successor trustee had itself authenticated such Health
Care Notes.
SECTION 6.12. Co-Trustee and Separate Trustee. At any time or times,
for the purpose of meeting the legal requirements of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Issuer and the
Trustee shall have power to appoint, and upon the written request of the
Trustee or of the Holders of Health Care Notes representing at least 50% of the
then Aggregate Outstanding Amount of the Health Care Notes of any Series, the
Issuer shall for such purpose join with the Trustee in the execution, delivery,
and performance of all instruments and agreements necessary or proper to
appoint, one or more Persons approved by the Trustee either to act as
co-trustee, jointly with the Trustee, of all or any part of such Trust Estate,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions of this
Section. If the Issuer does not join in such appointment within 15 days after
the receipt by it of a request so to do, or in case an Event of Default has
occurred and is continuing, the Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section 6.12 shall satisfy the requirements of Section 6.8 hereof.
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Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and
all such instruments shall, on request be executed, acknowledged and delivered
by the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(1) The Health Care Notes shall be authenticated and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall
be exercised solely by the Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or
performed by the Trustee or by the Trustee and such co-trustee or
separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent
that under any law of any jurisdiction in which any particular act is
to be performed, the Trustee shall be incompetent or unqualified to
perform such Act, in which event such rights, powers, duties, and
obligations shall be exercised and performed by such co-trustee or
separate trustee.
(3) The Trustee at any time by an instrument in writing executed
by it, with the concurrence of the Issuer evidenced by an Officer's
Certificate, may accept the resignation of or remove any co-trustee or
separate trustee appointed under this Section, and, in case an Event
of Default has occurred and is continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Issuer. Upon the
written request of the Trustee, the Issuer shall join with the Trustee
in the execution, delivery, and performance of all instruments and
agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned
or removed may be appointed in the manner provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder.
(5) The Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee, and the appointment of any such
co-trustee shall not constitute any such co-trustee the agent of the
Trustee.
(6) Any Act of Health Care Noteholders delivered to the Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
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The provisions of Sections 6.1, 6.2, 6.8 and 6.10 hereof shall apply
to each co-trustee and separate trustee hereunder with the same force and
effect as they apply to the Trustee.
SECTION 6.13. Reports to Holders of Health Care Notes. The Trustee
shall deliver to each Noteholder, to the extent set forth in the applicable
Series Supplement, the information, documents, notices and reports it receives
which are required to be delivered to it by or on behalf of the Master Servicer
pursuant to the Sale and Servicing Agreement or by or on behalf of the Issuer
pursuant to this Indenture.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 7.1. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture. The Trustee shall apply
all such money received by it as provided in this Indenture.
SECTION 7.2. Trust Accounts.
(1) The Issuer has established account No. 507-888502 (the "Collection
Account") with the Trustee. Funds in the Collection Account shall not be
commingled with any other moneys. All moneys deposited from time to time in the
Collection Account, all deposits therein pursuant to this Indenture or any
Related Document, and all investments made in Eligible Investments with such
moneys, including all income or other gain from such investments, shall be held
by, and in the name of, the Trustee in the Collection Account as part of the
Trust Estate as herein provided.
(2) The Issuer has established account No. 507-888812 (the
"Distribution Account") with the Trustee. With respect to each Series of Health
Care Notes issued hereunder, the Issuer will establish four subaccounts of the
Distribution Account into which all deposits with respect to such Series
pursuant to Section 6.3 of the Sale and Servicing Agreement shall be made, one
for principal, interest and premium (a "Payment Subaccount"), one for
Accumulation Amounts (an "Accumulation Subaccount"), one for a reserve for
Servicing Fees, the Trustee Fee and interest (a "Reserve Subaccount"), and
another for the payment of other amounts owing the Health Care Noteholders of
such Series (including, without limitation, any Series Special Obligations) (an
"Expense Subaccount"). Funds in the subaccounts to the Distribution Account
shall not be commingled with any other moneys. All moneys deposited from time
to time in the Distribution Account, all deposits therein pursuant to this
Indenture or any Related Document, and all investments made in Eligible
Investments with such moneys, including all income or other gain from such
investments, shall be held by and in the name of the Trustee in the
Distribution Account as part of the Trust Estate as herein provided. All
payments to be made from time to time by the Trustee out of funds in the
Distribution
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Account pursuant to this Indenture shall, unless a Series Supplement provides
for a different Paying Agent for such Series, be made by, and in the name of,
the Trustee as the Paying Agent of the Issuer.
(3) The Issuer has established Account No. 507-888510 (the "Expense
Account," and together with the Collection Account and the Distribution Account
(and all subaccounts created thereunder), the "Issuer Accounts"). All moneys
deposited from time to time in the Expense Account, all deposits therein
pursuant to this Indenture or any Related Document, and all investments made in
Eligible Investments with such moneys, including all income or other gain from
such investments, shall be held by, and in the name of, the Trustee in the
Expense Account as part of the Trust Estate as provided herein; provided,
however, that all amounts on deposit in the Expense Account shall be applied
pursuant to Section 7.2(h) of this Indenture and shall not be available for
payment to the Health Care Noteholders or for any other purpose.
(4) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the amounts in an Issuer Account may be
invested and reinvested by the Trustee upon Issuer Order which shall state that
the investments are Eligible Investments (or otherwise according to Section
7.3(d)), which Eligible Investments shall bear interest or be sold at discount;
provided, however, that such Eligible Investments shall not mature later than
the following Business Day (with respect to the Collection Account) or the
Business Day prior to the next Distribution Date (with respect to the
Distribution Account and the Expense Account) or, if a notice of redemption in
full has been sent to Health Care Noteholders of any Series, an amount in the
applicable subaccounts of the Distribution Account equal to the Redemption
Price shall mature not later than the second Business Day prior to the
Redemption Date. All income or other gain from investments of moneys deposited
in the Issuer Accounts shall be deposited by the Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to the
Collection Account.
(5) Amounts shall be deposited in, and withdrawn from, the Collection
Account by the Trustee as provided in Section 6.3 of the Sale and Servicing
Agreement and Section 9.1 of this Indenture.
(6) Amounts shall be deposited in the subaccounts to the Distribution
Account by the Trustee as provided in Section 6.3 of the Sale and Servicing
Agreement and withdrawn by the Trustee in the priority specified in Sections
7.2(g) and 7.2(i) of this Indenture or withdrawn pursuant to Section 9.1 of
this Indenture. For each Series, on the third Business Day prior to the
Liquidation Period for such Series or the first day of the Amortization Period,
amounts on deposit in the Accumulation Subaccount for such Series will be
transferred to the related Payment Subaccount.
(7) On each Payment Date, the Trustee shall pay to Holders of Health
Care Notes of the related Series all amounts on deposit in the related Payment
Subaccount (or, if applicable, the related Reserve Subaccount) in respect of
the Health Care Notes of such Series to the extent of amounts due and unpaid on
the Health Care Notes of such Series for principal and interest in the
following order of priority:
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(i) to accrued and unpaid interest on the Health Care Notes of
such Series (based on amounts on deposit in the Payment Subaccount on
the Business Day immediately prior to such Payment Date and to the
extent such amounts are insufficient, from the Reserve Subaccount
after giving effect to any distributions from the Reserve Subaccount
on such Payment Date in accordance with Section 7.2(h));
(ii) during the Amortization Period or during the Liquidation
Period for such Series, to principal of the Health Care Notes of such
Series until the principal balance of such Health Care Notes is paid
in full (based on amounts on deposit in the related Payment Subaccount
on the third Business Day preceding such Payment Date); and
(iii) if amounts remain on deposit in such Payment Subaccount
representing an Optional Partial Redemption, to the principal of the
Health Care Notes of such Series until the principal balance of such
Health Care Notes is paid in full; provided, that the principal
balance of such Health Care Notes shall be reduced by the principal
component of the related Redemption Price.
(8) On each Distribution Date, the Trustee shall make the following
payments from the amounts on deposit in the Expense Account (or, if applicable,
the Reserve Subaccounts of each Series), in the following manner (based on
amounts on deposit on the previous Business Day):
(i) to the Master Servicer, an amount equal to the accrued and
unpaid Servicing Fees as of such date (first, to the extent of
deposits into the Expense Account pursuant to Sections 6.3(a)(i) and
6.3(b)(i) of the Sale and Servicing Agreement and, second, from the
Reserve Subaccount of each Series pro rata based on the amount, if
any, set aside with respect to the Servicing Fees in each such Reserve
Subaccount);
(ii) to the Trustee, an amount equal to the accrued and unpaid
Trustee Fee and other amounts requested as of such date (first, to the
extent of deposits into the Expense Account pursuant to Sections
6.3(a)(ii) and 6.3(b)(ii) of the Sale and Servicing Agreement and,
second, from the Reserve Subaccount of each Series pro rata based on
the amount, if any, set aside with respect to the Trustee Fee in each
such Reserve Subaccount); and
(iii) first, to the Trustee, for any remaining due and unpaid
Daily Costs due to it, and then to the appropriate Persons pro rata
for the payment of all due and unpaid Daily Costs (as set forth in an
Officer's Certificate of the Master Servicer delivered to the Trustee
before 11:00 a.m. New York City time on such Distribution Date) (to
the extent of deposits into the Expense Account pursuant to Section
6.3(a)(vii) and (b)(vi) of the Sale and Servicing Agreement).
(9) On each Distribution Date, the Trustee shall pay to the Holders of
Health Care Notes of the related Series all amounts on deposit in the related
Expense Subaccount as follows (based on amounts on deposit on the previous
Business Day):
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(i) to the payment in full of all Series Special Obligations (to
the extent of deposits into the Expense Subaccount pursuant to
Sections 6.3(a)(v) and 6.3(b)(v) of the Sale and Servicing Agreement);
and
(ii) to the payment in full of all Daily Costs due and owing to
such Holders (to the extent of deposits into the Expense Subaccount
pursuant to Section 6.3(a)(vii) and 6.3(b)(vi) of the Sale and
Servicing Agreement).
(10) On each Optional Partial Redemption Date, the Trustee shall pay
to the Holders of the related Series all amounts on deposit in the related
Payment Subaccount and Expense Subaccount in respect of the Health Care Notes
being redeemed (based on amounts on deposit on the third Business Day preceding
such Optional Partial Redemption Date, after giving effect to all distributions
to be made on such Optional Partial Redemption Date pursuant to Section 7.2(g)
if such Optional Partial Redemption Date is also a Payment Date) to fund the
Redemption Price with respect to such Optional Partial Redemption (reducing the
principal balance of such Series by the principal component of the related
Redemption Price).
(11) On the Business Day following the Payment Date, the Trustee shall
release to the Issuer the excess, if any, of the amount on deposit in the
Reserve Subaccount of the related Series over the Required Reserve for such
Series.
SECTION 7.3. General Provisions Regarding Accounts.
(1) The Issuer shall not direct the Trustee to make any investment of
any funds or to sell any investment held in an Issuer Account unless the
security interest granted to the Trustee and perfected in such Issuer Account
will continue to be perfected in such investment or the proceeds of such sale,
in either case without any further action by the Issuer or the Trustee.
(2) If any amounts are needed for disbursement from an Issuer Account,
and sufficient uninvested funds are not available to make such disbursement, in
the absence of an Issuer Order for the liquidation of investments in an amount
sufficient to provide the required funds, the Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Issuer Account. The Trustee may cause any such sale to be transacted through
any lawful medium, including the Trustee's own facilities, and the Trustee may
pay the expenses of such sale out of the proceeds thereof.
(3) Subject to Section 6.1(c) hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Issuer Account resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
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(4) If (1) the Issuer shall have failed to give investment directions
for either Issuer Account to the Trustee by 11:15 a.m. Eastern Time (or such
other time as may be agreed by the Issuer and Trustee) on any Business Day; (2)
a Default or Event of Default shall have occurred and be continuing with
respect to the Health Care Notes of any Series but such Health Care Notes shall
not have been accelerated pursuant to Section 5.2 hereof, or if such Health
Care Notes shall have been accelerated following an Event of Default, and
amounts collected or receivable from the related Trust Estate are being applied
in accordance with Section 5.17 as if there had not been such an acceleration,
or (3) an Event of Default with respect to the Health Care Notes of such Series
shall have occurred and be continuing, the Health Care Notes of all Series
shall have been accelerated pursuant to Section 5.2, and amounts collected or
receivable from the Trust Estate are being applied in accordance with Section
5.17; then the Trustee shall, to the fullest extent practicable, invest and
reinvest funds in such Issuer Account in money market accounts that invest in
the Eligible Investments described in clause (i) of such definition. (1)
(5) Notwithstanding anything herein to the contrary, with respect to
all deposits to the Distribution Account, all such amounts shall be deposited
directly into the Payment Subaccount or Expense Subaccount, as applicable. All
payments to the Health Care Noteholders of a Series shall be made from the
Payment Subaccount, other than amounts in respect of Series Special Obligations
or Daily Costs payable to such Health Care Noteholders, which shall be made
from the Expense Subaccount.
SECTION 7.4. Release of Trust Estate.
(1) Subject to the payment of its fees and expenses pursuant to
Section 6.7 hereof, the Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Trustee's interest in the same, in a manner and
under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Trustee as
provided in this Article VII shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions precedent, or see to
the application of any moneys.
(2) The Trustee shall, at such time as there are no Health Care Notes
outstanding and all sums due the Trustee pursuant to Section 6.7 hereof have
been paid, release any remaining portion of the Trust Estate that secured the
Health Care Notes, from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Collection
Account for such Series. The Trustee shall release property from the Lien of
this Indenture pursuant to this Section 7.4(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate and an Opinion of Counsel.
SECTION 7.5. Opinion of Counsel. The Trustee shall receive at least
seven days' notice when requested by the Issuer to take any action pursuant to
Sections 7.4(a) and 7.4(b) hereof, accompanied by copies of any instruments
involved, and the Trustee shall also require, as a condition
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to such action, an Opinion of Counsel at the expense of the Issuer, in form and
substance satisfactory to the Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Health Care Notes or the rights of the Health Care Noteholders in contravention
of the provisions of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of the
Trust Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Trustee in connection with any such action.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Health Care
Noteholders. With the consent of Health Care Notes representing at least 50% of
the Aggregate Outstanding Amount of Health Care Notes of each Series adversely
affected thereby, if any, and upon satisfaction of the Rating Agency Condition,
the Issuer and the Trustee, when authorized by an Issuer Order, at any time and
from time to time, may enter into one or more indentures supplemental hereto
(which if this Indenture is required to be qualified under the Trust Indenture
Act, shall conform to the provisions of the Trust Indenture Act as in force at
the date of the execution thereof), in form satisfactory to the Trustee, for
any of the following purposes:
(1) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the
lien of this Indenture additional property;
(2) to add to the conditions, limitations, and restrictions on the
authorized amount, terms and purposes of issuance, authentication, and
delivery of Health Care Notes, as herein set forth, and additional
conditions, limitations, and restrictions thereafter to be observed;
(3) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption
by any such successor of the covenants of the Issuer herein and in the
Health Care Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of the
Holders of the Health Care Notes, or to surrender any right or power
herein conferred upon the Issuer;
(5) [intentionally omitted];
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(6) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with
any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising
under this Indenture or in any supplemental indenture;
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to one or more Series of
the Health Care Notes and to add to or change any of the provisions of
this Indenture as shall be necessary to facilitate the administration
of the trusts hereunder by more than one trustee, pursuant to the
requirements of Section 6.12 hereof;
(8) if this Indenture is required to be qualified under the Trust
Indenture Act, to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the Trust Indenture Act and to
add to this Indenture such other provisions as may be expressly
required by the Trust Indenture Act;
(9) to set forth the terms of any Series that has not theretofore
been authorized by a Series Supplement and to enter into the related
Series Supplement pursuant to Section 2.3;
(10) to amend Section 2.11 hereof, but only with respect to a
Series that has not theretofore been authorized by a Series
Supplement;
(11) to make any change necessary to maintain the then current
rating on any Series of Health Care Notes by any Rating Agency; or
(12) to make any other change which in the opinion of the Trustee
(based on advice of counsel) is not adverse to any Holder of Health
Care Notes.
Notwithstanding anything in this Section 8.1 to the contrary, no
consent of the Holders of Health Care Notes shall be required (regardless of
any adverse effect) with respect to any supplemental indenture of the type set
forth in clause (9) of this Section 8.1 which only sets forth the Series
specific terms set forth in the following clauses of Section 2.3 hereof: (1),
(2), (3) (but such Series Supplement shall not alter the Distribution Dates),
(4) (so long as the Scheduled Amortization Date of the new Series is not prior
to the Scheduled Amortization Date of any outstanding Series), (5), (7), (8),
(9) (solely to the extent of Redemption Dates and the Redemption Prices) and
(10), but solely to the extent any of such terms relate to specific terms
permitted to be established above without the consent of the Noteholders of any
Health Care Note or define such terms as Series Base Reserve Percentage, Series
Dynamic Reserve Floor Percentage, Series Rate Increment and Series Rating
Multiple.
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The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
SECTION 8.2. Supplemental Indentures with Consent of Health Care
Noteholders. With the consent of the Holders of not less than 50% of the then
Aggregate Outstanding Amount of the Health Care Notes of each Series, and upon
satisfaction of the Rating Agency Condition, by act of such Holders delivered
to the Issuer and the Trustee, the Issuer and the Trustee, when authorized by
an Issuer Order, may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture relating to such Series or
of modifying in any manner the rights of the Holders of the Health Care Notes
of such Series under this Indenture; provided, however, no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Health
Care Note of each Series affected thereby:
(1) change the Scheduled Amortization Date or Final Maturity Date
of, or any Payment Date for the payment of any installment of
principal or interest on, any Health Care Note, or reduce the
principal amount thereof, the Series Note Interest Rate (or method of
determination thereof) thereon or the Redemption Price with respect
thereto, change the provision of this Indenture and the related Series
Supplement relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of
Health Care Notes, or change any place of payment where, or in the
coin or currency in which, any Health Care Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article VII,
to the payment of any such amount due on the Health Care Notes on or
after the respective due dates thereof (or, in the case of redemption,
on or after the Redemption Date);
(2) reduce the percentage of the Aggregate Outstanding Amount of
the Health Care Notes of a Series, the consent of the Holders of which
is required for any such supplemental indenture, or the consent of the
Holders of which is required for any action or waiver of compliance
with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(3) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(4) reduce the percentage of the Aggregate Outstanding Amount of
the Health Care Notes required to direct the Trustee to direct the
Issuer to sell or liquidate the Trust Estate pursuant to Section 5.4
or Section 5.11 hereof;
(5) modify any provision of this Section 8.2 or to provide that
certain additional provisions of this Indenture or the Related
Documents cannot be modified or waived without the consent of the
Holder of each Outstanding Health Care Note affected thereby;
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(6) modify any of the provisions of this Indenture or the related
Series Supplement in such manner as to affect the calculation of the
amount of any payment of interest or principal due on any Health Care
Note of any Series on any Payment Date (including the calculation of
any of the individual components of such calculation) or to affect the
rights of the Holders of Health Care Notes of any Series to the
benefit of any provisions for the mandatory redemption of Health Care
Notes of such Series contained herein or in the related Series
Supplement;
(7) provide for payments on Health Care Notes of the same or of
different Series to be other than on a parity basis; or
(8) permit the creation of any Lien ranking prior to or on a
parity with the Lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the Lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Health Care Note of any
Series of the security provided by the Lien of this Indenture.
It shall not be necessary for any Act of Health Care Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section or Section 8.1, the Trustee
shall mail to the Holders of the Health Care Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Trustee to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
SECTION 8.3. Execution of Supplemental Indentures or Amendments to
Sale and Servicing Agreement. In executing, or permitting the additional trusts
created by, any supplemental indenture or any amendment to the Sale and
Servicing Agreement permitted by this Article VIII or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and subject to Sections 6.1 and 6.3 hereof, shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture or such amendment to the Sale and Servicing Agreement is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture or such amendment to
the Sale and Servicing Agreement that affects the Trustee's own rights, duties,
liabilities, or immunities under this Indenture or such agreement or otherwise.
SECTION 8.4. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to each Series of Health Care Notes affected thereby or all Health Care
Notes, and the respective rights, limitations of rights, obligations,
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duties, liabilities and immunities under this Indenture of the Trustee, the
Issuer and the Holders of the Health Care Notes of each Series and other
secured parties hereunder affected thereby shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 8.5. Reference in Health Care Notes to Supplemental
Indentures. Health Care Notes authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article VIII may, and if
required by the Trustee shall, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the Issuer or
the Trustee shall so determine (based upon the advice of counsel), new Health
Care Notes so modified as to conform, in the opinion of the Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Health Care Notes.
SECTION 8.6. Amendments of Sale and Servicing Agreement Without
Consent of Health Care Noteholders. With the consent of Health Care Notes
representing at least 50% of the Aggregate Outstanding Amount of Health Care
Notes of each Series adversely affected thereby, if any, and upon satisfaction
of the Rating Agency Condition, the Trustee may consent to any amendment to the
Sale and Servicing Agreement for any of the following purposes:
(1) to add to the covenants of the Seller, Master Servicer,
Beverly or any Servicer, for the benefit of the Holders of the Health
Care Notes, or to surrender any right or power therein conferred upon
the Seller, Master Servicer, Beverly or any Servicer;
(2) to cure any ambiguity, to correct or supplement any provision
herein or in the Sale and Servicing Agreement which may be
inconsistent with any other provision herein or in the Sale and
Servicing Agreement or to make any other provisions with respect to
matters or questions arising under the Sale and Servicing Agreement;
(3) to make any change necessary to maintain the then current
rating on any Series of Health Care Notes by any Rating Agency;
(4) to amend the definitions of "Facility" and/or of "Ineligible
Receivable" to permit additional facilities and additional types of
Receivables to comply with the requirements for purchase thereof under
the Sale and Servicing Agreement; provided, that: (i) the Rating
Agency Condition shall have been satisfied; and (ii) favorable legal
opinions, in substantially the respective forms of those delivered on
the Effective Date (but with respect to the additional facilities and
Receivables permitted to be sold under the Sale and Servicing
Agreement as a consequence of such amendment), are delivered in
connection with such amendment and (iii) no Amortization Event shall
have occurred or be continuing; and
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(5) to provide for alternative calculation of the Minimum Required
Receivables Balance (or any component thereof).
SECTION 8.7. Amendment of Sale and Servicing Agreement With Consent of
Health Care Noteholders. With the consent of at least 50% of the then Aggregate
Outstanding Amount of Health Care Notes of each Series, and upon satisfaction
of the Rating Agency Condition, the Trustee may consent to any amendment of the
Sale and Servicing Agreement; provided, that, without the consent of all Health
Care Noteholders affected thereby, no such amendment shall:
(1) [intentionally omitted];
(2) provide for payments on Health Care Notes of the same or of
different Series to be other than on a parity basis;
(3) modify any of the payment provisions thereof which may be
applicable to, or benefit, any such Health Care Noteholders; or
(4) permit the creation of any Lien ranking prior to or on a
parity with the Lien of the Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the Lien of the Indenture on any property at any time
subject thereto or deprive the Holder of any Health Care Note of any
Series of the security provided by the Lien of the Indenture.
ARTICLE IX
OPTIONAL REDEMPTION OF HEALTH CARE NOTES
SECTION 9.1. Optional Redemption by Issuer.
(1) The Issuer may, at its option, redeem all but not less than all of
the Health Care Notes of a Series as permitted by the related Series Supplement
on any Redemption Date at the times and at the Redemption Price specified in
such Series Supplement, subject to the conditions set forth below. If the
Issuer shall elect to redeem the Health Care Notes of a Series in full pursuant
to this Section 9.1(a), it shall furnish notice of such election (which shall
be irrevocable) containing the information described in Section 9.2 (together
with evidence satisfactory to the Trustee of compliance with the provisions of
Section 9.1(c)) to the Trustee not later than 45 days prior to the Redemption
Date and shall deposit into the Collection Account (to the extent not already
on deposit) on or prior to 11:00 a.m. New York City time on the third Business
Day prior to the Redemption Date the Redemption Price of the Health Care Notes
to be redeemed. On or prior to 11:00 a.m. New York City time on the Business
Day prior to any Redemption Date, the Trustee, pursuant to an Issuer Order
delivered to the Trustee, shall transfer the Redemption Price from the
Collection Account into the applicable subaccounts of the Distribution Account.
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(2) The Issuer may elect, by Issuer Order delivered to the Trustee on
or before the sixth Business Day prior to the proposed Optional Partial
Redemption Date (which shall include a duly completed form of notice meeting
the requirements of Section 9.2 to be sent to the related Health Care
Noteholders not later than one (1) Business Day thereafter), cause amounts on
deposit in the Collection Account to be applied to the partial redemption of
Health Care Notes of any Series at their Redemption Price; provided, that the
Issuer, by Issuer Order delivered to the Trustee (together with evidence
satisfactory to the Trustee of compliance with the provisions of Section
9.1(c)), may elect to revoke an election for an Optional Partial Redemption
upon payment to the related Health Care Noteholders of any Special Series
Obligations (x) due to such Health Care Noteholders because of any such notice
of Optional Partial Redemption or of such revocation or (y) otherwise due or
owing (on a pro rata basis) in respect of the Health Care Notes being redeemed.
Partial Optional Redemption of Health Care Notes shall take place in minimum
principal amounts of $5,000,000. All Optional Partial Redemption payments shall
be payable to the related Health Care Noteholders pro rata in the manner set
forth in Sections 2.9 and 7.2(g) and (j) of this Indenture. On or prior to
11:00 a.m. New York City time on the third Business Day prior to any Partial
Optional Redemption Date, the Trustee, pursuant to an Issuer Order delivered to
the Trustee, shall either (i) transfer the Redemption Price from the Collection
Account into the applicable subaccounts to the Distribution Account or (ii)
revoke such Optional Partial Redemption. As soon as practicable following
receipt by the Trustee of notice of such revocation, the Trustee shall so
notify each Health Care Noteholder of the related Series pursuant to Section
10.4 of this Indenture.
(3) Notwithstanding the foregoing, the Issuer's right to redeem Health
Care Notes of any Series pursuant to Sections 9.1(a) or 9.1(b) shall be
conditioned on the following:
(1) The Redemption Price may be paid solely from the proceeds of
refinancing all or a portion of such Series of Health Care Notes, from
a sale of Purchased Receivables pursuant to Section 9.4 (in the case
of a redemption in full), or from the application of the proceeds of
Purchased Receivables on deposit in the Collection Account pursuant to
Section 6.3(a)(viii) of the Sale and Servicing Agreement. In no event
shall any funds provided, directly or indirectly, by Beverly or any of
its Affiliates be utilized (except pursuant to sales of Purchased
Receivables pursuant to Section 9.4); and
(2) The Issuer's board of directors shall adopt a resolution
specifically authorizing such redemption.
SECTION 9.2. Form of Optional Redemption Notice. Unless otherwise
specified in the Series Supplement relating to a Series of Health Care Notes,
notice of redemption under Section 9.1 hereof shall be given by the Trustee (x)
by first-class mail, postage prepaid, mailed not less than thirty days nor more
than 45 days prior to the applicable Redemption Date, or (y) by facsimile sent
not less than five (5) Business Days prior to the applicable Partial Optional
Redemption Date, in each case to each Holder of Health Care Notes to be
redeemed, as of the close of business
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on the Record Date preceding the applicable Redemption Date or Partial Optional
Redemption Date at such Holder's address appearing in the Health Care Note
Register.
All notices of redemption shall state:
(1) the Redemption Date or Partial Optional Redemption Date;
(2) the Redemption Price;
(3) the place where such Health Care Notes are to be surrendered
for payment of the Redemption Price (which shall be the office or
agency of the Issuer to be maintained as provided in Section 3.2
hereof) (in the case of a Redemption in full);
(4) that on the Redemption Date or Partial Optional Redemption
Price the Redemption Price will become due and payable and that
interest on the principal portion thereof shall cease to accrue from
and after said date; and
(5) that any Partial Optional Redemption is subject to revocation.
Notice of redemption of the Health Care Notes to be redeemed shall be
given by the Trustee in the name and at the expense of the Issuer. Failure to
give notice of redemption, or any defect therein, to any Holder of any Health
Care Note selected for redemption shall not impair or affect the validity of
the redemption of any other Health Care Note.
SECTION 9.3. Health Care Notes Payable on Redemption Date or Optional
Partial Optional Redemption Date. Notice of redemption having been given as
provided in Section 9.2 hereof, unless such redemption has been revoked
pursuant to Section 9.1(b), the Health Care Notes or portion thereof to be
redeemed, shall on the applicable Redemption Date or Partial Optional
Redemption Date become due and payable at the Redemption Price and, unless the
Issuer shall default in the payment of the Redemption Price, no interest shall
accrue on the Redemption Price for any period after the date to which accrual
interest is calculated for purposes of calculating the Redemption Price.
SECTION 9.4. Sale of Collateral to Effect Redemption. In order to
effect the redemption of all of the Health Care Notes of all Series at the
Redemption Price the Issuer may, by Issuer Order, instruct the Trustee to
effect a sale of all of the Collateral, which Issuer Order shall set forth, for
the Trustee's benefit, the minimum price for which the Collateral can be sold
(as set forth below); provided, that no such sale shall be effected if the
proceeds of such sale (x) are insufficient to pay the aggregate Redemption
Prices of all Series of Health Care Notes and any other amounts due thereon,
hereunder or under any Related Document or (y) are not equal to the "fair
market value" of the Collateral (as set forth below). Such instruction of the
Issuer to the Trustee shall specify the time and place of such proposed sale
and the proposed Person to acquire the Collateral. Fair market value of the
Collateral shall be the amount set forth as the fair market value of the
Collateral in an
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Officer's Certificate of the Master Servicer to the Trustee (upon which
certificate the Trustee may conclusively rely without independent
investigation). The Trustee shall deposit any proceeds of such sale immediately
into the Collateral Account. The purchaser(s) at any such sale shall thereafter
hold the Collateral absolutely, free from any claim or right of whatever kind,
including any equity of redemption, of the Issuer, any such demand, notice,
claim, right or equity being hereby expressly waived and released. The Trustee
shall under no circumstances incur any liability as a result of the sale of the
Collateral, or any part thereof, at any sale conducted in accordance with the
foregoing. The Issuer hereby waives any claims against the Trustee and the
Health Care Noteholders arising by reason of the fact that the price at which
the Collateral may have been sold at any private sale was less than the price
which might have been obtained at a public sale or was less than the then total
unpaid Obligations.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Trustee to take any action under
any provision of this Indenture, the Issuer shall furnish to the Trustee at
Issuer expense (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, and (iii) if this Indenture and any Series Supplement are
required to be qualified under the Trust Indenture Act, an Independent
Certificate from a firm of certified public accountants meeting the applicable
requirements of this Section 10.1 (if such certificate is required by the Trust
Indenture Act), except that, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(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 each such signatory, such
signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
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(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
SECTION 10.2. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Servicer, the Seller, the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the
Seller, the Issuer, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI hereof.
SECTION 10.3. Acts of Health Care Noteholders.
(1) Any request, demand, authorization, direction, notice, consent,
waiver, or other action provided by this Indenture to be given or taken by
Health Care Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Health Care
Noteholders in person or by agents duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are
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delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Health
Care Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1
hereof) conclusive in favor of the Trustee and the Issuer, if made in the
manner provided in this Section.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(3) The ownership of Health Care Notes shall be proved by the Health
Care Note Register.
(4) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Health Care Notes shall bind the
Holder of every Health Care Note issued upon the registration thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Health Care Note.
SECTION 10.4. Notices to Health Care Noteholders; Waiver. Where this
Indenture provides for notice to Health Care Noteholders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class, postage prepaid, to each Health Care
Noteholder entitled to such notice, at his address as it appears on the Health
Care Note Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Health Care Noteholders is given by mail, neither the failure to mail
such notice nor any defect in any notice so mailed to any particular Health
Care Noteholder shall affect the sufficiency of such notice with respect to
other Health Care Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Health Care Noteholders shall be filed with the
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage, or similar activity, it shall be impractical
to mail notice of any event of Health Care Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be a sufficient giving of such notice.
72
<PAGE> 78
Where this Indenture provides for notice to each Rating Agency,
failure to give any such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute
a Default or Event of Default.
SECTION 10.5. Alternative Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Health Care Notes
to the contrary, the Issuer may enter into any agreement with any Holder of a
Health Care Note providing for a method of payment, or notice by the Trustee or
any Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices. The Issuer will furnish to
the Trustee a copy of each such agreement and the Trustee will cause payments
to be made and notices to be given in accordance with such agreements.
SECTION 10.6. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 10.7 Successors and Assigns. All covenants and agreements in
this Indenture by the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 10.8. Separability. In case any provision in this Indenture or
in the Health Care Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 10.9. Benefits of Indenture. Nothing in this Indenture or in
the Health Care Notes, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, and the Health Care
Noteholders, and any other party secured hereunder, and any other Person with
an ownership interest in any part of the Trust Estate, any benefit of any legal
or equitable right, remedy, or claim under this Indenture.
SECTION 10.10 [Intentionally Omitted].
SECTION 10.11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS. THE PARTIES HERETO EACH IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF, OR RELATING TO, THIS AGREEMENT, EACH HEREBY IRREVOCABLY WAIVING ANY
OBJECTION TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING SO BROUGHT AS
WELL AS ANY CLAIM OF INCONVENIENT FORUM. THE PARTIES HERETO EACH HEREBY
CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT, OR ANY DOCUMENT
73
<PAGE> 79
DELIVERED PURSUANT HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE
ADDRESS SPECIFIED AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO ANY OTHER
ADDRESS OF WHICH IT SHALL HAVE GIVEN WRITTEN NOTICE TO THE OTHER PARTIES. THE
PARTIES HERETO EACH WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM
OF ERROR BY REASON OF SUCH SERVICE, IF MADE PURSUANT TO THE TERMS HEREOF, AND
AGREES THAT SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID PERSONAL SERVICE UPON
IT AND SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS. THE
FOREGOING SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING SUIT IN THE
COURTS OF ANY JURISDICTION. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT CAN EFFECTIVELY DO SO UNDER APPLICABLE LAW, ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS.
SECTION 10.12 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 10.13. Nonpetition Covenant. The Trustee or any Health Care
Noteholder as such shall not, prior to the date which is 370 days after the
discharge of this Indenture, acquiesce, petition or otherwise, directly or
indirectly, invoke or cause the Issuer to invoke the process of any
governmental authority for the purpose of commencing or sustaining a case
against the Issuer under any Federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 10.14. Confidentiality. Notwithstanding any provision of this
Indenture to the contrary, in no event shall the Trustee have access to any
patient records required by any law, rule or regulation of any Governmental
Authority, the JCAHO or any similar agency, or any other regulatory or
professional organization to which the Issuer, the Seller or any Selling
Subsidiary belongs or is subject, to be kept confidential; provided, however,
that the Issuer shall use its reasonable efforts to furnish, or cause to be
furnished, information reasonably requested by the Trustee relating to the
Collateral without violating any such law, rule or regulation.
SECTION 10.15. Effect on Existing Indenture. This Indenture amends and
restates the Existing Indenture as of the Effective Date. This Indenture shall
not effect a novation of the obligations of the parties to the Existing
Indenture but instead shall be merely a restatement and, where applicable, an
amendment of the terms governing such obligations.
74
<PAGE> 80
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
BEVERLY FUNDING CORPORATION
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.3
SERIES SUPPLEMENT, dated as of June 1, 1999 (this "Supplement"), by and
between BEVERLY FUNDING CORPORATION, a Delaware corporation (the "Issuer"), and
THE CHASE MANHATTAN BANK (as successor to CHEMICAL BANK), a New York banking
corporation, as trustee under the Indenture (together with its successors in
trust thereunder as provided in the Indenture referred to below, the "Trustee").
PRELIMINARY STATEMENT
Section 8.1(9) of the First Amendment and Restatement dated as of June
1, 1999 to the Indenture between the parties hereto (the "Indenture") provides,
among other things, that the Issuer and the Trustee may at any time and from
time to time enter into one or more indentures supplemental to the Indenture for
the purposes of authorizing the issuance by the Issuer of a Series of Health
Care Notes and specifying the terms thereof. The Issuer has duly authorized the
creation of a Series of Health Care Notes with an initial aggregate principal
amount of $50,000,000 to be known as the Issuer's $50,000,000 Floating Rate
Health Care Receivables-Backed Notes, Series 1999-A (the "Health Care Notes"),
and the Issuer and the Trustee are executing and delivering this Supplement in
order to provide for the Health Care Notes.
All terms used in this Supplement that are defined in the Indenture,
either directly or by reference therein, have the meanings assigned to them
therein, except to the extent such terms are defined or modified in this
Supplement or the context clearly requires otherwise. In the event that any term
or provision contained herein shall conflict with or be inconsistent with any
term or provision contained in the Indenture, the terms and provisions of this
Supplement shall govern.
I. SECTION Designation. The Series of Health Care Notes issued pursuant hereto
shall be designated generally as the Issuer's $50,000,000 Floating Rate Health
Care Receivables-Backed Notes, Series 1999-A.
I. SECTION Interest. Interest on the Health Care Notes shall be determined and
computed as follows:
Interest on the Health Care Notes shall be payable quarterly until the
commencement of the Amortization Period or the Liquidation Period, after which
interest will be payable on the monthly Payment Dates at the rate specified
herein. Interest on the Health Care Notes shall accrue at the Series Note
Interest Rate during the initial Interest Accrual Period and during each
Interest Accrual Period thereafter until the commencement of the Liquidation
Period or the Amortization Period; provided, however, that if an Amortization
Event occurs at any time after the Series Note Interest Rate has been determined
in respect of a three-month Interest Accrual Period, the Series Note Interest
Rate shall remain in effect until the Payment Date coinciding with the last day
of
<PAGE> 2
such three-month Interest Accrual Period. Thereafter, interest on the Health
Care Notes will accrue at the Series Alternate Note Interest Rate.
For purposes of calculating the Series Note Interest Rate or Series
Alternate Note Interest Rate with respect to each Interest Accrual Period
subsequent to the initial Interest Accrual Period, the Trustee shall determine
LIBOR in accordance with the provisions set forth below, taking into account the
duration of the applicable Interest Accrual Period (as set forth in the
definition thereof):
1. On each Interest Determination Date, the Trustee shall determine the annual
rate of interest published or reported by the Telerate Service (by reference to
the screen page currently designated as "Page 3750" on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for Dollar deposits) at approximately 11:00 a.m.
(Chicago, Illinois time) on the Interest Determination Date as being the rate of
interest offered in the London interbank market for three-month or one-month
U.S. Dollar deposits, as applicable, for delivery on the first day of such
Interest Accrual Period. LIBOR shall be such rate of interest. If the offered
rate so appearing is replaced by the corresponding rates of more than one bank,
this sub-paragraph (i) shall be applied, with any necessary consequential
changes, to the arithmetic mean (rounded, if necessary, up to the nearest 1/16
percent) of the rates (being at least two) which so appear, as determined by the
Trustee.
1. If for any reason such offered rate does not so appear, or if the relevant
page is unavailable, the Trustee will request each of the Reference Banks acting
in each case through its respective principal London office to provide the
Trustee with its offered quotation to leading banks for Euro-dollar deposits in
London in respect of an amount equal to the aggregate principal amount of the
Health Care Notes as of the first date in such Interest Accrual Period (taking
into account payments of principal to be made on such date) for a period of
three months or one month, as applicable, as at 11:00 a.m. (Chicago, Illinois
time) on such Interest Determination Date. If at least two of the Reference
Banks provide such offered quotations, LIBOR shall be the arithmetic mean
(rounded, if necessary, up to the nearest 1/16 percent) of the rates so
provided, as determined by the Trustee.
1. If on any Interest Determination Date LIBOR may not be determined pursuant to
sub-paragraph (i) or (ii) above, LIBOR shall be whichever is the higher of:
(x) LIBOR as determined for the last preceding
Interest Accrual Period of the same duration as the applicable
Interest Accrual Period, if any, to which one of the preceding
sub-paragraphs shall have applied; and
(y) the rate per annum which the Trustee determines
to be either (a) the arithmetic mean (rounded, if necessary,
up to the nearest 1/16 percent) of the U.S. Dollar lending
rates which at least two New York City
<PAGE> 3
banks selected by the Trustee are quoting, on the relevant
Interest Determination Date in respect of an amount equal to
the aggregate principal amount of Health Care Notes as of the
first day in such Interest Accrual Period (taking into account
payments of principal to be made on such date), for a period
of three months or one month, to the Reference Banks or those
of them (being at least two in number) to which such
quotations are, in the opinion of the Trustee, being so made,
or (b) if the Trustee can determine no such arithmetic mean,
the lowest U.S. Dollar lending rate which at least two major
New York City banks selected by the Trustee are quoting on
such Interest Determination Date to leading European Banks in
respect of an amount equal to the aggregate principal amount
of Health Care Notes as of the first day in such Interest
Accrual Period (taking into account payments of principal made
on such date), for a period of three months or one month, as
applicable; provided, however, that if the banks so selected
by the Trustee are not quoting lending rates as mentioned
above, the interest rates shall be the interest rates
specified in (x) above.
The Trustee shall, as soon as practicable on each Interest
Determination Date, determine the Series Note Interest Rate and Series Alternate
Note Interest Rate. The Trustee shall calculate the amount of interest due on
the Health Care Notes based on a year of 360 days and actual days elapsed
(rounding the resultant figures to the nearest cent (half a cent being rounded
upwards)).
On each Interest Determination Date, the Trustee shall promptly give
notice of the Series Note Interest Rate and the Series Alternate Note Interest
Rate, regardless of which interest rate is applicable, for the relevant Payment
Date to the Health Care Noteholders in accordance with Section 10.4 of the
Indenture and to the Issuer and the Paying Agents, if any. The Trustee shall
also make such information available to the Health Care Noteholders at the
offices of the Trustee and the Paying Agent. On or prior to 1:00 p.m. (New York
City time) on the third Business Day prior to each Payment Date, Redemption Date
and Optional Partial Redemption Date, the Issuer shall notify the Trustee, the
initial Holder of the Health Care Notes and each other Health Care Noteholder
requesting such information from the Issuer in writing of the specific amounts
of interest, principal and other amounts to be paid to the Health Care
Noteholders on such Payment Date pursuant to Section 7.2 of the Indenture.
In determining LIBOR as set forth above, (i) three-month quotations
shall be used so long as the Series Note Interest Rate is applicable and (ii)
one-month quotations shall be used so long as the Series Alternate Note Interest
Rate is applicable. The establishment of LIBOR, the Series Note Interest Rate,
the Series Alternate Note Interest Rate and the interest accrued on the Health
Care Notes by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon the Health Care Noteholders, the Issuer and any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns.
<PAGE> 4
I. SECTION Authentication Date; Payment Dates; Stated Maturity Date; Principal
Payments; Book-Entry Health Care Notes; Exchange Requirements.
A. Original Issuance. The Health Care Notes shall be authenticated and delivered
by the Trustee to or upon the order of the Issuer on the Closing Date, in an
aggregate principal amount not to exceed $50,000,000, and shall be dated their
date of authentication. The Health Care Notes shall be issued in the minimum
denominations set forth herein and in the Indenture.
A. Payment Dates. Prior to the Amortization Period or Liquidation Period, the
Payment Dates for the Health Care Notes are March 15, June 15, September 15, and
December 15 of each calendar year commencing with the September 1999 Payment
Date, and during the Amortization Period or Liquidation Period, the Payment
Dates for the Health Care Notes are the 15th day of each month thereafter, or if
any such day is not a Business Day, the next succeeding Business Day, in any
event until the repayment of the Health Care Notes in full. In the event an
Amortization Event occurs during an Interest Accrual Period, such Interest
Accrual Period shall be deemed shortened to end on the next following
redetermined Payment Date which occurs at least two Business Days following such
Amortization Event, and all subsequent Interest Accrual Periods shall be
determined based on monthly Payment Dates.
A. Final Maturity Date. The Final Maturity Date for the Health Care Notes, on
which the unpaid principal amount, if any, of the Health Care Notes is due, is
the Payment Date in March 2005.
A. Scheduled Amortization Date, Scheduled Accumulation Date and Accumulation
Period. The Scheduled Amortization Date for the Health Care Notes, on which the
unpaid principal amount, if any, of the Health Care Notes may be paid in part on
an amortizing basis pursuant to Sections 2.9(b) and 7.2(g) of the Indenture, is
the Payment Date in June 2004 and the Scheduled Accumulation Date for the Health
Care Notes, on which amounts will begin to be set aside for the payment of the
unpaid principal amount, if any, of the Health Care Notes, is March 1, 2004. The
Accumulation Period shall begin on the Scheduled Accumulation Date and continue
on each day thereafter to and including May 31, 2004.
A. Principal Payments. Principal will be payable in respect of the Health Care
Notes as provided herein and in the Indenture. All such principal payments shall
be made in accordance with the provisions of Article VII of the Indenture.
A. Book-Entry Health Care Notes. The Health Care Notes will be initially issued
as Book-Entry Health Care Notes, and the Issuer shall execute, and the Trustee
shall authenticate and deliver, such Book-Entry Health Care Notes in accordance
with Section 2.12 of the Indenture.
<PAGE> 5
A. Exchange Requirements.
1. U.S. Note to Temporary Regulation S Note. Prior to the expiration of the
"40-day distribution compliance period" (within the meaning of Regulation S), if
a Health Care Noteholder of a U.S. Note deposited with the Clearing Agency
wishes at any time to exchange its interest in such U.S. Note for an interest in
a Temporary Regulation S Note, or to transfer its interest in such U.S. Note to
a Person who wishes to take delivery thereof in the form of an interest in such
Temporary Regulation S Note, such Health Care Noteholder may, subject to the
rules and procedures of the Clearing Agency and to the requirements set forth in
the following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent interest in such Temporary
Regulation S Note. Upon receipt by the Trustee, as transfer agent, at the
Corporate Trust Office of (1) instructions given in accordance with the Clearing
Agency's procedures from an agent member directing the Trustee to credit or
cause to be credited such Temporary Regulation S Note in an amount equal to the
interest in the U.S. Note to be exchanged or transferred, (2) a written order
given in accordance with the Clearing Agency's procedures containing information
regarding the Euroclear or Cedel account to be credited with such increase and
the name of such account, and (3) a certificate substantially in the form of
Exhibit D-1 given by the transferor (upon which the Trustee may conclusively
rely and shall be protected in so relying), the Trustee, as transfer agent,
shall instruct the Clearing Agency, its nominee, or the custodian for the
Clearing Agency, as the case may be, to reduce or reflect on its records a
reduction of such U.S. Note by the aggregate principal amount of the interest in
such U.S. Note to be so exchanged or transferred and the Trustee, as transfer
agent, shall instruct the Clearing Agency, its nominee, or the custodian for the
Clearing Agency, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of such
Temporary Regulation S Note by the aggregate principal amount of the interest in
such U.S. Note to be so exchanged or transferred, and to credit or cause to be
credited to the account of the Person specified in such instructions (who shall
be the agent member of Euroclear or Cedel, or both, as the case may be) an
interest in such Temporary Regulation S Note equal to the reduction in the
principal amount of such U.S. Note.
1. U.S. Note to Regulation S Note. After the expiration of the "40-day
distribution compliance period" (within the meaning of Regulation S), if a
Health Care Noteholder of a U.S. Note deposited with the Clearing Agency wishes
at any time to exchange its interest in such U.S. Note for an interest in a
Regulation S Note, or to transfer its interest in such Regulation S Note to a
Person who wishes to take delivery thereof in the form of an interest in such
Regulation S Note, such Health Care Noteholder may, subject to the rules and
procedures of the Clearing Agency and to the requirements set forth in the
following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent interest in such Regulation S Note.
Upon receipt by the Trustee, as transfer agent, at the Corporate Trust Office of
(1) instructions given in accordance with the Clearing Agency's procedures from
an agent member directing the Trustee to credit or cause to be credited such
Regulation S Note in an amount equal to the interest in the U.S. Note to be
exchanged or transferred, (2) a written
<PAGE> 6
order given in accordance with the Clearing Agency's procedures containing
information regarding the participant account of the Clearing Agency and such
order to contain information regarding the agent member's account with the
Clearing Agency or Euroclear or Cedel to be credited with such increase and (3)
a certificate substantially in the form of Exhibit D-2 given by the transferor
(upon which the Trustee may conclusively rely and shall be protected in so
relying), the Trustee, as transfer agent, shall instruct the Clearing Agency,
its nominee, or the custodian for the Clearing Agency, as the case may be, to
reduce or reflect on its records a reduction of such U.S. Note by the aggregate
principal amount of the interest in such U.S. Note to be so exchanged or
transferred and the Trustee, as transfer agent, shall instruct the Clearing
Agency, its nominee, or the custodian for the Clearing Agency, as the case may
be, concurrently with such reduction, to increase or reflect on its records an
increase of the principal amount of such Regulation S Note by the aggregate
principal amount of the interest in such U.S. Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions an interest in such Regulation S Note equal to
the reduction in the principal amount of such U.S. Note.
1. Regulation S Note to U.S. Note. If a Health Care Noteholder of a Regulation S
Note that is deposited with the Clearing Agency wishes at any time to exchange
its interest for an interest in a U.S. Note, or to transfer its interest in such
Regulation S Note to a Person who wishes to take delivery thereof in the form of
an interest in such U.S. Note, such Health Care Noteholder may, subject to the
rules and procedures of Euroclear or Cedel and the Clearing Agency, as the case
may be, and to the requirements set forth in the following sentence, exchange or
cause the exchange or transfer or cause the transfer of such interest for an
equivalent interest in such U.S. Note. Upon receipt by the Trustee, as transfer
agent, at the Corporate Trust Office of (1) instructions from Euroclear or Cedel
or the Clearing Agency, as the case may be, directing the Trustee, as transfer
agent, to credit or cause to be credited such U.S. Note equal to the interest in
the Regulation S Note to be exchanged or transferred, such instructions to
contain information regarding the agent member's account with the Clearing
Agency to be credited with such increase, and (2) a certificate substantially in
the form of Exhibit D-3 given by the transferor (upon which the Trustee may
conclusively rely and shall be protected in so relying), the Trustee, as
transfer agent, shall instruct the Clearing Agency, its nominee, or the
custodian for the Clearing Agency, as the case may be, to reduce or reflect on
its records a reduction of such Regulation S Note by the aggregate principal
amount of the interest in such Regulation S Note to be exchanged or transferred,
and the Trustee, as transfer agent, shall instruct the Clearing Agency, its
nominee, or the custodian for the Clearing Agency, as the case may be,
concurrently with such reduction, to increase or reflect on its records an
increase of the principal amount of such U.S. Note by the aggregate principal
amount of the interest in such Regulation S Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions an interest in such U.S. Note equal to the
reduction in the principal amount of such Regulation S Note.
<PAGE> 7
1. Temporary Regulation S Note to Regulation S Note. After the expiration of the
"40-day distribution compliance period" (within the meaning of Regulation S),
interests in a Temporary Regulation S Note, as to which the Trustee has received
from Euroclear or Cedel, as the case may be, a certificate substantially in the
form of Exhibit E (upon which the Trustee may conclusively rely and shall be
protected in so relying) to the effect that Euroclear or Cedel, as applicable,
has received a certificate substantially in the form of Exhibit C from the
Health Care Noteholder of a Temporary Regulation S Note, will be exchanged on
and after such "40-day distribution compliance period" for interests in a
Regulation S Note. The Trustee shall effect such exchange by delivering to the
Clearing Agency or its agent for credit to the respective Health Care Noteholder
accounts, a duly executed and authenticated Regulation S Note, representing the
principal amount of interests in such Temporary Regulation S Note initially
exchanged for interests in such Regulation S Note. The delivery to the Trustee
by Euroclear or Cedel of the certificate or certificates referred to above may
be relied upon by the Issuer and the Trustee as conclusive evidence that the
certificate or certificates referred to therein has or have been delivered to
Euroclear or Cedel pursuant to the terms of this Indenture and such Temporary
Regulation S Note. Upon any exchange of interests in a Temporary Regulation S
Note for interests in a Regulation S Note, the Trustee shall endorse such
Temporary Regulation S Note to reflect the reduction in the principal amount
represented thereby by the amount so exchanged and shall endorse such Regulation
S Note to reflect the corresponding increase in the amount represented thereby.
1. Other Exchanges. In the event that a Book-Entry Note is exchanged for a
Definitive Note pursuant to Section 2.14 of the Indenture, such exchange and any
subsequent exchange or transfer of such Definitive Notes shall only be made in
accordance with Section 2.15 of the Indenture and with such procedures as are
substantially consistent with the provisions of clauses (i) through (iv) and as
may be from time to time adopted by the Issuer and the Trustee.
A. Initial Deposit to Reserve Subaccount. The Issuer shall pay to the Trustee on
the Closing Date an amount equal to the Reserve Deficiency for deposit by the
Trustee into the Reserve Subaccount.
I. SECTION Optional Redemption. The Health Care Notes are subject (upon
compliance with the conditions specified in the Indenture, including, without
limitation, Section 9.1 of the Indenture) to redemption in whole on any
Redemption Date, or in part on any Optional Partial Redemption Date, at the
option of the Issuer for a redemption price (the "Redemption Price") equal to
(i) the following percentages of the principal amount thereof plus accrued
interest to the Redemption Date plus (ii) any Series Special Obligations owing
in respect of the Health Care Notes being redeemed accrued to the Redemption
Date or Optional Partial Redemption Date, as applicable, or otherwise payable in
connection with such redemption.
<PAGE> 8
<TABLE>
<CAPTION>
Payment Date Percentage
------------ ----------
<S> <C>
June 15, 2000 100.500%
thereafter, prior to June 15, 2001 100.375%
thereafter, prior to June 15, 2002 100.250%
thereafter, prior to June 15, 2003 100.125%
thereafter 100.000%
</TABLE>
The Issuer's ability to pay any premium in connection with any optional
redemption of Health Care Notes has not been rated by the Rating Agency, and
payment to the Health Care Noteholders of such amounts are subject to the
priority of payments set forth in Section 6.3 of the Sale and Servicing
Agreement and Section 7.2 of the Indenture.
I. SECTION Series Special Obligations.
The following obligations constitute "Series Special Obligations" for
purposes of this Supplement.
A. Default Interest. To the extent allowable by law, any payments due hereunder
which are not paid when due (whether by acceleration or otherwise, and
irrespective of any grace period applicable thereto) shall bear interest at a
default rate of interest equal to 2% in excess of the Series Note Interest Rate
or Series Alternate Note Interest Rate then in effect, as applicable, which
default rate shall remain in effect until such payments and any interest thereon
have been paid in full.
A. Increased Costs. If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) the compliance with
any directive guideline or request from any central bank or other governmental
authority (whether or not having the force of law), there shall be any increase
in the cost to any Holder of agreeing to make or making, funding or maintaining
its investment in the Health Care Notes, then the Issuer shall, within three
days following a written request (which request shall set forth in reasonable
detail the basis for requesting such amounts) by such Holder to the Issuer and
the Master Servicer, pay to such Holder additional amounts sufficient to
compensate such Holder for such increased cost. Any such request submitted to
the Issuer and the Master Servicer by such Holder shall be conclusive and
binding for all purposes, absent manifest error.
If any Holder determines that compliance with any law or regulation or
any guidelines or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Holder or any corporation
controlling such Holder and that the amount of such capital is increased by or
based upon the existence of such Holder's holding of any Health Care Notes,
then, upon a written request (which request shall set forth in reasonable detail
the basis for requesting such amounts) by such Holder to the Issuer and the
Master Servicer, the Issuer shall within three days following such request pay
to such Holder, as specified from time to time by such Holder, an additional
amount sufficient to compensate such Holder in light of such circumstances, to
the extent
<PAGE> 9
that such Holder reasonably determines such increase in capital to be allocable
to the existence of such Holder's Health Care Notes. Any such request submitted
to the Issuer and the Master Servicer by such Holder shall be conclusive and
binding for all purposes, absent manifest error.
A. Requirements of Law. If the existence of or compliance with (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof or (ii)
any request, guideline or directive from any central bank or other governmental
authority (whether or not having the force of law) issued or occurring after the
date of this Agreement:
a) does or shall subject any Holder to any tax of any kind whatsoever with
respect to this Agreement, or does or shall change the basis of taxation of
payments to any Holder on account of Collections, interest or any other amounts
payable hereunder (excluding taxes imposed on the overall net income or gross
receipts of any Holder, and franchise taxes imposed on any Holder, by the
jurisdiction under the laws of which any Holder is organized or a political
subdivision thereof);
a) 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, purchases, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
any Holder which are not otherwise included in the determination of the Series
Note Interest Rate or the Series Alternate Note Interest Rate hereunder; or
a) does or shall impose on any Holder any other condition;
and the result of any of the foregoing is (x) to increase the cost to any Person
acting as agent for any Holder, or of any Holder agreeing to purchase or
purchasing or maintaining the ownership of a Health Care Note in respect of
which interest is computed by reference to the Series Note Interest Rate or the
Series Alternate Note Interest Rate or (y) to reduce any amount receivable
hereunder (whether directly or indirectly) funded or maintained by reference to
the Series Note Interest Rate or the Series Alternate Note Interest Rate, then,
in any such case, within 15 days demand by any Holder the Issuer shall pay any
Holder any additional amounts sufficient and reasonably calculated to compensate
any Holder for such additional cost or reduced amount receivable; provided,
however, that such amount shall be reduced by the net amount of any off setting
tax benefit which any Holder receives as a result of such additional cost. All
such amounts shall be payable as incurred. A certificate from any Holder to the
Issuer certifying, in reasonably specific detail, the basis for, calculation of,
and amount of such additional costs or reduced amount receivable shall be
conclusive in the absence of manifest error; provided, however, that no Holder
shall be required to disclose any confidential or tax planning information in
any such certificate.
A. Breakage Costs. The Issuer shall compensate each Holder, within ten days upon
written request therefor (which request shall set forth in reasonable detail
<PAGE> 10
the basis for requesting such amounts) by that Holder to the Issuer and the
Master Servicer for all losses, expenses and liabilities (including, without
limitation, any loss or expense arising from interest or fees paid or payable by
that Holder to lenders of funds borrowed by it or other funding arrangements
entered into by it to make or carry its investment in the Health Care Notes and
any loss sustained by that Holder in connection with the termination of such
funding arrangements or the re-employment of such funds), that such Holder may
sustain: (i) if any payment or prepayment (by acceleration of maturity or
otherwise) of the Health Care Notes occurs on a date that is not the last day of
an Interest Accrual Period, (ii) if any payment or prepayment (by acceleration
of maturity or otherwise) of the Health Care Notes is not made on any date and
in the amount specified in a notice given by the Issuer at least three (3)
Business Days prior to any payment to such Holder, or (iii) as a consequence of
any other default by the Issuer to repay principal or interest in respect of the
Health Care Notes when required by the terms of this Agreement. The
determination of amounts payable under this Subsection 5(d) by such Holder shall
be conclusive and binding in all matters in the absence of manifest error.
A. Series Special Obligations Not Rated. The Issuer's ability to pay any Series
Special Obligation in connection with the Health Care Notes has not been rated
by the Rating Agency, and payment to the Health Care Noteholders of such amounts
are subject to the priority of payments set forth in Section 6.3 of the Sale and
Servicing Agreement and Section 7.2 of the Indenture.
I. SECTION Certain Defined Terms. With respect to the Health Care Notes, the
following definitions shall apply:
"Accumulation Amount" shall mean an amount equal to 1.66% of the Net
Note Balance of the Health Care Notes and increasing by 1.66% for each Business
Day thereafter during the Accumulation Period; provided, however, such amount
shall not exceed the Net Note Balance of the Health Care Notes.
"Authenticating Agent" shall mean the Trustee.
"Cedel" shall mean Cedel S.A.
"Closing Date" shall mean June 30, 1999.
"Euroclear" shall mean The Euroclear System.
"Health Care Noteholder" shall mean the Holder of any Health Care Note.
"Interest Accrual Period" shall mean, with respect to any Payment Date,
the period commencing on and including the prior Payment Date (or the Closing
Date in the case of the initial Payment Date) and ending on and including the
day preceding such Payment Date.
<PAGE> 11
"Interest Determination Date" shall mean the second business day
preceding the commencement of each Interest Accrual Period. The term "business
day" for purposes of this definition only shall mean a day on which the Trustee
and commercial banks located in the City of London are open for the transaction
of commercial banking business.
"LIBOR" shall mean, for each Interest Accrual Period, the London
interbank offered rate for three-month or one-month U.S. Dollar deposits, as
applicable, determined on the related Interest Determination Date by the Trustee
pursuant to the provisions of Section 2 of this Supplement.
"Minimum Denomination" shall mean $1,000,000.
"Payment Date" has the meaning determined in accordance with Section
3(b) of this Supplement.
"Reference Banks" shall mean, collectively, Morgan Guaranty Trust
Company of New York and The Chase Manhattan Bank.
"Regulation S" shall mean Regulation S promulgated under the Securities
Act of 1933, as amended and any successor regulation thereto.
"Regulation S Note" shall mean a note representing a Health Care Note
offered and sold outside the United States in reliance on Regulation S issued in
exchange for a Temporary Regulation S Note sold after the expiration of the
"40-day distribution compliance period" (within the meaning of Regulation S) in
substantially the form set forth in Exhibit B-2 of this Supplement.
"Required Reserve" shall mean the sum of the Servicing Fees, the
Trustee Fee and interest on the Health Care Notes accrued or to accrue and
payable on the next quarterly Payment Date or the next three monthly Payment
Dates, as applicable (or, if the senior unsecured long-term debt of Beverly
Enterprises, Inc. is rated "B3" or lower by Moody's, the next two quarterly
Payment Dates or the next six monthly Payment Dates, as applicable).
"Reserve Deficiency" shall mean the excess, if any, of (i) the Required
Reserve for the Health Care Notes over (ii) the amount on deposit in the Reserve
Subaccount for the Health Care Notes.
"Scheduled Accumulation Date" has the meaning determined in accordance
with Section 3(d) of this Supplement.
"Scheduled Amortization Date" has the meaning determined in accordance
with Section 3(d) of this Supplement.
"Series Alternate Note Interest Rate" shall equal 6.0675% per annum,
with respect to the initial Interest Accrual Period, and with respect to any
applicable Interest Accrual
<PAGE> 12
Period thereafter, shall be a per annum rate equal to the Series Interest Rate
Spread plus one-month LIBOR determined as of the related Interest Determination
Date.
"Series Base Reserve Percent" shall mean 2.0%.
"Series Dynamic Reserve Floor Percent" shall mean 12.0%.
"Series Interest Rate Spread" shall mean, with respect to any Interest
Accrual Period, the percentage equal to .70%.
"Series Liquidation Payment Frequency" shall mean a monthly Payment
Date frequency applicable during the Liquidation Period or Amortization Period.
"Series Note Interest Rate" shall equal 6.0675% per annum with respect
to the initial Interest Accrual Period and, with respect to each applicable
Interest Accrual Period thereafter, shall be a per annum rate equal to the
Series Interest Rate Spread plus three-month LIBOR determined as of the related
Interest Determination Date.
"Series Rate Increment" shall equal 1.0%.
"Series Rating Multiple" shall mean 3.
"Series Special Obligations" shall have the meaning set forth in
Section 5 of this Supplement.
"Temporary Regulation S Note" shall mean a note representing a
temporary Health Care Note offered and sold outside the United States in
reliance on Regulation S in substantially the form set forth in Exhibit B-1 of
this Supplement.
"U.S. Note" shall mean a note representing a Health Care Note offered
and sold within the United States in substantially the form set forth in Exhibit
A of this Supplement.
Further, "Maximum Rate" shall not be applicable, nor have a definition,
for purposes of the Health Care Notes and this Supplement.
I. SECTION Form of the Health Care Notes. The Health Care Notes shall be in the
forms of Exhibits A, B-1 and B-2 hereto.
I. SECTION Copies to Holders. At the written request of any Noteholder, the
Trustee shall deliver to such requesting Noteholder a copy of the current
Monthly Trustee Report after receipt thereof by the Trustee.
I. SECTION Ratification of Agreement. As supplemented by this Supplement, the
Indenture is in all respects ratified and confirmed and the Indenture, as so
<PAGE> 13
supplemented by this Supplement, respectively, shall be read, taken, and
construed as one and the same instrument.
I. SECTION Counterparts. This Supplement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all of such counterparts shall together constitute but one and the same
instrument.
I. SECTION GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. THE
PARTIES HERETO EACH IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF
NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO,
THIS AGREEMENT, EACH HEREBY IRREVOCABLY WAIVING ANY OBJECTION TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING SO BROUGHT AS WELL AS ANY CLAIM OF
INCONVENIENT FORUM. THE PARTIES HERETO EACH HEREBY CONSENTS TO PROCESS BEING
SERVED IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, OR ANY
DOCUMENT DELIVERED PURSUANT HERETO BY THE MAILING OF A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS
RESPECTIVE ADDRESS SPECIFIED AT THE TIME FOR NOTICES UNDER THIS AGREEMENT OR TO
ANY OTHER ADDRESS OF WHICH IT SHALL HAVE GIVEN WRITTEN NOTICE TO THE OTHER
PARTIES. THE PARTIES HERETO EACH WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL CLAIM OF ERROR BY REASON OF SUCH SERVICE, IF MADE PURSUANT TO THE TERMS
HEREOF, AND AGREES THAT SERVICE IN SUCH MANNER SHALL CONSTITUTE VALID PERSONAL
SERVICE UPON IT AND SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS. THE FOREGOING SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO TO BRING
SUIT IN THE COURTS OF ANY JURISDICTION. THE PARTIES HERETO EACH HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT CAN EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SUPPLEMENT OR ANY OF THE RELATED
DOCUMENTS.
I. SECTION Rule 144A. So long as any of the Health Care Notes are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act of
1933, the Issuer shall, unless it becomes subject to and complies with the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended,
<PAGE> 14
or rule 12g3-2(b) thereunder, provide to any Health Care Noteholder or Health
Care Note Owner of such restricted securities, or to any prospective Health Care
Noteholder or Health Care Note Owner of such restricted securities designated by
a Health Care Noteholder or Health Care Note Owner, upon the request of such
Health Care Noteholder or prospective Health Care Noteholder or Health Care Note
Owner, any information required to be provided by Rule 144A(d)(4) under the
Securities Act of 1933.
<PAGE> 15
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the date first above written.
BEVERLY FUNDING CORPORATION, as Issuer
By:
--------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 16
EXHIBIT A
FORM OF U.S. NOTE
PRINCIPAL PAYMENTS OF THIS U.S. NOTE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS U.S. NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS U.S. NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY
LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. NO U.S.
NOTE, OR INTEREST THEREIN, MAY BE OFFERED, SOLD OR TRANSFERRED (INCLUDING BY
PLEDGE OR HYPOTHECATION) UNLESS (A) THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS ARE
COMPLIED WITH, OR (B) SUCH OFFER, SALE OR TRANSFER IS MADE TO A PERSON (i) THAT
THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ACTING
FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AN
AGENT FOR OTHERS (WHICH OTHERS ARE QIBS) TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT OR (ii)
IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES
ACT.
NO EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA"), AND NO OTHER PLAN SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE"), WITH RESPECT TO WHICH NESBITT BURNS
SECURITIES INC., OR BEVERLY FUNDING CORPORATION OR THE CHASE MANHATTAN BANK IS A
"PARTY IN INTEREST" (WITHIN THE MEANING OF SECTION 3(14) OF ERISA), OR A
"DISQUALIFIED PERSON" (WITHIN THE MEANING OF SECTION 4975 OF THE CODE), MAY
PURCHASE THIS U.S. NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND THE
HOLDING OF THIS U.S. NOTE OR SUCH INTEREST BY SUCH PLAN (OR ANY ENTITY THE
ASSETS OF WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT TO A
STATUTORY OR ADMINISTRATIVE EXEMPTION.
SECTION 2.15 OF THE INDENTURE AND SECTION 3 OF THE SUPPLEMENT (EACH AS DEFINED
BELOW) CONTAIN FURTHER RESTRICTIONS ON THE
<PAGE> 17
TRANSFER AND RELEASE OF THIS U.S. NOTE. EACH TRANSFEREE OF THIS U.S. NOTE, BY
ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS U.S. NOTE, SUBJECT TO THE
FOREGOING RESTRICTIONS ON TRANSFERABILITY AND RESALE. BY ACCEPTANCE HEREOF, THE
HOLDER OF THIS U.S. NOTE AGREES TO THE TERMS AND CONDITIONS.
<PAGE> 18
BEVERLY FUNDING CORPORATION
Floating Rate Health Care Receivables-Backed Notes,
Series 1999-A
NO. ___ $___________________
CUSIP 087862AA6
Beverly Funding Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of FIFTY MILLION ($50,000,000.00) DOLLARS (or such smaller
amount as shall be the outstanding principal amount of this U.S. Note shown in
Schedule A hereto), payable in installments on each Payment Date in accordance
with the Indenture commencing on the earliest of (x) the date determined as
provided on the reverse hereof (the "Scheduled Amortization Date"), (y) the date
of acceleration of this U.S. Note following the occurrence of an Event of
Default and (z) the commencement of the Amortization Period, and ending on or
before the Payment Date in March 2005 (the "Final Maturity Date"). The Issuer
also promises to pay interest on each Payment Date at the rate per annum
specified in the Supplement and the Indenture. Interest on the unpaid principal
amount on this U.S. Note will accrue for each Interest Accrual Period (which
initial Interest Accrual Period will commence on June 30, 1999). Such principal
of and interest on this U.S. Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this U.S. Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this U.S. Note shall be applied in the manner set forth
in the Indenture referred to on the reverse hereof.
Reference is made to the further provisions of this U.S. Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this U.S. Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this U.S. Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
<PAGE> 19
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer.
Dated: BEVERLY FUNDING CORPORATION
-------------
By:
--------------------------------------
Name:
Title:
This is one of the Health Care Notes referred to in the within
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:
------------------------------
Authorized Signatory
<PAGE> 20
This U.S. Note is one of a duly authorized issue of Health Care Notes
of the Issuer, designated as its Floating Rate Health Care Receivables-Backed
Notes, Series 1999-A (herein called the "Health Care Notes"), issued and to be
issued in one or more Series, and this U.S. Note is one of the Health Care Notes
designated as the Issuer's Series 1999-A Health Care Notes (herein called the
"Series 1999-A Health Care Notes"), all issued and to be issued under the First
Amendment and Restatement dated as of June 1, 1999 to the Indenture dated as of
December 1, 1994 and a Series Supplement (the "Supplement") thereto with respect
to the Series 1999-A Health Care Notes dated as of June 1, 1999 (such Indenture,
as supplemented by the Supplement, and as may be further supplemented or amended
from time to time, is herein called the "Indenture"), both between the Issuer
and The Chase Manhattan Bank, as trustee (the "Trustee", which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights thereunder of the Issuer, the Trustee and the Holders of the Health Care
Notes. All terms used in this U.S. Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended. In the event of any conflict or
inconsistency between this U.S. Note and the Indenture, the Indenture shall
control.
THE SERIES 1999-A HEALTH CARE NOTES AND ANY OTHER SERIES OF HEALTH CARE
NOTES ISSUED BY THE ISSUER ARE AND WILL BE EQUALLY AND RATABLY SECURED BY THE
COLLATERAL PLEDGED AS SECURITY THEREFOR AS PROVIDED IN THE INDENTURE, AND THE
SERIES 1999-A HEALTH CARE NOTES WILL RANK PARI PASSU WITH ANY OTHER SERIES OF
HEALTH CARE NOTES ISSUED UNDER THE INDENTURE BY THE ISSUER OR TO BE ISSUED
THEREUNDER.
The principal of this U.S. Note shall be payable no later than the
Final Maturity Date. Principal may be payable in whole earlier either because
(x) an Event of Default shall have occurred and be continuing and the Health
Care Notes have been accelerated in accordance with Section 5.2 of the
Indenture, or (y) the Issuer shall have called for the redemption in full of the
Series 1999-A Health Care Notes pursuant to Section 9.1 of the Indenture. In
addition, payments of principal on this U.S. Note may be made in whole or in
part (x) on each Payment Date beginning with the Payment Date in June 2004 (the
"Scheduled Amortization Date"), (y) on any Optional Partial Redemption Date if
an Optional Partial Redemption has been elected by the Issuer to be made
pursuant to Section 9.1 of the Indenture or (z) on any Payment Date following
the occurrence of an Amortization Event under the Sale and Servicing Agreement,
until paid in full or required to be paid in full upon the Final Maturity Date.
All principal payments on the Health Care Notes shall be made pro rata to the
Health Care Noteholders entitled thereto.
Payments of interest on this U.S. Note are due and payable on each
Payment Date, together with any installment of principal, to the extent not in
full payment of this U.S. Note, required to be made on such Payment Date, and
shall be made by check mailed to the Person whose name appears as the registered
Holder of this U.S. Note (or one or more Predecessor Health Care Notes) on the
Health Care Note Register as of the close of business on the last day of the
month preceding the Payment Date (the "Record Date"),
<PAGE> 21
except that with respect to Health Care Notes registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.) or in the name of a Holder of at least $5,000,000 in initial
principal amount of Health Care Notes of any Series, payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee or Holder in writing in form satisfactory to the Trustee at least five
(5) Business Days prior to such Payment Date. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it appears on the
Health Care Note Register as of the applicable Record Date without requiring
that this U.S. Note be submitted for notation of payment, and the mailing of
such check shall constitute payment of the amount thereof regardless of whether
such check is returned undelivered. Any reduction in the principal amount of
this U.S. Note (or any one or more Predecessor Health Care Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this U.S. Note and of any Health Care Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount and all other
amounts owing in respect of this U.S. Note on a Payment Date, then the Trustee,
in the name of and on behalf of the Issuer, will notify the Person who was the
registered Holder hereof as of the Record Date preceding such Payment Date by
notice mailed no later than ten days prior to such Payment Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this U.S. Note at the Trustee's principal corporate trust office or at the
office of the Trustee's agent appointed for such purposes located in the City of
New York.
To the extent allowable by law, any payments (including interest) due
hereunder which are not paid when due (whether by acceleration or otherwise, and
irrespective of any grace period applicable thereto) shall bear interest at a
default rate of interest equal to 2% in excess of the Series Note Interest Rate
or Series Alternate Note Interest Rate, as applicable, which default rate shall
remain in effect until such payments and any interest accrued thereon have been
paid in full. In addition, under certain circumstances, the holders of the
Health Care Notes will be entitled to payment of certain Series Special
Obligations and other amounts pursuant to the Indenture and the Supplement.
As provided in the Indenture, the Series 1999-A Health Care Notes may
be redeemed, in whole or in part, at the option of the Issuer on any Payment
Date, or in part, at the option of the Issuer, on any Optional Partial
Redemption Date, as applicable, at the Redemption Price, subject to the
conditions set forth in Section 9.1 of the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this U.S. Note may be registered on the Health Care
Note Register of the Issuer, upon surrender of this U.S. Note for registration
of transfer at the office or agency designated by the Issuer pursuant to the
Indenture, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by a
commercial bank or trust company located, or having a correspondent located, in
the
<PAGE> 22
City of New York or the city in which the Corporate Trust Office is located, or
a member firm of a national securities exchange, and such other documents as the
Trustee may require, and thereupon one or more new Health Care Notes of
authorized denomination and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this U.S. Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Prior to the due presentment for registration of transfer of this U.S.
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this U.S. Note (as of the day of determination or
as of such other date as may be specified in the Indenture) is registered as the
owner hereof for all purposes, whether or not this U.S. Note be overdue, and
neither the Issuer, the Trustee, nor any such agent shall be affected by notice
to the contrary.
In connection with its acquisition of a U.S. Note, each purchaser will
be deemed to represent that at least one of the following statements is an
accurate representation as to the source of funds to be used by it to acquire
and hold the U.S. Note: (i) if it is an insurance company, either (1) any
employee benefit plans subject to Part 4, Subtitle B, Title I of Employee
Retirement Security Act of 1974, as amended ("ERISA"), plans within the meaning
of Section 497(e)(1) of the Code (including an individual retirement account or
Keogh plan) and persons treated as using "plan assets" of such plans pursuant to
the United States Department of Labor Regulation Section 2510.3-101 or other
applicable law (each a "Benefit Plan") and to any participant or beneficiary of
such Benefit Plan (including any annuitant) are not affected in any manner by
the investment performance of the separate account; or (2) the source is an
"insurance company general account" within the meaning of Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60, and the amount of
reserves and liabilities for the contract(s) held by or on behalf of each
Benefit Plan that has an interest in such prospective transferee's general
account as a contract holder, together with the amount of reserves and
liabilities for the general account contracts held by or on behalf of any such
other Benefit Plan maintained by the same employer (or an affiliate thereof) or
by the same employee organization, does not exceed and, so long as such U.S.
Note is held by such insurance company general account, will not exceed (unless
no portion of such excess results from an increase in the assets allocated to
such insurance company general account by such a Benefit Plan, not including the
reinvestment of such insurance company general account's earnings as assets
allocated to such insurance company general account by such a Benefit Plan), 10%
of the total reserves and liabilities of such prospective transferee's general
account plus surplus as determined pursuant to the provisions of Section I(a) of
PTCE 95-60; or (ii) its acquisition and holding of the U.S. Note will not give
rise to a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code; or (iii) the source does not include assets of any
Benefit Plan. The purchaser shall also be deemed to agree not to sell or
otherwise transfer the U.S. Note to any person
<PAGE> 23
without obtaining the same representation and warranties and the same
obligations from such purchaser or other transferee.
The Indenture permits, pursuant to the conditions therein set forth,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Health Care Notes of a Series under
the Indenture at any time by the Issuer with the consent of the Holders of
Health Care Notes specified in the Indenture. The Indenture also contains
provisions permitting the Holders of Health Care Notes of a Series representing
specified percentages of the Aggregate Outstanding Amount of the Health Care
Notes of such Series, on behalf of the Holders of all the Health Care Notes of
such Series, to take certain actions which may affect other Holders, including
waiving compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
action, consent or waiver by the Holder of this U.S. Note (or any one or more
Predecessor Health Care Notes) shall be conclusive and binding upon such Holder
and upon all future Holders of this U.S. Note and of any Health Care Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such action, consent or waiver is made upon this U.S.
Note. The Indenture also permits the Trustee to amend certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Health Care Notes issued thereunder.
The Series 1999-A Health Care Notes are issuable only in registered
form in denominations as provided in the Indenture and the Supplement, subject
to certain limitations therein set forth.
THIS U.S. NOTE, THE INDENTURE AND THE SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
No reference herein to the Indenture and no provision of this U.S. Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this U.S.
Note at the times, place, and rate, and in the coin or currency herein
prescribed.
The Holder of this U.S. Note agrees that it will not, prior to the date
which is 370 days after the discharge of the Indenture, acquiesce, petition or
otherwise, directly or indirectly, invoke or cause the Issuer to invoke the
process of any governmental authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property or ordering the winding up or liquidation of
the affairs of the Issuer.
<PAGE> 24
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns, and
transfers unto ___________________
Please insert Social Security or other identifying number of
assignee:
----------------------
the within Health Care Note of Beverly Funding Corporation (the "Issuer")
standing in the name(s) of the undersigned in the Health Care Note Register of
the Issuer and does hereby irrevocably constitute and appoint ______________
attorney to transfer such Health Care Note in such Health Care Note Register,
with full power of substitution in the premises.
Dated:
--------------- [SIGNATURE]
---------------------------
[SIGNATURE]
---------------------------
Notice: The signature(s) to
this assignment must
correspond with the name(s)
as written upon the face of
this U.S. Note in every
particular without
alteration or any change
whatsoever. The
signature(s) must be
guaranteed by a commercial
bank or trust company
located, or having a
correspondent location, in
the City of New York or the
city in which the corporate
trust office is located, or
by a member firm of a
national securities
exchange. Notarized or
witnessed signatures are
not acceptable as
guaranteed signatures.
Signature Guarantee:
- --------------------------------------------------------------------------------
Name of Institution
- --------------------------------------------------------------------------------
Authorized Officer
- --------------------------------------------------------------------------------
<PAGE> 25
SCHEDULE A
SCHEDULE OF EXCHANGES
The following exchanges of the Health Care Notes for Health Care Notes
represented by this U.S. Note have been made:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal amount of
Principal Amount of Change in principal this U.S. Note Notation made by or
this U.S. Note as of amount of this U.S. following such on behalf of the
June __, 1999 Date exchange made Note due to exchange exchange Issuer
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
$0.00
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
EXHIBIT B-1
FORM OF TEMPORARY REGULATION S NOTE
THE PRINCIPAL OF THIS TEMPORARY REGULATION S NOTE IS PAYABLE IN INSTALLMENTS AS
SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
TEMPORARY REGULATION S NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE
FACE HEREOF.
THIS TEMPORARY REGULATION S NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN
SECURITIES LAWS. NO TEMPORARY REGULATION S NOTE, OR INTEREST THEREIN, MAY BE
OFFERED, SOLD OR TRANSFERRED (INCLUDING BY PLEDGE OR HYPOTHECATION) UNLESS (A)
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS ARE COMPLIED WITH, OR (B) SUCH OFFER, SALE OR
TRANSFER IS MADE TO A PERSON (i) THAT THE TRANSFEROR REASONABLY BELIEVES AFTER
DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF
OTHERS) OR AS A FIDUCIARY OR AN AGENT FOR OTHERS (WHICH OTHERS ARE QIBS) TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT OR (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT.
NO EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA"), AND NO OTHER PLAN SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE"), WITH RESPECT TO WHICH NESBITT BURNS
SECURITIES INC., OR BEVERLY FUNDING CORPORATION OR THE CHASE MANHATTAN BANK IS A
"PARTY IN INTEREST" (WITHIN THE MEANING OF SECTION 3(14) OF ERISA), OR A
"DISQUALIFIED PERSON" (WITHIN THE MEANING OF SECTION 4975 OF THE CODE), MAY
PURCHASE THIS TEMPORARY REGULATION S NOTE OR ANY INTEREST HEREIN, UNLESS SUCH
PURCHASE AND THE HOLDING OF THIS TEMPORARY REGULATION S NOTE OR SUCH INTEREST BY
SUCH PLAN (OR ANY ENTITY THE ASSETS OF WHICH
<PAGE> 27
CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT TO A STATUTORY OR
ADMINISTRATIVE EXEMPTION.
SECTION 2.15 OF THE INDENTURE AND SECTION 3 OF THE SUPPLEMENT (EACH AS DEFINED
BELOW) CONTAIN FURTHER RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS TEMPORARY
REGULATION S NOTE. EACH TRANSFEREE OF THIS TEMPORARY REGULATION S NOTE, BY
ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED THIS TEMPORARY REGULATION S NOTE,
SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY AND RESALE.
BY ACCEPTANCE HEREOF, THE HOLDER OF THIS TEMPORARY REGULATION S NOTE AGREES TO
THE TERMS AND CONDITIONS SET FORTH IN THE INDENTURE AND THE SUPPLEMENT AND
HEREIN.
<PAGE> 28
BEVERLY FUNDING CORPORATION
Floating Rate Health Care Receivables-Backed Notes,
Series 1999-A
NO. ____
$
------------------
CUSIP (CINS) NO. 087862AA6
ISIN US087862AA69
Common Code
--------
Beverly Funding Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to [CEDE & CO.] or registered
assigns, the principal sum of FIFTY MILLION ($50,000,000) DOLLARS (or such
smaller amount as shall be the outstanding principal amount of this Temporary
Regulation S Note shown in Schedule A hereto), payable in installments on each
Payment Date in accordance with the Indenture commencing on the earliest of (x)
the date determined as provided on the reverse hereof (the "Scheduled
Amortization Date"), (y) the date of acceleration of this Temporary Regulation S
Notes following the occurrence of an Event of Default and (z) the commencement
of the Amortization Period, and ending on or before the Payment Date in March
2005 (the "Final Maturity Date"). The Issuer also promises to pay interest on
each Payment Date at the rate per annum specified in the Supplement and the
Indenture. Interest on the unpaid principal amount on this Temporary Regulation
S Note will accrue for each Interest Accrual Period (which initial Interest
Accrual Period will commence on June 30, 1999). Such principal of and interest
on this Temporary Regulation S Note shall be paid in the manner specified on the
reverse hereof
The principal of and interest on this Temporary Regulation S Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All payments
made by the Issuer with respect to this Temporary Regulation S Note shall be
made by the Issuer with respect to this Temporary Regulation S Note shall be
applied in the manner set forth in the Indenture referred to on the reverse
hereof.
Reference is made to the further provisions of this Temporary
Regulation S Note set forth on the reverse hereof, which shall have the same
effect as though fully set forth on the face of this Temporary Regulation S
Note.
<PAGE> 29
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Temporary
Reflation S Note shall not be entitled to any benefit under the Indenture
referred to on the reverse hereof, or be valid or obligatory for any purpose.
<PAGE> 30
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer.
Dated: BEVERLY FUNDING CORPORATION
-------------
By:
-----------------------------------
Name:
Title:
This is one of the Health Care Notes referred to in the within
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------
Authorized Signatory
<PAGE> 31
This Temporary Regulation S Note is one of a duly authorized issue of
Health Care Notes of the Issuer, designated as its Floating Rate Health Care
Receivables-Backed Notes, Series 1999-A (herein called the "Health Care Notes"),
issued and to be issued in one or more Series, and this Temporary Regulation S
Note is one of the Health Care Notes designated as the Issuer's Series 1999-A
Health Care Notes (herein called the "Series 1999-A Health Care Notes"), all
issued and to be issued under the First Amendment and Restatement dated as of
June 1, 1999 to the Indenture dated as of December 1, 1994 and a Series
Supplement (the "Supplement") thereto with respect to the Series 1999-A Health
Care Notes dated as of June 1, 1999 (such Indenture, as supplemented by the
Supplement and as may be further supplemented or amended from time to time, is
herein called the "Indenture"), both between the Issuer and The Chase Manhattan
Bank, as trustee (the "Trustee", which term includes any successor Trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights thereunder of
the Issuer, the Trustee and the Holders of the Health Care Notes. All terms used
in this Temporary Regulation S Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended. In the event of any conflict or
inconsistency between this Temporary Regulation S Note and the Indenture, the
Indenture shall control.
THE SERIES 1999-A HEALTH CARE NOTES AND ANY OTHER SERIES OF HEALTH CARE
NOTES ISSUED BY THE ISSUER ARE AND WILL BE EQUALLY AND RATABLY SECURED BY THE
COLLATERAL PLEDGED AS SECURITY THEREFOR AS PROVIDED IN THE INDENTURE, AND THE
SERIES 1999-A HEALTH CARE NOTES WILL RANK PARI PASSU WITH ANY OTHER SERIES OF
HEALTH CARE NOTES ISSUED UNDER THE INDENTURE BY THE ISSUER OR TO BE ISSUED
THEREUNDER.
Prior to the expiration of the "40-day distribution compliance period"
(as defined in Regulation S under the Securities Act, the "40-day distribution
compliance period"), payments (if any) on this Temporary Regulation S Note will
only be paid to any Health Care Noteholder with an interest therein to the
extent that there is presented by Cedel or Euroclear to the Trustee a
certificate, substantially in the form of Exhibit E to the Supplement, to the
effect that it has received from or in respect of a Person entitled to a
Temporary Regulation S Note (as shown by its records) a certificate from such
Person in or substantially in the form of Exhibit C to the Supplement. After the
40-day restricted period, the holder of this Temporary Regulation S Note will
not be entitled to receive any payment hereon.
On or after the 40-day distribution compliance period, interests in
this Temporary Regulation S Note may be exchanged for interests in the
Regulation S Note upon presentation of this Temporary Regulation S Note and
otherwise in accordance with Section 3 of the Supplement. The Regulation S Note
shall be so issued and delivered in exchange for only that portion of this
Temporary Regulation S Note in respect of which there shall have been presented
to the Trustee by Euroclear or Cedel a certificate,
<PAGE> 32
substantially in the form set out in Exhibit E to the Supplement, to the effect
that it has received from or in respect of a Person entitled to a Health Care
Note (as shown by its records) a certificate from such Person in or
substantially in the form of Exhibit C to the Supplement.
Interests in this Temporary Regulation S Note are exchangeable or
transferable in whole or in part for interests in the Regulation S Note, in each
case of the same class, only if such exchange or transfer complies with the
Indenture and the Supplement.
On an exchange of the whole of this Temporary Regulation S Note, this
Temporary Regulation S Note shall be surrendered to the Trustee. Interests in
this Temporary Regulation S Note will be transferred in accordance with the
rules and procedures for the time being of Euroclear or Cedel.
The principal of this Temporary Regulation S Note shall be payable no
later than the Final Maturity Date. Principal may be payable in whole earlier
either because (x) an Event of Default shall have occurred and be continuing and
the Health Care Notes have been accelerated in accordance with Section 5.2 of
the Indenture, or (y) the Issuer shall have called for the redemption in full of
the Series 1999-A Health Care Notes pursuant to Section 9.1 of the Indenture. In
addition, payments of principal on this Temporary Regulation S Note may be made
in whole or in part (x) on each Payment Date beginning with the Payment Date in
June 2004 (the "Scheduled Amortization Date"), (y) on any Optional Partial
Redemption Date if an Optional Partial Redemption has been elected by the Issuer
to be made pursuant to Section 9.1 of the Indenture or (z) on any Payment Date
following the occurrence of an Amortization Event under the Sale and Servicing
Agreement, until paid in full or required to be paid in full upon the Final
Maturity Date. All principal payments on the Health Care Notes shall be made pro
rata to the Health Care Noteholders entitled thereto.
Payments of interest on this Temporary Regulation S Note are due and
payable on each Payment Date, together with any installment of principal, to the
extent not in full payment of this Temporary Regulation S Note, required to be
made on such Payment Date, and shall be made by check mailed to the Person whose
name appears as the registered Holder of this Temporary Regulation S Note (or
one or more Predecessor Health Care Notes) on the Health Care Note Register as
of the close of business on the last day of the month preceding the Payment Date
(the "Record Date"), except that with respect to Health Care Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.) or in the name of a Holder of at least $5,000,000
in initial principal amount of Health Care Notes of any Series, payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee or Holder in writing in form satisfactory to the Trustee at
least five (5) Business Days prior to such Payment Date. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Health Care Note Register as of the applicable Record Date
without requiring that this Temporary Regulation S Note be submitted for
notation of payment, and the mailing of such check
<PAGE> 33
shall constitute payment of the amount thereof regardless of whether such check
is returned undelivered. Any reduction in the principal amount of this Temporary
Regulation S Note (or any one or more Predecessor Health Care Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Temporary Regulation S Note and of any Health Care Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount and
all other amounts owing in respect of this Temporary Regulation S Note on a
Payment Date, then the Trustee, in the name of and on behalf of the Issuer, will
notify the Person who was the registered Holder hereof as of the Record Date
preceding such Payment Date by notice mailed no later than ten days prior to
such Payment Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Temporary Regulation S Note at the Trustee's
principal corporate trust office or at the office of the Trustee's agent
appointed for such purposes located in the City of New York.
To the extent allowable by law, any payments (including interest) due
hereunder which are not paid when due (whether by acceleration or otherwise, and
irrespective of any grace period applicable thereto) shall bear interest at a
default rate of interest equal to 2% in excess of the Series Note Interest Rate
or Series Alternate Note Interest Rate, as applicable, which default rate shall
remain in effect until such payments and any interest accrued thereon have been
paid in full. In addition, under certain circumstances, the holders of the
Health Care Notes will be entitled to payment of certain Series Special
Obligations and other amounts pursuant to the Indenture and the Supplement.
As provided in the Indenture, the Series 1999-A Health Care Notes may
be redeemed, in whole or in part, at the option of the Issuer on any Payment
Date, or in part, at the option of the Issuer, on any Optional Partial
Redemption Date, as applicable, at the Redemption Price, subject to the
conditions set forth in Section 9.1 of the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Temporary Regulation S Note may be registered on
the Health Care Note Register of the Issuer, upon surrender of this Temporary
Regulation S Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
in which the Corporate Trust Office is located, or a member firm of a national
securities exchange, and such other documents as the Trustee may require, and
thereupon one or more new Health Care Notes of authorized denomination and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Temporary Regulation S Note, but the transferor may
be required to pay a sum sufficient to cover any
<PAGE> 34
tax or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Prior to the due presentment for registration of transfer of this
Temporary Regulation S Note, the Issuer, the Trustee and any agent of the Issuer
or the Trustee may treat the Person in whose name this Temporary Regulation S
Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Temporary Regulation S Note be overdue, and neither the
Issuer, the Trustee, nor any such agent shall be affected by notice to the
contrary.
In connection with its acquisition of a Temporary Regulation S Note,
each purchaser will be deemed to represent that at least one of the following
statements is an accurate representation as to the source of funds to be used by
it to acquire and hold the Temporary Regulation S Note: (i) if it is an
insurance company, either (1) any employee benefit plans subject to Part 4,
Subtitle B, Title I of Employee Retirement Security Act of 1974, as amended
("ERISA"), plans within the meaning of Section 497(e)(1) of the Code (including
an individual retirement account or Keogh plan) and persons treated as using
"plan assets" of such plans pursuant to the United States Department of Labor
Regulation Section 2510.3-101 or other applicable law (each a "Benefit Plan")
and to any participant or beneficiary of such Benefit Plan (including any
annuitant) are not affected in any manner by the investment performance of the
separate account; or (2) the source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction Class Exemption
("PTCE") 95-60, and the amount of reserves and liabilities for the contract(s)
held by or on behalf of each Benefit Plan that has an interest in such
prospective transferee's general account as a contract holder, together with the
amount of reserves and liabilities for the general account contracts held by or
on behalf of any such other Benefit Plan maintained by the same employer (or an
affiliate thereof) or by the same employee organization, does not exceed and, so
long as such Temporary Regulation S Note, is held by such insurance company
general account, will not exceed (unless no portion of such excess results from
an increase in the assets allocated to such insurance company general account by
such a Benefit Plan, not including the reinvestment of such insurance company
general account's earnings as assets allocated to such insurance company general
account by such a Benefit Plan), 10% of the total reserves and liabilities of
such prospective transferee's general account plus surplus as determined
pursuant to the provisions of Section I(a) of PTCE 95-60; or (ii) its
acquisition and holding of the Temporary Regulation S Note, will not give rise
to a non-exempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code; or (iii) the source does not include assets of any Benefit
Plan. The purchaser shall also be deemed to agree not to sell or otherwise
transfer the Temporary Regulation S Note, to any person without obtaining the
same representation and warranties and the same obligations from such purchaser
or other transferee.
<PAGE> 35
The Indenture permits, pursuant to the conditions therein set forth,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Health Care Notes of a Series under
the Indenture at any time by the Issuer with the consent of the Holders of
Health Care Notes specified in the Indenture. The Indenture also contains
provisions permitting the Holders of Health Care Notes of a Series representing
specified percentages of the Aggregate Outstanding Amount of the Health Care
Notes of such Series, on behalf of the Holders of all the Health Care Notes of
such Series, to take certain actions which may affect other Holders, including
waiving compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
action, consent or waiver by the Holder of this Temporary Regulation S Note (or
any one or more Predecessor Health Care Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Temporary Regulation S Note
and of any Health Care Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such action,
consent or waiver is made upon this Temporary Regulation S Note. The Indenture
also permits the Trustee to amend certain terms and conditions set forth in the
Indenture without the consent of Holders of the Health Care Notes issued
thereunder.
The Series 1999-A Health Care Notes are issuable only in registered
form in denominations as provided in the Indenture and the Supplement, subject
to certain limitations therein set forth.
THIS TEMPORARY REGULATION S NOTES, THE INDENTURE, AND THE SUPPLEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
NEW YORK.
No reference herein to the Indenture and no provision of this Temporary
Regulation S Note or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Temporary Regulation S Note at the times, place, and rate, and
in the coin or currency herein prescribed.
The Holder of this Temporary Regulation S Note agrees that it will not,
prior to the date which is 370 days after the discharge of the Indenture,
acquiesce, petition or otherwise, directly or indirectly, invoke or cause the
Issuer to invoke the process of any governmental authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property or ordering the winding up or
liquidation of the affairs of the Issuer.
The term "Issuer" as used in this Temporary Regulation S Note
includes any successor to the Issuer under the Indenture.
<PAGE> 36
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns, and
transfers unto __________________
Please insert Social Security or other identifying number of
assignee:
-------------------
the within Health Care Note of Beverly Funding Corporation (the "Issuer")
standing in the name(s) of the undersigned in the Health Care Note Register of
the Issuer and does hereby irrevocably constitute and appoint ______________
attorney to transfer such Health Care Note in such Health Care Note Register,
with full power of substitution in the premises.
Dated:
------------------ [SIGNATURE]
---------------------------
[SIGNATURE]
---------------------------
Notice: The signature(s) to
this assignment must
correspond with the name(s)
as written upon the face of
this Temporary Regulation S
Note in every particular
without alteration or any
change whatsoever. The
signature(s) must be
guaranteed by a commercial
bank or trust company
located, or having a
correspondent location, in
the City of New York or the
city in which the corporate
trust office is located, or
by a member firm of a
national securities
exchange. Notarized or
witnessed signatures are
not acceptable as
guaranteed signatures.
Signature Guarantee:
- --------------------------------------------------------------------------------
Name of Institution
- --------------------------------------------------------------------------------
Authorized Officer
- --------------------------------------------------------------------------------
<PAGE> 37
SCHEDULE A
SCHEDULE OF EXCHANGES
The following exchanges of the Health Care Notes for Health Care Notes
represented by this Temporary Regulation S Note have been made:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Change in principal Principal amount of
Principal Amount of amount of this this Temporary
this Temporary Temporary Regulation Regulation S Note Notation made by or
Regulation S Note as S Note due to following such on behalf of the
of June __, 1999 Date exchange made exchange exchange Issuer
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$0.00
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 38
EXHIBIT B-2
FORM OF REGULATION S NOTE
THE PRINCIPAL OF THIS REGULATION S NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS REGULATION S NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS REGULATION S NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN
SECURITIES LAWS. NO REGULATION S NOTE, OR INTEREST THEREIN, MAY BE OFFERED, SOLD
OR TRANSFERRED (INCLUDING BY PLEDGE OR HYPOTHECATION) UNLESS (A) THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS ARE COMPLIED WITH, OR (B) SUCH OFFER, SALE OR
TRANSFER IS MADE TO A PERSON (i) THAT THE TRANSFEROR REASONABLY BELIEVES AFTER
DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF
OTHERS) OR AS A FIDUCIARY OR AN AGENT FOR OTHERS (WHICH OTHERS ARE QIBS) TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT OR (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT.
NO EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED ("ERISA"), AND NO OTHER PLAN SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE"), WITH RESPECT TO WHICH NESBITT BURNS
SECURITIES INC., OR BEVERLY FUNDING CORPORATION OR THE CHASE MANHATTAN BANK IS A
"PARTY IN INTEREST" (WITHIN THE MEANING OF SECTION 3(14) OF ERISA), OR A
"DISQUALIFIED PERSON" (WITHIN THE MEANING OF SECTION 4975 OF THE CODE), MAY
PURCHASE THIS REGULATION S NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND
THE HOLDING OF THIS REGULATION S NOTE OR SUCH INTEREST BY SUCH PLAN (OR ANY
ENTITY THE ASSETS OF WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT
TO A STATUTORY OR ADMINISTRATIVE EXEMPTION.
<PAGE> 39
SECTION 2.15 OF THE INDENTURE AND SECTION 3 OF THE SUPPLEMENT (EACH AS DEFINED
BELOW) CONTAIN FURTHER RESTRICTIONS ON THE TRANSFER AND RESALE OF THIS
REGULATION S NOTE. EACH TRANSFEREE OF THIS REGULATION S NOTE, BY ACCEPTANCE
HEREOF, IS DEEMED TO HAVE ACCEPTED THIS REGULATION S NOTE, SUBJECT TO THE
FOREGOING RESTRICTIONS ON TRANSFERABILITY AND RESALE.
BY ACCEPTANCE HEREOF, THE HOLDER OF THIS REGULATION S NOTE AGREES TO THE TERMS
AND CONDITIONS SET FORTH IN THE INDENTURE AND THE SUPPLEMENT AND HEREIN.
<PAGE> 40
BEVERLY FUNDING CORPORATION
Floating Rate Health Care Receivables-Backed Notes, Inc.
Series 1999-A
NO. ____
$
------------------
CUSIP (CINS) NO. 087862AA6
ISIN US087862AA69
Common Code
-------
Beverly Funding Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to [CEDE & CO.] or registered
assigns, the principal sum of FIFTY MILLION ($50,000,000) DOLLARS (or such
smaller amount as shall be the outstanding principal amount of this Regulation S
Note shown in Schedule A hereto), payable in installments on each Payment Date
in accordance with the Indenture commencing on the earliest of (x) the date
determined as provided on the reverse hereof (the "Scheduled Amortization
Date"), (y) the date of acceleration of this Regulation S Notes following the
occurrence of an Event of Default and (z) the commencement of the Amortization
Period, and ending on or before the Payment Date in March 2005 (the "Final
Maturity Date"). The Issuer also promises to pay interest on each Payment Date
at the rate per annum specified in the Supplement and the Indenture. Interest on
the unpaid principal amount on this Regulation S Note will accrue for each
Interest Accrual Period (which initial Interest Accrual Period will commence on
June 30, 1999). Such principal of and interest on this Regulation S Note shall
be paid in the manner specified on the reverse hereof
The principal of and interest on this Regulation S Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Regulation S Note shall be made by the Issuer
with respect to this Regulation S Note shall be applied in the manner set forth
in the Indenture referred to on the reverse hereof.
Reference is made to the further provisions of this Regulation S Note
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Regulation S Note.
<PAGE> 41
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Regulation S Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
<PAGE> 42
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer.
Dated: BEVERLY FUNDING CORPORATION
-----------
By:
------------------------------------
Name:
Title:
This is one of the Health Care Notes referred to in the within
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------
Authorized Signatory
<PAGE> 43
This Regulation S Note is one of a duly authorized issue of Health Care
Notes of the Issuer, designated as its Floating Rate Health Care
Receivables-Backed Notes, Series 1999-A (herein called the "Health Care Notes"),
issued and to be issued in one or more Series, and this Regulation S Note is one
of the Health Care Notes designated as the Issuer's Series 1999-A Health Care
Notes (herein called the "Series 1999-A Health Care Notes"), all issued and to
be issued under the First Amendment and Restatement dated as of June 1, 1999 to
the Indenture dated as of December 1, 1994 and a Series Supplement (the
"Supplement") thereto with respect to the Series 1999-A Health Care Notes dated
as of June 1, 1999 (such Indenture, as supplemented by the Supplement, and as
may be further supplemented or amended from time to time, is herein called the
"Indenture"), both between the Issuer and The Chase Manhattan Bank, as trustee
(the "Trustee", which term includes any successor Trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights thereunder of the Issuer, the
Trustee and the Holders of the Health Care Notes. All terms used in this
Regulation S Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended. In the event of any conflict or inconsistency between
this Regulation S Note and the Indenture, the Indenture shall control.
THE SERIES 1999-A HEALTH CARE NOTES AND ANY OTHER SERIES OF HEALTH CARE
NOTES ISSUED BY THE ISSUER ARE AND WILL BE EQUALLY AND RATABLY SECURED BY THE
COLLATERAL PLEDGED AS SECURITY THEREFOR AS PROVIDED IN THE INDENTURE, AND THE
SERIES 1999-A HEALTH CARE NOTES WILL RANK PARI PASSU WITH ANY OTHER SERIES OF
HEALTH CARE NOTES ISSUED UNDER THE INDENTURE BY THE ISSUER OR TO BE ISSUED
THEREUNDER.
The principal of this Regulation S Note shall be payable no later than
the Final Maturity Date. Principal may be payable in whole earlier either
because (x) an Event of Default shall have occurred and be continuing and the
Health Care Notes have been accelerated in accordance with Section 5.2 of the
Indenture, or (y) the Issuer shall have called for the redemption in full of the
Series 1999-A Health Care Notes pursuant to Section 9.1 of the Indenture. In
addition, payments of principal on this Regulation S Note may be made in whole
or in part (x) on each Payment Date beginning with the Payment Date in June 2004
(the "Scheduled Amortization Date"), (y) on any Optional Partial Redemption Date
if an Optional Partial Redemption has been elected by the Issuer to be made
pursuant to Section 9.1 of the Indenture or (z) on any Payment Date following
the occurrence of an Amortization Event under the Sale and Servicing Agreement,
until paid in full or required to be paid in full upon the Final Maturity Date.
All principal payments on the Health Care Notes shall be made pro rata to the
Health Care Noteholders entitled thereto.
Payments of interest on this Regulation S Note are due and payable on
each Payment Date, together with any installment of principal, to the extent not
in full payment of this Regulation S Note, required to be made on such Payment
Date, and shall be made by check mailed to the Person whose name appears as the
registered Holder of this
<PAGE> 44
Regulation S Note (or one or more Predecessor Health Care Notes) on the Health
Care Note Register as of the close of business on the last day of the month
preceding the Payment Date (the "Record Date"), except that with respect to
Health Care Notes registered on the Record Date in the name of the nominee of
the Clearing Agency (initially, such nominee to be Cede & Co.) or in the name of
a Holder of at least $5,000,000 in initial principal amount of Health Care Notes
of any Series, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee or Holder in writing in form
satisfactory to the Trustee at least five (5) Business Days prior to such
Payment Date. Such checks shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Health Care Note Register as of the
applicable Record Date without requiring that this Regulation S Note be
submitted for notation of payment, and the mailing of such check shall
constitute payment of the amount thereof regardless of whether such check is
returned undelivered. Any reduction in the principal amount of this Regulation S
Note (or any one or more Predecessor Health Care Notes) effected by any payments
made on any Payment Date shall be binding upon all future Holders of this
Regulation S Note and of any Health Care Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount and all other
amounts owing in respect of this Regulation S Note on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed no later than ten days prior to such Payment Date and the
amount then due and payable shall be payable only upon presentation and
surrender of this Regulation S Note at the Trustee's principal corporate trust
office or at the office of the Trustee's agent appointed for such purposes
located in the City of New York.
To the extent allowable by law, any payments (including interest) due
hereunder which are not paid when due (whether by acceleration or otherwise, and
irrespective of any grace period applicable thereto) shall bear interest at a
default rate of interest equal to 2% in excess of the Series Note Interest Rate
or Series Alternate Note Interest Rate, as applicable, which default rate shall
remain in effect until such payments and any interest accrued thereon have been
paid in full. In addition, under certain circumstances, the holders of the
Health Care Notes will be entitled to payment of certain Series Special
Obligations and other amounts pursuant to the Indenture and the Supplement.
As provided in the Indenture, the Series 1999-A Health Care Notes may
be redeemed, in whole or in part, at the option of the Issuer on any Payment
Date, or in part, at the option of the Issuer, on any Optional Partial
Redemption Date, as applicable, at the Redemption Price, subject to the
conditions set forth in Section 9.1 of the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Regulation S Note may be registered on the
Health Care Note Register of the Issuer, upon surrender of this Regulation S
Note for registration of transfer at the office or agency designated by the
Issuer pursuant to the Indenture, duly endorsed by, or
<PAGE> 45
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
in which the Corporate Trust Office is located, or a member firm of a national
securities exchange, and such other documents as the Trustee may require, and
thereupon one or more new Health Care Notes of authorized denomination and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Regulation S Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Prior to the due presentment for registration of transfer of this
Regulation S Note, the Issuer, the Trustee and any agent of the Issuer or the
Trustee may treat the Person in whose name this Regulation S Note (as of the day
of determination or as of such other date as may be specified in the Indenture)
is registered as the owner hereof for all purposes, whether or not this
Regulation S Note be overdue, and neither the Issuer, the Trustee, nor any such
agent shall be affected by notice to the contrary.
In connection with its acquisition of a Regulation S Note, each
purchaser will be deemed to represent that at least one of the following
statements is an accurate representation as to the source of funds to be used by
it to acquire and hold the Regulation S Note: (i) if it is an insurance company,
either (1) any employee benefit plans subject to Part 4, Subtitle B, Title I of
Employee Retirement Security Act of 1974, as amended ("ERISA"), plans within the
meaning of Section 497(e)(1) of the Code (including an individual retirement
account or Keogh plan) and persons treated as using "plan assets" of such plans
pursuant to the United States Department of Labor Regulation Section 2510.3-101
or other applicable law (each a "Benefit Plan") and to any participant or
beneficiary of such Benefit Plan (including any annuitant) are not affected in
any manner by the investment performance of the separate account; or (2) the
source is an "insurance company general account" within the meaning of
Department of Labor Prohibited Transaction Class Exemption ("PTCE") 95-60, and
the amount of reserves and liabilities for the contract(s) held by or on behalf
of each Benefit Plan that has an interest in such prospective transferee's
general account as a contract holder, together with the amount of reserves and
liabilities for the general account contracts held by or on behalf of any such
other Benefit Plan maintained by the same employer (or an affiliate thereof) or
by the same employee organization, does not exceed and, so long as such
Regulation S Note, is held by such insurance company general account, will not
exceed (unless no portion of such excess results from an increase in the assets
allocated to such insurance company general account by such a Benefit Plan, not
including the reinvestment of such insurance company general account's earnings
as assets allocated to such insurance company general account by such a Benefit
Plan), 10% of the total reserves and liabilities of such prospective
transferee's general account plus surplus as determined pursuant to the
provisions of Section I(a) of PTCE 95-60; or (ii) its acquisition and holding of
the Regulation S Note, will not give rise to a non-exempt prohibited transaction
under Section 406 of ERISA or
<PAGE> 46
Section 4975 of the Code; or (iii) the source does not include assets of any
Benefit Plan. The purchaser shall also be deemed to agree not to sell or
otherwise transfer the Regulation S Note, to any person without obtaining the
same representation and warranties and the same obligations from such purchaser
or other transferee.
The Indenture permits, pursuant to the conditions therein set forth,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Health Care Notes of a Series under
the Indenture at any time by the Issuer with the consent of the Holders of
Health Care Notes specified in the Indenture. The Indenture also contains
provisions permitting the Holders of Health Care Notes of a Series representing
specified percentages of the Aggregate Outstanding Amount of the Health Care
Notes of such Series, on behalf of the Holders of all the Health Care Notes of
such Series, to take certain actions which may affect other Holders, including
waiving compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
action, consent or waiver by the Holder of this Regulation S Note (or any one or
more Predecessor Health Care Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Regulation S Note and of any Health
Care Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such action, consent or waiver is
made upon this Regulation S Note. The Indenture also permits the Trustee to
amend certain terms and conditions set forth in the Indenture without the
consent of Holders of the Health Care Notes issued thereunder.
The Series 1999-A Health Care Notes are issuable only in registered
form in denominations as provided in the Indenture and the Supplement, subject
to certain limitations therein set forth.
THIS REGULATION S NOTE, THE INDENTURE, AND THE SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK.
No reference herein to the Indenture and no provision of this
Regulation S Note or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Regulation S Note at the times, place, and rate, and in the
coin or currency herein prescribed.
The Holder of this Regulation S Note agrees that it will not, prior to
the date which is 370 days after the discharge of the Indenture, acquiesce,
petition or otherwise, directly or indirectly, invoke or cause the Issuer to
invoke the process of any governmental authority for the purpose of commencing
or sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property or ordering the winding up or liquidation of
the affairs of the Issuer.
<PAGE> 47
The Health Care Notes represented by this Regulation S Note were
originally represented by a Temporary Regulation S Note.
Interests in this Regulation S Note will be transferred in accordance
with the rules and procedures in effect at the time of transfer of the
Depositary Trust Company, Euroclear or Cedel, as applicable. For purposes of
this Regulation S Note, the securities account records of the Depositary Trust
Company, Euroclear or Cedel, as applicable, shall, in the absence of manifest
error, be conclusive evidence of the identity of the Noteholders and of the
principal amount of the Health Care Notes represented by this Regulation S Note
credited to the securities accounts of such Noteholders. Any statement issued by
the Depositary Trust Company, Euroclear or Cedel, as applicable, to any
Noteholder relating to a specified Health Care Note or Health Care Notes
credited to the securities account of such Noteholder and stating the principal
amount of such Health care Note or Health Care Notes and certified by Euroclear
or Cedel to be a true record of such securities account shall, in the absence of
manifest error, be conclusive evidence of the records of the Depositary Trust
Company, Euroclear or Cedel, as applicable, for the purposes of the next
preceding sentence (but without prejudice to any other means of producing such
records in evidence).
Interests in this Regulation S Note are exchangeable or transferable in
whole or in part for interests in a U.S. Note, in each case of the same class,
only if such exchange or transfer complies with the Indenture and the
Supplement.
Under certain conditions set forth in the Indenture, interests in this
Regulation S Note are exchangeable in whole or in part for duly executed and
issued Definitive Notes.
The term "Issuer" as used in this Regulation S Note includes any
successor to the Issuer under the Indenture.
<PAGE> 48
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________ hereby sells, assigns, and
transfers unto ____________________
Please insert Social Security or other identifying number of
assignee:
-----------------
the within Health Care Note of Beverly Funding Corporation (the "Issuer")
standing in the name(s) of the undersigned in the Health Care Note Register of
the Issuer and does hereby irrevocably constitute and appoint ______________
attorney to transfer such Health Care Note in such Health Care Note Register,
with full power of substitution in the premises.
Dated:
--------------- [SIGNATURE]
---------------------------
[SIGNATURE]
---------------------------
Notice: The signature(s) to
this assignment must
correspond with the name(s)
as written upon the face of
this Regulation S Note in
every particular without
alteration or any change
whatsoever. The
signature(s) must be
guaranteed by a commercial
bank or trust company
located, or having a
correspondent location, in
the City of New York or the
city in which the corporate
trust office is located, or
by a member firm of a
national securities
exchange. Notarized or
witnessed signatures are
not acceptable as
guaranteed signatures.
Signature Guarantee:
- --------------------------------------------------------------------------------
Name of Institution
- --------------------------------------------------------------------------------
Authorized Officer
- --------------------------------------------------------------------------------
<PAGE> 49
SCHEDULE A
SCHEDULE OF EXCHANGES
The following exchanges of the Health Care Notes for Health Care Notes
represented by this Regulation S Note have been made:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Principal Amount of Change in principal Principal amount of
this Regulation S amount of this this Regulation S Notation made by or
Note as of June __, Regulation S Note Note following such on behalf of the
1999 Date exchange made due to exchange exchange Issuer
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$0.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 50
EXHIBIT C
FORM OF CERTIFICATE OF BENEFICIAL OWNERSHIP
[TRUSTEE OR TRANSFER AGENT]
[ADDRESS]
[EUROCLEAR][CEDEL S.A.]
[ADDRESS]
Re: BEVERLY FUNDING CORPORATION
$[_____________]
Reference is hereby made to the Series Supplement dated as of June 1,
1999] (the "Supplement") by and between BEVERLY FUNDING CORPORATION (the
"Issuer") and THE CHASE MANHATTAN BANK (the "Trustee"). Capitalized terms not
defined in this Certificate shall have the meanings given to them in the
Supplement.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Health Care Notes held by you for our account are
beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased
the Health Care Notes in transactions which did not require registration under
the Securities Act of 1933, as amended (the "Act"). As used in this paragraph,
the term "U.S. person" has the meaning given to it by Regulation S under the
Act.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Health
Care Notes held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certification excepts and does not relate to $__________ of such
interest in the above Health Care Notes in respect of which we are not able to
certify and as to which we understand exchange and delivery of a Regulation S
Note (or, if relevant, exercise of any rights or collection of any interest)
cannot be made until we do so certify.
We understand that this certification is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal
<PAGE> 51
proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification to any interested party in such proceedings.
You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to
matters covered hereby.
Date: ,
----- -- ----
By:
------------------------------------------
As, or as agent for, the beneficial owner(s) of the Securities to which
this certificate relates.
<PAGE> 52
EXHIBIT D-1
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM U.S. NOTE TO TEMPORARY
REGULATION S NOTE
[INDENTURE TRUSTEE OR TRANSFER AGENT]
[ADDRESS]
Re: BEVERLY FUNDING CORPORATION
$[_____________]
Reference is hereby made to the Series Supplement dated as of June 1,
1999 (the "Supplement") by and between BEVERLY FUNDING CORPORATION (the
"Issuer") and THE CHASE MANHATTAN BANK (the "Trustee"). Capitalized terms not
defined in this Certificate shall have the meanings given to them in the
Supplement.
This letter relates to $___________ principal amount of Health Care
Notes represented by a beneficial interest in the U.S. Note (CUSIP No. [ ]) held
with DTC by or on behalf of [transferor] as beneficial owner (the "Transferor").
The Transferor has requested an exchange or transfer of its beneficial interest
for an interest in the Temporary Regulation S Note (CUSIP (CINS) No. [ ]) to be
held with Euroclear or Cedel (ISIN Code [US ]) (Common Code [ ]) through DTC.
In connection with such request and in respect of such Health Care Notes, the
Transferor does hereby certify that such exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Supplement and
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and accordingly the Transferor does hereby certify that:
(1) the offer of the Health Care Notes was not made to a person in the
United States;
(2)(A) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on
its behalf reasonably believed that the transferee was outside the
United States, or
(B) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor
any person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States;
<PAGE> 53
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903 or 904 of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act of 1933; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above was held with DTC through Euroclear or
Cedel or both (Common Code [ ])(ISIN Code [ ]).
You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to
matters covered hereby.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the dealers.
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Name:
Title:
Dated: ,
----- -- ----
<PAGE> 54
EXHIBIT D-2
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
OR EXCHANGE FROM U.S. NOTE TO REGULATION S NOTE
[INDENTURE TRUSTEE OR TRANSFER AGENT]
[ADDRESS]
Re: BEVERLY FUNDING CORPORATION
$[_____________]
Reference is hereby made to the Series Supplement dated as of June 1,
1999 (the "Supplement") by and between BEVERLY FUNDING CORPORATION (the
"Issuer") and THE CHASE MANHATTAN BANK (the "Trustee"). Capitalized terms not
defined in this Certificate shall have the meanings given to them in the
Supplement.
This letter relates to $___________ principal amount of Health Care
Notes represented by a beneficial interest in the U.S. Note (CUSIP No. [ ]) held
with DTC by or on behalf of transferor as beneficial owner (the "Transferor").
The Transferor has requested an exchange or transfer of its interest for an
interest in the Regulation S Note (CUSIP CINS No.[ ]).
In connection with such request and in respect of such Health Care
Notes, the Transferor does hereby certify that such exchange or transfer has
been effected in accordance with the transfer restrictions set forth in the
Supplement and (i) that, with respect to transfers made in reliance on
Regulation S under the Securities Act of 1933, as amended:
(1) the offer of the Health Care Notes was not made to a person in the
United States;
(2)(A) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on
its behalf reasonably believed that the transferee was outside the
United States, or
(B) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor
any person acting on its behalf knows that the transaction was
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903 or 904 of Regulation S, as applicable, and
<PAGE> 55
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act of 1933.
You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to
matters covered hereby.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the dealers.
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------
Name:
Title:
Dated: ,
----- -- ----
<PAGE> 56
EXHIBIT D-3
FORM OF TRANSFER CERTIFICATE FOR TRANSFER OR
EXCHANGE FROM REGULATION S NOTE
TO U.S. NOTE
[INDENTURE TRUSTEE OR TRANSFER AGENT]
[ADDRESS]
Re: BEVERLY FUNDING CORPORATION
$[____________]
Reference is hereby made to the Series Supplement dated as of June 1,
1999 (the "Supplement") by and between BEVERLY FUNDING CORPORATION (the
"Issuer") and THE CHASE MANHATTAN BANK (the "Trustee"). Capitalized terms not
defined in this Certificate shall have the meanings given to them in the
Supplement.
This letter relates to $____________ principal amount of Health Care
Notes which are held in the form of the Regulation S Notes (CUSIP CINS No. [ ])
with [DTC][EUROCLEAR][CEDEL] (ISIN Code [ ]) (Common Code [ ]) through DTC by or
on behalf of transferor as beneficial owner (the "Transferor"). The Transferor
has requested an exchange or transfer of its interest in the Regulation S Notes
for an interest in the U.S. Note (CUSIP No. [ ]).
In connection with such request, and in respect of such Health Care
Notes, the Transferor does hereby certify that such Health Care Notes are being
transferred in accordance with Rule 144A under the United States Securities Act
of 1933, as amended (the "Securities Act") to a transferee that the Transferor
reasonably believes is purchasing such Health Care Notes for its own account or
an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
<PAGE> 57
You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to
matters covered hereby.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the dealers of the Health Care Notes.
[INSERT NAME OF TRANSFEROR]
By:
-----------------------------------
Name:
Title:
Dated: ,
----- -- ----
<PAGE> 58
EXHIBIT E
FORM OF CLEARING SYSTEM CERTIFICATE
[INDENTURE TRUSTEE OR TRANSFER AGENT]
[ADDRESS]
Re: BEVERLY FUNDING CORPORATION
$[____________]
Reference is hereby made to the Series Supplement dated as of June 1,
1999 (the "Supplement") by and between BEVERLY FUNDING CORPORATION (the
"Issuer") and THE CHASE MANHATTAN BANK (the "Trustee"). Capitalized terms not
defined in this Certificate shall have the meanings given to them in the
Supplement.
This is to certify with respect to the principal amount of Health Care
Notes set forth above that, except as set forth below, we have received in
writing, by tested telex or by electronic transmission, from our member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth above ("Member Organizations"), certifications
with respect to such portion substantially to the effect set forth in accordance
with the terms of the Supplement.
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, exercise of any rights or collection of any interest)
any portion of the Temporary Regulation S Notes excepted in such certifications
and (ii) that as of the date hereof we have not received any notification from
any of our Member Organizations to the effect that the statements made by such
Member Organizations with respect to any portion of the part submitted herewith
for exchange (or, if relevant, exercise of any rights or collection of any
interest) are no longer true and cannot be relied upon as the date hereof.
<PAGE> 59
We understand that this certification is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
Dated: ,
----- -- ----
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
BRUSSELS OFFICE, AS OPERATOR OF THE EUROCLEAR
SYSTEM]
or
[CEDEL S.A.]
By
------------------------------------------
<PAGE> 1
EXHIBIT 10.4
- --------------------------------------------------------------------------------
BEVERLY FUNDING CORPORATION
FIRST AMENDMENT
Dated as of July 14, 1999
to
Series Supplement
Dated as of June 1, 1999
Re: Floating Rate Health Care Receivables-Backed Notes, Series 1999-A
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST AMENDMENT TO SERIES SUPPLEMENT, dated as of July 14, 1999 (this
"Amendment") by and between BEVERLY FUNDING CORPORATION, a Delaware corporation
(the "Issuer"), and THE CHASE MANHATTAN BANK, as trustee under the Indenture
(together with its successors in trust thereunder as provided in the Indenture
referred to below, the "Trustee").
PRELIMINARY STATEMENT
Pursuant to Section 8.1(9) of the First Amendment and Restatement,
dated as June 1, 1999 of the Trust Indenture (the "Indenture"), dated as of
December 1, 1994, between the Issuer and the Trustee, the Issuer and the Trustee
entered into an indenture supplemental to the Indenture (the "Series
Supplement") for the purposes of authorizing the issuance by the Issuer of the
Series of Health Care Notes with an initial aggregate principal amount of
$50,000,000 known as the Issuer's Floating Rate Health Care Receivables-Backed
Notes, Series 1999-A (the "Health Care Notes").
Pursuant to Section 24 of the Note Purchase Agreement (Series 1999-A)
(the "Note Purchase Agreement"), dated June 30, 1999, among Beverly Enterprises,
Inc., a Delaware corporation ("Beverly"), the Issuer, Fairway Finance
Corporation, a Delaware corporation (the "Purchaser"), and Nesbitt Burns
Securities Inc., as agent for the Purchaser (the "Agent"), the Issuer desires to
increase the size of the Health Care Notes by $20,000,000.
In accordance with Section 8.2 of the Indenture, the Issuer and the
Trustee hereby amend the Series Supplement as hereinafter set forth.
All terms used in this Amendment that are defined in the Series
Supplement or the other Related Documents, either directly or by reference
therein, have the meanings assigned to them therein, except to the extent such
terms are defined or modified in this Amendment or the context clearly requires
otherwise. In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Series Supplement or the other Related Documents, the terms and provisions of
this Amendment shall govern.
In consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Issuer and the Trustee do
hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1 The first paragraph, second sentence of Preliminary Statement of
the Series Supplement is amended in its entirety to read as follows:
"The Issuer has duly authorized the creation of a Series of Health Care
Notes with an initial aggregate principal amount of $70,000,000 to be
know as the Issuer's $70,000,000 Floating Rate Health Care
Receivables-Backed Notes, Series 1999-A (the "Health Care
<PAGE> 3
Notes"), and the Issuer and the Trustee are executing and delivering
this Supplement in order to provide for the Health Care Notes."
1.2 Section 1 of Series Supplement is amended in its entirety to read
as follows:
"SECTION 1. Designation. The Series of Health Care Notes issued
pursuant hereto shall be designated generally as the Issuer's
$70,000,000 Floating Rate Health Care Receivables-Backed Notes, Series
1999-A."
1.3 Section 3(a) of Series Supplement is amended in its entirety to
read as follows:
"(a) The Health Care Notes shall be authenticated and
delivered by the Trustee to or upon the order of the Issuer on the
Closing Date, in an aggregate principal amount not to exceed
$70,000,000, and shall be dated their date of authentication. The
Health Care Notes shall be issued in the minimum denominations set
forth herein and in the Indenture."
1.4 The first paragraph of page A-3 of Exhibit A (FORM OF U.S. NOTE) of
the Series Supplement is amended by deleting "FIFTY MILLION ($50,000,000.00)
DOLLARS" and inserting in its place "SEVENTY MILLION ($70,000,000.00) DOLLARS."
1.5 The first paragraph of page B-1-3 of Exhibit B-1 (FORM OF TEMPORARY
REGULATION S NOTE) the of Series Supplement is amended by deleting "FIFTY
MILLION ($50,000,000.00) DOLLARS" and inserting in its place "SEVENTY MILLION
($70,000,000.00) DOLLARS."
1.6 The first paragraph of page B-2-3 of Exhibit B-2 (FORM OF
REGULATION S NOTE) of the Series Supplement is amended by deleting "FIFTY
MILLION ($50,000,000.00) DOLLARS" and inserting in its place "SEVENTY MILLION
($70,000,000.00) DOLLARS."
1.7 All references in the Note Purchase Agreement (other than in
Section 24 thereof) and the Related Documents to the "Notes" or the "Health Care
Notes" shall be deemed to include the Note delivered pursuant to this Amendment.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1 Each of the Issuer, Beverly and the Seller hereby represents and
warrants to the Trustee, the Purchaser and the Agent as follows:
(a) Representations and Warranties. Its representations and
warranties contained in the Indenture, the other Related Documents and
the Note Purchase Agreement are true and correct as of the date hereof
(unless stated to relate solely
<PAGE> 4
to an earlier date, in which case such representations and warranties
were true and correct as of such earlier date).
(b) Enforceability. The execution and delivery of this
Amendment, and the performance of its obligations under this Amendment,
the Related Documents and the Note Purchase Agreement, as amended
hereby, are within its corporate powers and have been duly authorized
by all necessary corporate action on its part. This Amendment, the
Related Documents and the Note Purchase Agreement, as amended hereby,
are its valid and legally binding obligations, enforceable in
accordance with its terms.
(c) Amortization Event. No Amortization Event has occurred and
is continuing.
SECTION 3. EFFECTIVENESS.
3.1 This Amendment shall become effective as of the date hereof upon
receipt by the Agent of the following, each duly executed and dated as of the
date hereof (or such other date satisfactory to the Agent), in form and
substance satisfactory to the Agent:
(a) counterparts of this Amendment (whether by facsimile or
otherwise) executed by each of the parties hereto;
(b) a written statement from Moody's Investor Service, Inc.
that this Amendment will not result in a downgrade or withdrawal of the
rating of the Health Care Notes;
(c) favorable opinions of counsel to the Issuer as to such
matters as the Agent may request;
(d) evidence of delivery of a duly executed and authenticated
Health Care Note to the Trustee with an initial aggregate principal
amount of $20,000,000;
(e) the DTC Agreement shall have been amended, as necessary,
to reflect the changes contemplated herein; and
(f) such other documents and instruments (including
cross-receipts) as the Agent may reasonable request.
SECTION 4. MISCELLANEOUS.
4.1 This Amendment shall be construed in connection with and as part of
the Related Documents and the Note Purchase Agreement, and except as modified
and expressly amended by this Amendment, all terms, conditions and covenants
contained in the Related Documents and the Note Purchase Agreement are hereby
ratified and shall be and remain in
<PAGE> 5
full force and effect.
4.2 The Issuer and Beverly shall pay all expenses of the Purchaser and
the Agent in connection herewith, including, without limitation, all reasonable
attorney's fees, charges and disbursements.
4.3 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Amendment may
refer to the Indenture or Series Supplement without making specific reference to
this Amendment but nevertheless all such references shall include this Amendment
unless the context otherwise requires.
4.4 The descriptive headings of the various Sections or parts of this
Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
4.5 This Amendment shall be governed by and construed in accordance
with New York law.
4.6 Upon the Issuer's execution of this Amendment, this Amendment shall
constitute an Issuer Order authorizing the Trustee to enter into this Amendment
and authorizing and directing the Trustee to authenticate and deliver the
$70,000,000 Health Care Note to or at the direction of the Agent.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE> 6
4.7 This Amendment may be executed in any number of counterparts, each
executed counterpart constituting an original, but all together only one
agreement.
BEVERLY FUNDING CORPORATION,
as Issuer
By:
Name:
Title:
<PAGE> 7
THE CHASE MANHATTAN BANK, as
Trustee
By:
Name:
Title:
<PAGE> 8
Accepted and Agreed to:
BEVERLY ENTERPRISES, INC.
By:
Name:
Title:
BEVERLY HEALTH AND
REHABILITATION SERVICES, INC.
By:
Name:
Title:
<PAGE> 9
Consented to:
NESBITT BURNS SECURITIES INC.,
as Agent
By:
Name:
Title:
By:
Name:
Title:
FAIRWAY FINANCE CORPORATION,
as Purchaser
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
[EXECUTION COPY]
MASTER AMENDMENT NO. 1 TO AMENDED AND
RESTATED PARTICIPATION AGREEMENT AND AMENDED AND RESTATED
MASTER LEASE AND OPEN-END MORTGAGE
This AMENDMENT NO. 1 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT
AND AMENDED AND RESTATED MASTER LEASE AND OPEN-END MORTGAGE (this "Amendment"),
is entered into as of September 30, 1999, among BEVERLY ENTERPRISES, INC., a
Delaware corporation ("BEI"), as the Representative, Construction Agent, Parent
Guarantor and a Lessee (in its capacity as Representative, the "Representative";
in its capacity as Construction Agent, the "Construction Agent"; in its capacity
as Parent Guarantor, the "Parent Guarantor" and together with the Guarantors
listed on the signature page to the Guaranty (each a "Guarantor") and the
Structural Guarantors, the "Guarantors"; and, in its capacity as Lessee, a
"Lessee"); certain subsidiaries of BEI that are signatories hereto, as Lessees;
BANK OF MONTREAL GLOBAL CAPITAL SOLUTIONS, INC. (formerly known as BMO LEASING
(U.S.), INC.), a Delaware corporation, as a Lessor (together with any permitted
successors and assigns thereto, each a "Lessor" and collectively the "Lessors")
and as Agent Lessor for the Lessors (in such capacity, the "Agent Lessor"); the
various financial institutions as are or may from time to time become lenders
(the "Lenders") under the Loan Agreement; BANK OF MONTREAL, a Canadian banking
organization ("BMO"), as Administrative Agent (in such capacity, the
"Administrative Agent") for the Lenders, as Arranger and Syndication Agent
(collectively, the "Parties").
R E C I T A L S:
The Parties entered into an Amended and Restated Participation
Agreement (the "Participation Agreement") dated as of August 28, 1998, amending
and restating the Participation Agreement dated as of March 21, 1997.
The Agent Lessor, the Lessees and the Representative entered into an
Amended and Restated Master Lease and Open-End Mortgage (the "Lease") dated as
of August 28, 1998, amending and restating the Master Lease and Open-End
Mortgage dated as of March 21, 1997.
The Parties wish to amend certain provisions of the Participation
Agreement and the Lease as set forth herein to reflect the changes made to the
Morgan Credit Agreement and provide additional collateral to the Lenders.
<PAGE> 2
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises made
hereunder, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereto, intending to be legally
bound, hereby agree as follows:
1. Defined Terms; References. Unless otherwise expressly
defined herein, all capitalized terms used herein and defined in Appendix A to
the Participation Agreement shall be used herein as so defined. Unless otherwise
expressly stated herein, all Section and Article references herein shall refer
to Sections and Articles of the Participation Agreement.
2. Amended Defined Terms. (a) The following defined terms in
Appendix A to the Participation Agreement are hereby amended in their entirety
to read as follows:
"Additional Lender Property" shall mean any of the Properties listed in
Schedule V-1 to the Participation Agreement, in each case as previously
disclosed to and approved by the Lenders.
"Additional Mortgage" means, with respect to each Additional Lender
Property, each Mortgage and Fixture Filing and any and all other
security instruments in appropriate recordable form sufficient to grant
the Agent Lessor, on behalf of the Lessors, a first priority Lien on
such Additional Lender Property.
"Adjusted Consolidated Debt" means at any date the sum, without
duplication, of (i) all liabilities of the Representative and its
Subsidiaries at such date of the types classified as "current
liabilities: short-term borrowings", "current liabilities: current
portion of long-term obligations," "long-term obligations" and, to the
extent arising out of claims made by governmental authorities relating
to reimbursement obligations or settlements thereof, "other liabilities
and deferred items" on the consolidated balance sheet included in the
Base Financials (including any Subordinated Notes), (ii) all guarantees
at such date of obligations of other issuers (other than guarantees
outstanding on the Amendment No. 1 Effective Date of obligations
outstanding on the Amendment No. 1 Effective Date, in amounts not in
excess of $79,375,000 and reported in the Base Financials) and (iii)
an amount equal to the product of eight multiplied by the Consolidated
Rental Expense for the four fiscal quarters of the Representative most
recently completed on or prior to such date.";
"Amendment No. 1 Effective Date" means the date upon this amendment
becomes effective in accordance with its terms.
"Assignment of Additional Mortgage" means, with respect to each
Additional Lender Property, each assignment of mortgage from Agent
Lessor, on behalf of the Lessors, to the Administrative Agent, on
behalf of the Lenders, in form and substance satisfactory to the Agent
Lessor.
2
<PAGE> 3
"Attributable Debt" means, on any date, in respect of any lease of the
Representative or any of its Subsidiaries entered into as part of a
Sale and Leaseback Transaction, (i) if such lease is a lease that is
required to be capitalized in accordance with GAAP, the capitalized
amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, and (ii) if such
lease is not a lease that is required to be capitalized in accordance
with GAAP, the capitalized amount of the remaining lease payments under
such lease that would appear on a balance sheet of such Person prepared
as of such date in accordance with GAAP if such lease were a lease that
is required to be capitalized in accordance with GAAP.
"Encore Facility" means the Term Loan Agreement, dated as of December
30, 1985, as amended, among Encore Nursing Center Partners. Ltd. - 85,
a New York limited partnership, Beverly Health and Rehabilitation
Services, Inc., the Representative and The Bank of New York.
"Final Settlement" means the execution and delivery of settlement
agreements among the Representative (and, in some cases, certain of its
Subsidiaries), the United States Department of Health and Human
Services and the United States Department of Justice finally settling
the claims and allegations referred to in the first four paragraphs
under "Item 1. Legal Proceedings" of the Representative's quarterly
report on Form 10-Q for the quarter ended June 30, 1999, as filed with
the Securities and Exchange Commission.
"Lessor Margin" means, with respect to the Lessor Amounts on any day,
the percentage set forth below opposite the Pricing Category in effect
for such date for the applicable type of Lessor Amount:
<TABLE>
<CAPTION>
Pricing Category LIBO Margin Base Rate Margin
---------------- ----------- ----------------
<S> <C> <C>
I 2.125% 1.125%
II 2.375% 1.375%
III 2.75% 1.75%
IV 3.0% 2.0%
V 3.25% 2.25%
</TABLE>
"Loan Margin" means, with respect to the Loans on any day, the
percentage set forth below opposite the Pricing Category in effect for
such day for the applicable type of Loan:
<TABLE>
<CAPTION>
Pricing Category LIBO Margin Base Rate Margin
---------------- ----------- ----------------
<S> <C> <C>
I 1.625% 0.625%
II 1.875% 0.875%
III 2.25% 1.25%
IV 2.5% 1.5%
V 2.75% 1.75%
</TABLE>
3
<PAGE> 4
"PNC Facility" means the Amended and Restated Reimbursement Agreement,
dated as of June 20, 1997, as amended, by and among Beverly Health,
Beverly Enterprises - Massachusetts, Inc., Beverly Enterprises
- Pennsylvania, Inc. and Beverly Enterprises - Ohio, Inc. as Borrowers
therein and PNC Bank, National Association as the Issuer of Letter of
Credit therein.
"Sale and Leaseback Transaction" has the meaning set forth in Section
10.2(m).
(b) The definition of "Base Financials" shall be amended by
deleting each reference to the year "1997" and substituting therefore
a reference to the year "1998".
(c) The definition of "Operative Documents" shall be amended
by (i) deleting the word "and" at the end of clause (q) therein, (ii)
deleting the period at the end of clause (r) and replacing same with a
semi-colon, and (iii) adding "(s) the Assignment of Additional
Mortgages; and (t) the Additional Mortgages." at the end thereof.
(d) The definitions set forth in Schedule IV to the
Participation Agreement are amended as follows:
(i) the definition of "Pricing Ratio" shall be
deleted in its entirety and replaced with the following:
"Pricing Ratio" means the ratio of Adjusted
Consolidated Debt to Consolidated EBITDAR;
(ii) the reference to "2.50" in the definition of
"Category I Pricing" shall be deleted and replaced with
"3.50";
(iii) the reference to "2.25" in the definition of
"Category II Pricing" shall be deleted and replaced with
"4.0";
(iv) the reference to "2.00" in the definition of
"Category III Pricing" shall be deleted and replaced with
"4.5"; and
(v) the reference to "1.75" in the definition of
"Category IV Pricing" shall be deleted and replaced with
"5.0".
3. Payments Regarding Additional Lender Property. Section
7.7(a) of the Participation Agreement is hereby amended by adding the following
language at the end thereof prior to the period:
4
<PAGE> 5
"; provided, however, that any payment received by
the Administrative Agent with regard to the Additional Lender
Property shall be distributed pro rata among the Lenders"
4. Representations and Warranties. Section 8.2 of the
Participation Agreement is hereby amended as follows:
(a) Section 8.2(e) is hereby amended by (i) deleting
each reference therein to the year "1997" and replacing same
with the year "1998" and (ii) adding the following at the end
thereof:
The unaudited consolidated balance
sheets of the Representative and its
Consolidated Subsidiaries as of June 30,
1999 and the related unaudited consolidated
statements of operations, stockholders'
equity and cash flows for the six months
then ended, set forth in the
Representative's June 30, 1999 Form 10-Q, a
copy of which has been delivered to each
Lender, each Lessor, the Lessor Agent and
the Administrative Agent, fairly present, in
conformity with generally accepted
accounting principles applied on a basis
consistent with the Base Financials, the
consolidated financial position of the
Representative and its Consolidated
Subsidiaries as of such date and their
consolidated results of operations and cash
flows for such six month period (subject to
normal year-end adjustments, the absence of
footnote disclosure and condensation
pursuant to the rules of the Securities and
Exchange Commission).
(b) Section 8.2(f) is hereby amended by deleting such
section in its entirety and replacing same with the following:
(f) No Material Adverse Change.
Except for the matters referred to in the
first four paragraphs under "Item 1. Legal
Proceedings" in the Representative's June
30, 1999 Form 10-Q, since December 31, 1998
there has been no material adverse change in
the business, financial position, results of
operations or prospects of the
Representative and its Consolidated
Subsidiaries, considered as a whole.
5
<PAGE> 6
(c) Section 8.2(i) is hereby amended by (i) deleting
each reference therein to the year "1997" and replacing same
with the year "1998,", (ii) adding the phrase "the first four
paragraphs under Item 1. Legal Proceedings in" between the
words "or" and "the" on the second line thereof and (iii)
replacing "June 30, 1998" with "June 30, 1999" on the third
line thereof;
(d) The following Section 8.2(z) shall be added after
Section 8.2(y):
(z) Year 2000 Compliance. The
Representative has (i) initiated a review
and assessment of all areas within the
business and operations of the
Representative and each of its Subsidiaries
(including those areas affected by suppliers
and vendors) that could be adversely
affected by the "YEAR 2000 PROBLEM" (that
is, the risk that computer applications used
by it or any of its Subsidiaries (or their
respective suppliers and vendors) may be
unable to recognize and perform properly
date-sensitive functions involving certain
dates prior to and any date after December
31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000
Problem on a timely basis and (iii) to date,
implemented such plan in accordance with
such timetable. The Representative
reasonably believes that all computer
applications (including those of suppliers
and vendors) that are material to the
business or operations of the Representative
or any of its Subsidiaries will on a timely
basis be able to perform properly
date-sensitive functions for all dates
before and from and after January 1, 2000,
except to the extent that a failure to do so
could not reasonably be expected to have a
material adverse effect on the business,
financial position, results of operations or
prospects of the Representative and its
Consolidated Subsidiaries, taken as a
whole."
5. Affirmative Covenants of the Representative. Section 10.1
of the Participation Agreement is hereby amended by adding the following Section
10.1(l) at the end thereof:
(l) Additional Mortgages and
Assignments of Additional Mortgages. On or
prior to October 31, 1999:
6
<PAGE> 7
(i) The applicable Lessee shall
have delivered to the Agent Lessor
all UCC financing statements as the
Agent Lessor or any other Lessor may
reasonably request appropriately
completed and executed for filing in
the applicable jurisdiction in order
to protect the Agent Lessor's and
Lenders' interest in the Additional
Lender Property;
(ii) Each of the Participants shall
have received (x) evidence
reasonably satisfactory to it that
each of (i) Additional Mortgages and
Assignment of Additional Mortgages
in the forms acceptable to the
Lessor Agent, has been duly
executed, delivered and has been or
are being recorded in the
appropriate jurisdictional records
with respect to each Additional
Lender Property and create and
perfect valid Liens as intended
therein and (ii) the Additional
Financing Statements have been, or
are being, recorded in a manner
sufficient to properly perfect each
of their interests therein and (y)
copies of file search reports from
the Uniform Commercial Code filing
officer in the jurisdiction in which
is located such Additional Lender
Property, setting forth the results
of such Uniform Commercial Code file
searches;
(iii) The Representative shall have
delivered to the Administrative
Agent and the Agent Lessor a
commitment to deliver an ALTA
lenders title insurance policy
covering each Additional Lender
Property in favor of the Agent
Lessor, the Administrative Agent and
the Participants, respectively, such
policy in form satisfactory to the
Agent Lessor and Administrative
Agent, with such customary
endorsements and affirmative
assurances issued by the title
company as a routine matter, if
requested by the Agent Lessor or the
Administrative Agent; and
(iv) The Agent Lessor and the
Administrative Agent shall have
received (i) an opinion of counsel
qualified with respect to the laws
of the jurisdiction in which the
Additional Lender Properties are
situated, addressed to the
Administrative Agent, the Agent
Lessor, each Lender and each Lessor,
substantially in the form
satisfactory to the Agent Lessor and
Administrative Agent and (ii) if
requested by the Agent Lessor and
the Administrative Agent, opinions
from such other counsel and covering
such issues as they may reasonably
request.
7
<PAGE> 8
6. Negative Covenants of the Representative. Section 10.2 of
the Participation Agreement is hereby amended as follows:
(a) Section 10.2(a) is hereby amended by deleting
such section in its entirety and replacing same with the
following:
(a) Minimum Consolidated Net Worth.
Permit Consolidated Net Worth of the
Representative to be less than 90% of
Consolidated Net Worth at June 30, 1999 plus
(i) 50% of the aggregate positive
Consolidated Net Income (excluding any
consolidated net loss) of BEI and its
Consolidated Subsidiaries for each fiscal
quarter ending after June 30, 1999 plus (ii)
50% of the aggregate net proceeds, including
the fair market value of property other than
cash (as determined in good faith by BEI's
board of directors), received by BEI from
the issuance and sale after June 30, 1999 of
any capital stock of BEI (other than the
proceeds of any issuance and sale of any
capital stock (x) to a Subsidiary or (y)
which is required to be redeemed, or is
redeemable at the option of the holder, if
certain events or conditions occur or exist
or otherwise) or in connection with the
conversion or exchange of any Debt of BEI
into capital stock of BEI after June 30,
1999.
(b) Section 10.2(b) of the Participation Agreement is
hereby amended in its entirety to read as follows:
(b) Fixed Charge Coverage Ratio. Permit the
Fixed Charge Coverage Ratio at any date
during the periods specified below to be
less than the ratio set forth below opposite
the period in which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Amendment No. 1 Effective Date through 1.15 to 1.0
(and including) June 29, 2003
June 30, 2003 and thereafter 1.25 to 1.0
</TABLE>
8
<PAGE> 9
(c) Section 10.2(c) of the Participation Agreement is
hereby amended in its entirety to read as follows:
(c) Adjusted Consolidated Debt Ratio. Permit
the Adjusted Consolidated Debt Ratio at any date
during the periods specified below to be more than
the ratio set forth below opposite the period in
which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Amendment No. 1 Effective Date through (and including) 5.75 to 1.0
September 29, 2000
September 30, 2000 and thereafter through (and including) 5.50 to 1.0
June 29, 2002
June 30, 2002 through (and including) June 29, 2003 5.00 to 1.0
June 30, 2003 through (and including) and thereafter 4.50 to 1.0
</TABLE>
(d) Section 10.2(f)(vi) is hereby amended by deleting
such section in its entirety and replacing same with the
following:
(vi) the Representative may make any
such payment or distribution if, after
giving effect thereto, the aggregate amount
of all such payments or distributions made
after the Amendment No. 1 Effective Date
(including, without limitation, any such
payments or distributions permitted under
subclause (ii)(A) or clause (iv) above) does
not exceed (A) on any date on and after the
Final Settlement on which (x) no Event of
Default shall have occurred and be
continuing or shall result from such payment
and (y) the ratio of (x) Adjusted
Consolidated Debt to (y) Consolidated
EBITDAR is (I) less than 5.00 to 1.00 but
not less than 4.75 to 1.00, $25,000,000,
(II) less than 4.75 to 1.00 but not less
than 4.50 to 1.00, $30,000,000, and (III)
less than 4.50 to 1.00, $40,000,000 and (B)
on any other date, $10,000,000.
9
<PAGE> 10
(e) Section 10.2(g) is hereby amended by (i) adding,
at the end of clause 1 thereof prior to the semicolon, the
words ", including, without limitation, Liens created under
the PNC Facility and the Encore Facility and Liens (other than
Liens of the types referred to in clauses 4, 7, 9) to the
extent such Liens constitute refinancing of Liens permitted
under such clauses 4 and 7 or 12 existing on the Amendment No.
1 Effective Date securing Indebtedness and other obligations
outstanding on the Amendment No. 1 Effective Date" and (ii)
replacing the amount "$50,000,000" in clauses 13 and 15
thereof with the amount "$25,000,000".
(f) Section 10.2(i) is hereby amended by deleting the
word "Incur" on the first line thereof and replacing same with "With
respect to the Representative's and each Lessee's Subsidiaries only,
such Subsidiaries will not incur"
(g) Section 10.2(i)(6) is hereby amended by deleting
the reference to "$150,000,000" and replacing same with
"$100,000,000".
(h) Section 10.2(i)(14) is hereby amended by deleting
the reference to "$75,000,000" and replacing same with
"$20,000,000".
(i) Section 10.2 is hereby amended by adding the
following Section 10.2(l) and (m) after Section 10.2(k):
(l) Consolidated Gross Capital
Expenditures. Permit Consolidated Gross
Capital Expenditures for any of the fiscal
years set forth below, to exceed the amount
indicated opposite such fiscal year:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1999 $120,000,000
December 31, 2000 $120,000,000
December 31, 2001 $125,000,000
</TABLE>
To the extent that Consolidated Gross
Capital Expenditures for any fiscal year set
forth above are less than the applicable
amount specified in the table, the
difference may be carried forward to the
next fiscal year (and for this purpose,
Consolidated Gross Capital Expenditures in
any subsequent fiscal year shall be applied,
first, to any such carry-forward amount and,
second, to the specified amount for such
year).
10
<PAGE> 11
(m) Sale and Leaseback Transactions.
Enter into, or permit any of its
Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby it shall
sell or transfer any property, real or
personal, used or useful in its business,
whether now owned or hereafter acquired,
which property has been owned by the
Representative and its Subsidiaries for more
than 180 days, and thereafter rent or lease
such property or other property that it
intends to use for substantially the same
purpose or purposes as the property sold or
transferred (each, a "SALE AND LEASEBACK
TRANSACTION"), except for Sale and Leaseback
Transactions the aggregate amount of
Attributable Debt in respect of which does
not exceed $20,000,000 at any time
outstanding.
7. Events of Default. Section 16.1 of the Lease is hereby
amended by (a) deleting the word "or" at the end of Section 16.1(m), (b)
deleting the period at the end of Section 16.1(n) and replacing same with a
semi-colon and (c) adding the following Sections 16.1(o) and (p) at the end
thereof:
(o) any of the Additional Mortgages or Assignment of
Additional Mortgages shall at any time after the date on which
same are executed and delivered fail to create or assign Liens
in favor of the parties intended thereunder and in the
priorities intended thereunder; or
(p) the terms of the Final Settlement shall require
payments by the Representative and its Subsidiaries to the
United States Federal government and agencies and
instrumentalities thereof (I) in the aggregate in excess of
$225,000,000, (ii) up-front in excess of $30,000,000 or (iii)
with a final maturity of less than eight (8) year.;"
8. Effective Date. Subject to Section 10 below, this Amendment
shall be effective and the Participation Agreement and Lease amended as of
September 30, 1999, as if entered into on such date.
9. Representations and Warranties. To induce the
Administrative Agent, the Agent Lessor and the Participants to execute and
deliver this Amendment (which representations shall survive the execution and
delivery of this Amendment), each of the Beverly Entities that is a party hereto
represents and warrants to each of the Administrative Agent, the Agent Lessor
and the Participants that:
11
<PAGE> 12
(a) this Amendment has been duly authorized, executed
and delivered by it and this Amendment constitutes the legal, valid and
binding obligation, contract and agreement of such Beverly Entity
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Participation Agreement, as amended by this
Amendment, constitutes the legal, valid and binding obligation,
contract and agreement of such Beverly Entity enforceable against it in
accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors'
rights generally;
(c) the execution, delivery and performance by such
Beverly Entity of this Amendment (i) has been duly authorized by all
requisite corporate action and, if required, shareholder action, (ii)
does not require the consent or approval of any governmental or
regulatory body or agency, and (iii) will not (A) violate (l) any
provision of law, statute, rule or regulation or its certificate of
incorporation or bylaws, (2) any order of any court or any rule,
regulation or order of any other agency or government binding upon it,
or (3) any provision of any material indenture, agreement or other
instrument to which it is a party or by which its properties or assets
are or may be bound, including, without limitation, the Morgan Credit
Agreement, or (B) result in a breach or constitute (alone or with due
notice or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in clause (iii)(A)(3) of this
subsection (c);
(d) as of the date hereof and after giving effect to
this Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all the representations and warranties contained
in Section 8.2 of the Participation Agreement (after giving effect to
this Amendment) are true and correct in all material respects with the
same force and effect as if made by such Beverly Entity on and as of
the date hereof.
10. Conditions to Effectiveness of this Amendment. This
Amendment shall not become effective until, and shall become effective when,
each and every one of the following conditions shall have been satisfied to the
satisfaction of the Agent Lessor, the Administrative Agent and each Participant
(the conditions precedent are for the benefit of the Agent Lessor, the
Administrative Agent and each Participant only):
(i) The Agent Lessor, the
Administrative Agent and the
Participants shall have received
executed counterparts of this
Amendment, duly executed by the
Beverly Entities party hereto;
12
<PAGE> 13
(ii) The Agent Lessor, the
Administrative Agent and the
Participants shall have received
evidence satisfactory to them that
the Morgan Credit Agreement has been
amended in form and substance
satisfactory to the Administrative
Agent, the Agent Lessor and the
Participants;
(iii) The representations and
warranties of the Beverly Entities
set forth in Section 8 hereof are
true and correct on and with respect
to the date hereof; and
(iv) The Administrative Agent shall
have received a fee for the account
of the Participants in connection
with the Participants' agreement to
the terms of this Amendment equal to
.20% multiplied by each
Participant's Commitment.
Upon receipt of all of the foregoing, this Amendment shall become
effective.
11. Payment of Fees and Expenses. The Representative agrees to
pay upon demand, the reasonable fees and expenses of Mayer, Brown & Platt,
counsel to the Lessors, in connection with the negotiation, preparation,
approval, execution and delivery of this Amendment and all reasonable fees and
expenses attendant to any filing, registration, recording or perfection of any
Lien contemplated hereby.
12. Effect of Amendment. The Parties agree that upon the
effectiveness of this Amendment as provided in Section 10 except as amended
hereby or hereafter, the Participation Agreement and any and all other
agreements, documents, certificates and other instruments executed in connection
therewith shall remain in full force and effect in accordance with their terms,
and any reference to the Participation Agreement shall be deemed to be a
reference to the Participation Agreement as amended by this Amendment.
13. Amendment to Schedules and Exhibits. Schedule V-1 and
Exhibits I and J shall be added to the Participation Agreement in the forms
attached hereto
14. Counterparts. This Amendment may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
15. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
13
<PAGE> 14
IN WITNESS WHEREOF, the Parties have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
BEVERLY ENTERPRISES, INC., as
Representative, Construction Agent,
Parent Guarantor and a Lessee
By
--------------------------------------
Name:
Title:
BANK OF MONTREAL, as Arranger,
Administrative Agent and as a Lender
By
--------------------------------------
Name:
Title:
BANK OF MONTREAL GLOBAL CAPITAL
SOLUTIONS, INC., as Agent Lessor and as
a Lessor
By
--------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as
a Lender
By
--------------------------------------
Name:
Title:
TORONTO-DOMINION (TEXAS), INC., as a
Lender
By
--------------------------------------
Name:
Title:
S-1
<PAGE> 15
BANK OF AMERICA, NATIONAL ASSOCIATION,
as a Lender
By
--------------------------------------
Name:
Title:
VANTAGE HEALTHCARE CORPORATION, as
Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
PETERSEN HEALTH CARE, INC., as Lessee
and Structural Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY SAVANA CAY MANOR, INC., as
Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY ENTERPRISES - GEORGIA, INC., as
Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
S-2
<PAGE> 16
BEVERLY ENTERPRISES - CALIFORNIA, INC.,
as Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY ENTERPRISES - ARKANSAS, INC., as
Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY ENTERPRISES - FLORIDA, INC., as
Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY HEALTH AND REHABILITATION
SERVICES, INC., as Lessee and Structural
Guarantor
By
--------------------------------------
Name:
Title:
BEVERLY ENTERPRISES - WASHINGTON, INC.,
as Lessee and Structural Guarantor
By
--------------------------------------
Name:
Title:
S-3
<PAGE> 17
Schedule V-1
Additional Properties
<TABLE>
<CAPTION>
FACILITY # FACILITY NAME CITY COUNTY STATE
- ---------- ------------- ---- ------ -----
<S> <C> <C> <C> <C>
2272 Lincoln Hills Health Care Tell City Perry IN
2046 Fontanbleu Nursing Center Bloomington Monroe IN
3678 Woodland Convalescent Center Newburgh Warrick IN
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 17,462
<SECURITIES> 0
<RECEIVABLES> 442,441<F1>
<ALLOWANCES> 60,704<F2>
<INVENTORY> 32,577
<CURRENT-ASSETS> 492,219
<PP&E> 1,858,682
<DEPRECIATION> 750,494
<TOTAL-ASSETS> 1,970,072
<CURRENT-LIABILITIES> 345,194
<BONDS> 776,276
0
0
<COMMON> 11,038
<OTHER-SE> 662,868
<TOTAL-LIABILITY-AND-EQUITY> 1,970,072
<SALES> 1,903,748
<TOTAL-REVENUES> 1,907,038
<CGS> 0
<TOTAL-COSTS> 1,727,368
<OTHER-EXPENSES> 287,630
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 54,029
<INCOME-PRETAX> (161,989)
<INCOME-TAX> (59,936)
<INCOME-CONTINUING> (102,053)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,053)
<EPS-BASIC> (1.00)
<EPS-DILUTED> (1.00)
<FN>
<F1>Excludes $6,456 of long-term notes receivable.
<F2>Excludes $2,462 of allowance for doubtful long-term notes receivable.
<F3>Included in Total costs and expenses line.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 23,538
<SECURITIES> 0
<RECEIVABLES> 485,620<F1>
<ALLOWANCES> 14,135<F2>
<INVENTORY> 29,397
<CURRENT-ASSETS> 599,820
<PP&E> 1,831,725
<DEPRECIATION> 683,014
<TOTAL-ASSETS> 2,198,953
<CURRENT-LIABILITIES> 335,952
<BONDS> 818,775
0
0
<COMMON> 11,028
<OTHER-SE> 857,518
<TOTAL-LIABILITY-AND-EQUITY> 2,198,953
<SALES> 2,107,752
<TOTAL-REVENUES> 2,115,710
<CGS> 0
<TOTAL-COSTS> 1,898,799
<OTHER-EXPENSES> 74,318
<LOSS-PROVISION> 0<F3>
<INTEREST-EXPENSE> 48,869
<INCOME-PRETAX> 93,724
<INCOME-TAX> 32,803
<INCOME-CONTINUING> 60,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (4,415)
<NET-INCOME> 56,506
<EPS-BASIC> .54
<EPS-DILUTED> .54
<FN>
<F1>Excludes $25,831 of long-term notes receivable.
<F2>Excludes $2,997 of allowance for doubtful long-term notes receivable.
<F3>Included in Total cost and expenses line.
</FN>
</TABLE>
